Job creation fails to match rise in working age population, despite economic growth: IIM study

The study notes an employment decline starting in the 1990s, recovering in 2004–05, and reaching near-stagnation in 2011–12.

Despite India making big strides on the economic growth trajectory from 2004-05 to 2017-18, the pace of job creation has failed to match steps with the rise in working-age population, shows a study by the Indian Institute of Management (IIM) Lucknow.

IIM Lucknow conducted the study in collaboration with researchers from Birla Institute of Technology and Science (BITS), Pilani, and the Ministry of Agriculture and Farmers Welfare.

Analysing data from the National Sample Survey Office (NSSO) Employment and Unemployment Survey, and Periodic Labour Force Survey Dashboard, the researchers found that the agricultural sector, though employing the most youth, contributed low value-adds to the overall economy, resulting in significant employment challenges.

Non-farm sectors, with greater economic potential, showed a lower inclination to hire, despite their capacity to boost the economy, it said.

The research, led by Professor Dr Tripati Rao, senior professor of economics and business environment area at IIM Lucknow, Dr T Triveni from the agriculture ministry, and Professor Balakrushna Padhi, of BITS Pilani, is published in the Indian Journal of Labour Economics.

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“Apparently, economic growth, rather than creating more jobs, has resulted in net labour displacement. Alongside the number of jobs created, it is equally important to examine the quality and decency of jobs, as there is a strong linkage between productivity and job decency,” said Professor Dr Tripati Rao.

The study notes a declining trend in employment from the 1990s, recovering in 2004–05, and reaching near stagnation in 2011–12. Despite a remarkable economic growth phase from 2004–05 to 2017-18, job creation remained lacklustre, leading to a period of ‘jobless growth’ where workers remained underutilised despite the increased working-age population, which is 15 to 64 years.

Various reasons contribute to this, including a high percentage (55 percent) of self-employed workers in India, compared to 33 percent in the US. “The new employment structure relies on non-standard types like casual, contract, and fixed-term employment, intertwined with social hierarchy and discrimination, resulting in new forms of precariousness and extending general disparity in the labour market,” Professor Rao said.

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The short-term gig and platform economy is growing and is expected to reach 23.5 million by 2030, according to NITI Aayog. These workers lack job security in the informal sector.

The study also points out that gender disparity in employment patterns persist even today, and highlights a significant point that unemployment was on the rise in highly educated youths.

The analysis suggests the need for a key policy intervention. A conscious effort is needed to make the manufacturing sector more labour-intensive for inclusive growth. This, the researchers argued, will create high linkage effects, uplifting various industries. There is also hope that recent improvements in health and education in India may positively influence the conversion of unemployed youth into a high-quality and skilled workforce.