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Holistic Economic Reforms Can Address Unemployment Challenge

India is a high growth economy, and its job market as a result, may not be impacted significantly in the short run

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Debates about the future of work, its evolving nature and the implications of its changing nature has never been timelier. Equally significant is the discussion around the changing structure of ‘occupations’ and industries and its larger consequences for society.

Work encompasses and relates to most aspects of everyday life. Job is a means to make a living, and largely defines and affects the standards of living of its members and their families. It exemplifies their relationship with the community, epitomises social status. Work has the most significant bearing on one's self-esteem.

*Jobs provide legitimacy, social status. Most potent vehicle to upward mobility

A Crux qualitative study titled, ‘Evolving Nature of Work’ to understand, and analyse the nature and forces that shape work, and how these forces impact organisational, social, and individual contexts has several lessons. The goal of the study was to ascertain India’s ability and the optimum framework needed to cope with the change.

Unemployment in India is linked to several inherent challenges. It has numerous variables, many assorted moving parts; few global in nature, some systematic and many others ‘non-addressable’. However, many of the ‘addressable’ challenges are of our own making. For example, tackling the fragility of the MSMEs is a low hanging-high multiplier. So are the much-needed reforms in the education system.

A fourth of all job roles are ‘automatable’ over the next five years. Polarisation will disrupt a third of middle jobs in five years; over a fourth of graduating students will be working on roles that don’t exist today.

*Job security has become illusory; many young envision a world without work

Explosion of digital technology, microelectronics, AI, robotics, and computer-integrated manufacturing may render many skills redundant. Industrial revolution demolished several vocations, altered the nature of many industries. History also tells us that the western world seized the growth baton, even as eastern societies like China and India ‘ignored’ the reality; grappled with industrialisation for the next few decades. Unsuccessfully.

Events of the present point to an accelerating and mushrooming change across the economy. It will have a larger, even more profound impact on society. While the trajectory is easy to foresee, the velocity needs more than a looking glass. One needs insight, and vision. The study articulates that several policymaking institutions lack the insight to foresee, the agencies lack the ability to plan for the work evolution that may be upon us sooner (not later). We need to be better prepared.

*Growth-job linearity is ebbing

While we focus on reinforcing our economy to create opportunities; there are several ‘unexpected and unknowns’. Manufacturing jobs are diminishing at a rate of 10 per cent per year, even as the sector grows at a healthy 12 per cent. We will also see a structural but weakening shift in our demography over the next 10 years, denying us the growth momentum. Similarly, unemployment will push many into the poverty trap, watering down the effort of the last three decades.

However, under an enabling ecosystem, we may even profit from automation. India is a ‘growth’ economy, has low consumer penetration across several categories pointing to a huge potential. Innovative solutions can ride on technology infrastructure. Additionally, India has the capability, pivoted on a healthy demography, supported by entrepreneurial spirit to ‘embrace’ change.

*Tech prompts productivity, enhances competitiveness, catalyses opportunities

The study articulates that India’s job ecosystem, and its trajectory will be defined as much by digitisation as several other forces.  Globalisation of markets, demography (both age and gender) of the workforce, and the laws and regulations governing work and employment are particularly important forces. We can influence only one corner of the field i.e., laws and regulations.

Sample this. The MSMEs are the job ‘factories’ employing over 80 per cent of the workforce, but over 80 per cent plateau at ten people companies. The mortality rate of the MSME sector is worrying. The ecosystem makes them inefficient. Most have little or no competitive advantages. They are much too frail to adapt and adopt. They spend resources to ‘battle’ inspectors and ‘comply’ with value subtracting filings. They invest a large proportion of their effort to ‘acquire and run’ businesses; and frustrating effort to ‘collect’ from the government and its bodies. The government schemes and support bypass them. The government must address this.

The MSMEs will feel the pinch of automation when larger organisations automate, relying less on ‘outsourcing’ to the smaller players. India needs to protect its MSMEs. God forbid if they fail. The domino effect will lead to mushrooming unemployment. It will cripple the economy. The government has initiated labour reforms, but in the absence of skill and education reforms it gets ‘watered’ down; has no impact. Several ‘reforms’ lead nowhere.

Our policymakers need a better understanding of the forces driving economic change and its impact. Similarly, they need to appreciate the weakening growth-jobs correlation. We need an enabling ‘job’ framework that dovetails education and skills, intertwine labour laws with the MSME support ecosystem. We may also need to radically reform the economic facing policies, junk several value subtracting schemes and initiatives.

‘Doomsayers’ predict the ‘disappearance’ of work altogether for a significant section of the workforce. However, the fear of robots taking away jobs, on balance is unfounded, overstated, even alarmist.

The shift and evolution of markets, industry structure, demography and technology are more ‘gradual’ in India; so are the adaptations to these shifts. Additionally, automation is yet not viable for a low wage-high growth economy. Job polarisation is a decade away as we are not a nation of highly skilled technicians, professionals. We are a consumer driven economy, with several under-penetrated sectors.

*Holistic, solution-centric reforms will create jobs

India is a high growth economy, and its job market as a result, may not be impacted significantly in the short run.

However, this must not console us. The unemployment problem is not going away, nor is there a magic wand to make it disappear. India cannot afford to be in denial, needs a holistic, solution-centric framework to address the challenges of unemployment. And a pulley.

It must charge the policymakers into action, driven by a missionary zeal.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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economic reforms

Dr. Vikas Singh

The author is a senior economist, columnist, author and a votary of inclusive development

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