Where are the jobs? This is the question Prime Minister Narendra Modi is repeatedly asked by his political opponents. One answer he has given recently in media interviews is that the jobs that are being created are invisible in the statistics: loans from the Mudra Bank are enabling self-employment, and as these micro businesses grow, they will add employees, one or two at a time. Hopefully, they will ultimately create millions of jobs in an economy that is releasing one million youth every month into the job market.
While creating a nation of micro-entrepreneurs is better than doing nothing, there is a grimmer reality at work: stable and quality jobs are not growing fast enough, if not actually contracting. While job statistics are woefully inadequate in the Indian context, one source that gives us good data is the Labour Bureau’s quarterly survey of employment trends. It covers eight employment-intensive sectors – textiles, leather, metals, autos, gems and jewellery, transport, IT/BPO, and handlooms and powerlooms.
In its latest report covering the July-September 2015 quarter, the Bureau found that 1,34,000 jobs were created in these sectors. But the average for the last eight quarters was just over one lakh jobs per quarter (2013-15). This is lower than the 1.5 lakh jobs created in the previous eight quarters (2011-13), and really bad compared to the eight-quarter average before that (nearly three lakh jobs every quarter in 2009-11).
The Indian jobs machine is stalling, and stalling badly. A longer-term snapshot based on National Sample Survey (NSS) data shows the same trend: during 1999-2004, 60 million jobs were created; during 2004-10, just 27 million. This implies that during the slower growth period of NDA-I, more jobs were created than in the faster-growth years of UPA-I and the first half of UPA-II, before the wheels came off completely during the final years of UPA-II. Though the jobs data provided by the Labour Bureau and NSS are not comparable, the trend is unmistakeable.
An HDFC Bank report uses another number to make the same point: India’s employment elasticity, which measures growth in jobs compared to every percentage point rise in GDP, is heading south. In the 1997-2000 period, this elasticity was 0.39 – meaning for every 1% rise in GDP, jobs grew by 0.39%. This elasticity came down to 0.23 in the next decade, and fell further to a measly 0.15.
Growth no longer means jobs.
The causes for this jobs slowdown are many: inflexible labour laws, that make firing difficult, ensure that employers prefer more automation to more hires. This is happening not only in manufacturing, but high-quality service industries like IT too. In the January-March 2016 quarter, three of the Big Five Indian IT companies (Wipro, HCL Tech and Tech Mahindra) saw net hires decline. While this may be a short-term blip, there is little doubt that automation and productivity increases have slowed down hiring in IT.
According to a pink newspaper, the headcount required to generate $1 billion of software revenues has fallen by half in the last six years. Industry leaders like Vishal Sikka of Infosys and TCS’s N Chandrasekaran are retraining staff for higher levels of automation, with lower-skill work being automated.
Globalisation is another issue: when labour can move freely across borders, either legally or illegally, jobs will go to the cheapest workers. In the European Union’s free market for labour, the high level of inward immigration into Britain was one reason for the pro-Brexit vote on June 23.
Economists like to rubbish the idea that globalisation and automation are job destroyers. They are right, for jobs destroyed in one sector will be made up elsewhere. Today, as kirana shops fold up, big retail and online marketplaces may be creating lots of jobs at checkout counters, warehousing and logistics. But are they doing so at a rate fast enough to take up the slack?
Economists also seem to discount the larger political and social reality that restricts jobs mobility: people do not change as fast as they need to, nor do governments and laws change fast enough to enable this. When Google delivers us our first driverless cars, the millions of chauffeurs driven out of work will not immediately know whether they should invest in becoming auto mechanics or electronics engineers. Skilling up, and moving cities and countries to where the jobs are, are not seamless processes.
It is worth recalling that while the industrial revolution in Britain ultimately created lots of jobs, the process took nearly 50-100 years to happen. Today’s world may not take that kind of time to adjust, but the rate of adjustment between young and old is not the same. This partly explains why the young voted to stay in the EU, and the old did not.
A fast-changing world needs even faster speeds in information dissemination about jobs and trends. But there is always a time and spatial gap between job loss and gain that is not easy to bridge. Jobs lost today may take years to recoup. And future technologies like 3D printing may hollow out manufacturing even faster. An academic paper by Oxford researchers Carl Benedikt Frey and Michael A Osborne says half of existing jobs could be automated in 10-15 years.
The equation we need to watch out for is simple: can human adaptation catch up with the speed of technological change?
DISCLAIMER : Views expressed above are the author's own.