Urban employment as the focal point
#GS2 #Issues #Employment
Economic contraction and the associated unemployment problem in India.
India’s Gross Domestic Product (GDP) suffered a steep contraction of 23.9% in the April-June quarter of the current fiscal year.
Employment concern and associated issues:
- Notably, the employment-intensive sectors like construction (–50%), trade, hotels and other services (–47%), manufacturing (–39%), and mining (–23%) have suffered the worst contractions. Given the contraction and lack of demand in the economy, there would be a significant dip in urban employment opportunities.
- This raises concern on the employment situation in India as it would lead to either a growing number of people losing jobs or the newly joining labour force failing to find new opportunities. This could lead to a rise in unemployment levels.
- There has been a wave of massive ‘reverse migration’ with millions of workers returning to their home states due to a loss of livelihoods in urban areas.
- In the rural areas, this reverse migration has resulted in surplus labour force availability which could result in depression of rural wages and will also further add to the problem of disguised unemployment in the rural areas. The viability of agriculture to provide these workers with a decent living is also questionable.
- The lack of workers in the urban areas has limited the industries’ capacity to ramp up production to pre-COVID levels.
- The central government launched the ‘Garib Kalyan Rojgar Abhiyaan’ in June 2020 with an outlay of Rs. 50,000 crore. This employment scheme aims to provide livelihood opportunities in rural India.
- The Government has enhanced the budgetary announcement for the Mahatma Gandhi Employment Guarantee scheme. Rs 40,000 crore was allocated to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) over and above the budgetary allocation of Rs 61,500 crore making it the highest-ever allocation towards MGNREGA. This will help boost employment opportunities in rural areas and will be a big relief to returning migrant labourers.
Structure of the economy:
- The informal sector accounts for a large share of Indian employment.
- According to the International Labour Organization, of the 535 million labour force in India in 2019, some 398.6 million have poor quality jobs.
- These jobs are characterized by inadequate earnings, low productivity and difficult conditions of work that undermine the basic rights of workers. They lack effective representation by trade unions. Thus despite higher economic growth in recent years, working poverty in India remains high.
- The working poor are working people whose incomes fall below a given poverty line due to low-income jobs and low familial household income.
- The high level of informal employment can be mainly attributed to the economic structural transformation process in India, wherein capital and labour transfer instead of taking place from low to higher value-added sectors have been flowing from one low value-added activity to another but not to higher value-added activities. This leads to a situation where a large proportion of the jobs being created are of poor quality. This undermines the prospects of reducing working poverty.
- India enjoys a demographic dividend and a large number of people are joining the labour market annually. The estimates are that more than 10 million people join the labour force annually. The lack of adequate job opportunities will turn this demographic dividend to a demographic disaster.
Inadequacy of the government schemes:
- While the move to expand MGNREGA is a welcome move, it is very idealistic to assume that the entire workforce, which has returned to their respective home states, will be accommodated by an expanded MGNREGA or any other similar schemes.
- Also, there seems to be very little attention towards urban employment.
- There is a need for urgent policy interventions to secure the livelihoods of workers in urban areas.
Generating more jobs:
- The emphasis should be to design and implement employment-intensive investment policies.
Incentivizing private enterprises:
- The policies should incentivize private entrepreneurs and private investments need to be facilitated. Enterprise formation needs to be an integral part of the strategy.
- Small and micro-enterprises which are considered employment-intensive need to be supported by the administration.
Investing in infrastructure:
- The government will need to prioritise urban infrastructure as it accounts for a large share of total investments in the local economy.
- A labour-intensive approach to building municipal infrastructure can be a cost-effective alternative to capital intensive-approach as currently, the wage rates are low.
- Infrastructure investments would spur employment, generate earnings and contribute to small enterprise formation.
Urban employment scheme:
- The government needs to immediately launch an urban employment scheme on the lines of the MGNREGA scheme. This has to focus on building large-scale medical, health and sanitation infrastructure in cities and towns across India.
- Another avenue for immediate employment generation can be to expand networks of essential services as a part of welfare interventions of state and local governments.
Reducing vulnerabilities in the informal sector:
- Given the vulnerabilities of urban informal jobs, apart from ensuring adequate job generation, there is also the need to generate jobs which provide decent wages and some form of job security.