Relevance: GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Key Phrases: Low-skill jobs, Labor force participation rate, Unemployment rate, Statistical system, Formal job, Social stigma, Unemployment allowances, Social protection, Demographic dividend.

Why in News?

• Last month witnessed protests in several parts of north India by students who had appeared for the Non-Technical Popular Categories exam conducted by the Railway Recruitment Board. This was to fill up 35,000 posts for which 12.5 million candidates had applied. While the RRB’s decision to set up a committee to examine the issue may have pacified students for the time being, it is unlikely to offer any solution for the bigger problem of employment and earnings in the Indian economy.

Background:

• Indian Railway is among the largest employers in India. But its problem is not with the recruitment process but the huge number of applicants for low-skill jobs. How big is 12.5 million? It is almost 10% of all those aged 20-25 in the country. So every tenth person in this age group was an applicant for the lowest category of employment in the Railways.

Status of Unemployment in India:

• India's unemployment rate for all ages increased to 10.3 per cent in October-December 2020, as compared to 7.9 per cent in the corresponding months a year ago, according to a periodic labor force survey by the National Statistical Office (NSO).
• As per Periodic Labor Force Surveys (PLFS), the 18-25 age group’s unemployment rate at 24.5% for 2019-20 is not only extremely high, it’s among the highest in the world if small and conflict-ridden countries are excluded.
• With a labour force participation rate (LFPR) of around 40%, it also means that every tenth young person in the country is unemployed by the official definition.
• By the PLFS estimates, two-thirds of regular salaried workers in 2019-20 did not have a written job contract and most had no social security.

Issues with Unemployment in India:

• Underestimation of unemployment: It is as much a statistical issue as it is an economic reality. As there has been argument on the issue of data mishandling as well.
• Prevailing poverty: Despite improvements in standards of living and rising per capita income, a third of our population is poor by official estimates.
  • For these households that must feed themselves, being jobless is hardly affordable situation. By default, they tend to accept work at whatever wages are available.
• Social stigma: The social stigma attached to being unemployed also means that many would prefer the disguise of employment in agriculture and other enterprises even though they might not be contributing to production.
  • For many others, being stuck in informal work arrangements at exploitative wages may be their only option.
• Complexity of unemployment: Even with the best of definitions and survey mechanisms, it is difficult to get a true estimate of unemployment, given the complexity and multitude of work arrangements that exist.
• Politicization of employment: It has become a public issue in almost all states that are in the midst of electoral battles to elect governments. Several political parties in the fray have promised unemployment allowances to woo the electorate.
  • But unemployment allowance is only a temporary reprieve from the crisis, these are insufficient.

Reforms needed in tackling unemployment:

• Understanding the problem: An effort at getting a better understanding of the problem by strengthening our statistical system should be a priority for the government, as it will push for evidence-based policy making.
• Recognition of the severity of India’s employment crisis is only the beginning for us to resolve the problem, which is arguably the economy’s biggest. Ideas like an unemployment allowance or an urban employment guarantee are unlikely to solve the problem in its entirety. However, the politicization of India’s job scarcity should lead to a discussion on long-term solutions.
• Holistic employment coverage: The country requires a policy push not just for creating additional employment, but also to ensure that the jobs created provide decent wages, security of tenure and social protection.
• Structural solution required: Given that the incentive structure built into the current policy regime favours capital- intensive growth at the cost of labor utilization, a structural solution to the employment problem would require a close re-examination of the prevalent structure of production.
• Reviving rural demand: At a time, our economy is struggling with low demand and a crisis of income in the rural economy, reviving rural demand through public expenditure is not just a necessity for economic revival, it is also the best way to increase the employment content of growth.

Conclusion:

• The rise in the unemployment rate in recent times has come in the backdrop of the Covid-19 pandemic and static government policy, which suspended commercial activities for a long time, leading to people losing jobs countrywide. India needs to focus on skilling, reskilling and upskilling of labour force to reap the benefits of demographic dividend before it's too late and demographic dividend becomes liability.

Sources: Live Mint

Mains Question:

Q. Though India is among the fastest growing economies in the world, the problem of unemployment has intensified recently. Discuss the reasons and issues of unemployment and suggest measures to address it. [250 words]