Jobs conundrum in a red-hot economy

While these figures seem promising, they are hard to reconcile with the broader economic challenges posed by the global slowdown and disruptions caused by the COVID-19 pandemic. This has sparked a debate among various critics, highlighting that the pressing concerns about the types or quality of job being created in India in recent years.

Quality of jobs, characterised by fair wages, job security, and high productivity, which are vital for a healthy labour market. On the other hand, low-quality employment—often referred to as "distress employment"—reflects economic necessity rather than genuine opportunities. Analysing key indicators such as employment status, earnings, structural transformation, and labour productivity helps shed light on these emerging challenges.

Formal employment takes a hit in the post-Covid phase

The status of employment reveals concerning trends. Regular salaried jobs, considered the most desirable form of work due to their job security and benefits, declined from 23 percent in 2018 to 21.2 percent in 2021 and have since remained stagnant.

Conversely, self-employment rose consistently, from 52.3 percent in 2018 to 58.4 percent in 2024. Among these, the most concerning is the increase in unpaid family helpers—a vulnerable form of employment where individuals do not receive any income, which grew from 13.5 percent to 19.3 percent during this period. This shift underscores the growing difficulty of securing stable, formal employment in the economy.

Earnings trend downwards

Earnings data further highlight the precarious nature of jobs being created, with lower pay being a steady trend. Between 2018 and 2024, real average monthly earnings declined consistently for both regular salaried workers (from Rs 10,658 to Rs 10,341) and self-employed individuals (from Rs 6,897 to Rs 6,644). This trend indicates rising underemployment, where people have jobs but earn less to maintain a decent standard of living. Such declining and low-paying jobs fail to provide financial stability or improve workers’ quality of life.

Another worrying development is the reversal of structural transformation in India’s labour market. Typically, as economies grow, workers transition from low-productivity sectors like agriculture to higher-productivity sectors such as manufacturing and services. However, between 2018 and 2024, the majority of new jobs were created in agriculture and construction—sectors with low productivity. The share of agricultural employment increased from 42.4 percent in 2019 to 46 percent in 2024, reversing a decades-long structural transformation in the economy. At the same time, manufacturing, a sector known for higher wages and productivity, saw its employment share fall from 12 percent to 11.4 percent. Additionally, informal sector employment rose from 80.5 percent to 82.9 percent, highlighting limited progress toward formalisation and meaningful structural transformation.

Labour productivity, measured as Gross Value Added (GVA) per worker, further illustrates the complex employment challenges. In 2024, labour productivity levels in agriculture (Rs 40,000) and construction (Rs 194,000) were significantly lower compared to manufacturing ( Rs 383,000) and services (Rs 470,000). This growing reliance of employment on low-productivity sectors makes it difficult to raise workers’ living standards or contribute meaningfully to long-term economic growth. Jobs that only ensure subsistence will fail to drive India’s economic aspirations.

This analysis shows that while India’s impressive economic growth demonstrates its immense potential, the persistent challenges of quality employment in the labour market highlight the need for urgent policy attention.

Possible solutions

First, the government needs to prioritise the employment growth in modern manufacturing and services, as these sectors offer better wages, higher productivity, and job security. Policies that promote investment, simplify regulations, and enhance infrastructure are essential to unlocking their full potential.

Second, there is an urgent need to upgrade workforce skills to meet the demands of emerging industries. Expanding initiatives like Skill India and aligning them with industry needs can help workers transition to more productive sectors.

Third, formal sector employment must be encouraged by providing incentives for businesses to shift from the informal to the formal economy. Simplifying tax systems, streamlining compliance requirements, and introducing supportive labour laws can promote this transition.

Fourth, increasing women’s participation in the workforce is essential for inclusive growth. Addressing barriers such as inadequate childcare, unsafe workplaces, and restrictive societal norms can enable more women to take up formal, productive jobs in manufacturing and services. This not only enhance economic growth but also ensures equitable development.  Lastly, strengthening social safety nets is essential to supporting workers in informal and emerging gig economy.

These efforts will be instrumental in generating full, productive, and decent employment while fostering sustained and inclusive economic growth, as envisioned in SDG Goal 8, thereby enhancing the well-being of people for generations to come.

(The author is ‘Professor’ at Institute for Human Development (IHD), New Delhi.)

Views are personal and do not represent the stand of this publication.