Separating the Illusions from reality – India’s Job Story

“Jobs” and the importance this subject in Indian context is undebatable. Ever since the first absolute majority government came into power (after many decades), job creation as an outcome has been discussed in every forum available. More often lately, as the Modi government celebrates its third anniversary. Despite many good things the government has been credited for, “Job creation” bucket has somehow always been a sour point. 

We can either agree or agree to disagree on the success of the Government in “jobs”. But it is very important to understand the key dynamics which have placed us in this spot. 

Curious case of Indian Economy:  Jobs and their availability in India has been a chronic issue. The truth is that we have never had enough jobs. Thus, no matter how much we blame the current government, it doesn’t change the fact that our economy has some basic issues. Unlike all other economies, India is still dominated by agriculture. While the movement of job seekers from farm to non-farm jobs is happening fast, the job creation is not happening at the needed pace. Indian economy is generating jobs at a rate which is 2/3 of the world’s average. The employment elasticity (which means the number of jobs which get created with every point increase in GDP of output) has declined from 0.44 to 0.01 over the last decade of the 2000s. 

This implies that for the Indian economy to generate a certain number of jobs, the growth rate of the economy must be much higher than economies with higher employment elasticity. For example, if N number of job creation with average employment elasticity requires 8 per cent growth per annum, for India to create N number of jobs the growth would need to be 12% (which means need for more investments). 

Now, when we look at the current situation every year 10 -12 million young people join the labor force. Additionally, 2 -3 million educated and unemployed workers look for jobs in the industry and services sectors, and 5 million people leave agriculture to join the non-agriculture sectors. When it comes to jobs being generated, we all know we have lot of work to do.

In this situation, it is a question worth asking that is it fair to expect any Government for that matter to solve the “Job Market Conundrum” without fixing the deeper issues? Obviously no, but here are two simple yet core aspects for us to understand and focus on for a short term impact.

Mid-Market growth: The best way the gap between the talent availability and jobs can be reduced is through the rise of a strong small and mid-market segment. The problem with our economy is that we are heavily dependent of large size organizations or on unorganized sectors for growth (including the job growth). We need to remove this dependency and create a job generating engine based on large number of small and mid-sized organizations. This will happen once the large number of startups and small size enterprises get means to grow and generate jobs. And it’s not that difficult. Infact we can clearly see some of these companies already picking up pace. For example despite the negative publicity internet businesses received from job perspective, there are enough companies adding significant numbers. Infact, 20 of our mid-sized customers alone are adding about 25000 jobs in next 12 months. The need today is to extend this impact further. The base work has already started. With government creating an ecosystem where starting a company, managing taxation, labor and statutory reforms, a welcome start has been made.  Step are now needed to ensure that these companies get an ecosystem to have a sustainable growth as well and succeed. 

Skilling, Re-Skilling and matchmaking – On demand

40% of the workforce is employable , As per India Skills Report 2017. Though this number has significantly improved in the last few years, it still a grave situation to be in. On top of this, when digital disruption (Robotics, Artificial Intelligence and Automation) would start its effect the gap would further increase. The need is thus to have Just-In-Time skilling, which means that a responsive relationship is built between supply and demand side. Gig economy is another such solution. With talent moving out of the organizational boundaries, it will be available on demand. This would solve the chronic problem of Job-Skills matchmaking. It is rightly said that the quality of treatment depends on the accuracy of diagnostic. When we are solving the biggest challenge our country is facing till date; we cannot base our solutions on assumptions merely based on global trends. The stakes are too high.

US economists Alvin Roth and Lloyd Shapley won the Nobel Prize in 2012 for their match-making theories relating to supply-demand issues prevalent in the market. Though these tools have been implemented in problems across sectors, their impact on Job Market is yet to be seen. The truth is that our future lies on how well we are able manage job demand and supply. Else one of biggest opportunity as a nation – reaping demographic dividend would slip off our hands. And I have full faith that we as a nation would be able to cross this hurdle to create a bright future where there would be abundant work than jobs which will improve quality of life an individual leads!