Zero Employment Elasticity: The Harsh Reality

By- Suhani Gupta

As India is heading towards an awaited general election, one thing that is concerning both the parties and the citizens is ‘jobs’. The reason being that the job scenario in the country has been immensely grim over the past few years. A layman would probably associate growth in the gross domestic product with the growth in employment in the country. However, this is far from true. We need to take a closer look at the changes unfolding in India’s labor market. It is quite ironical that the growth in the country’s GDP hasn’t been accompanied by a similar growth in the number of jobs. According to a recent report by the Times of India, between the period of 2000-2012, jobs in the country have grown by a mere 2.2% per year. This is a matter to worry about, since an approximate number of 12 million people join the workforce every year. Employment elasticity is an indicator, which measures the percentage changes in employment induced by the changes in the gross domestic product.

According to the Planning Commission, employment elasticity has descended from 0.44 to 0.01 over the last decade. An employment elasticity of 0.01 is as good as saying that employment in the country did not grow at all, at the time when the economy was witnessing extraordinary levels of growth of output. One explanation behind this occurring can be the very evident swing from labor- intensive work to capital-intensive work. Technologically advanced machines are now featuring in both fiction and in real life. Technology has been replacing labor, and hence apart from providing solutions, it has also been exacerbating problems for the working class of the country.

This malaise of the falling employment has especially been proven to be true in case of the agriculture and the manufacturing sector. Most of us are well aware of the fact that agriculture has been the economic mainstay of the country for many decades. Yet, what is disturbing to know is, that jobs in the agriculture sector have practically fallen over the past thirteen years, rather than increasing. The total farm employment in the country has fallen by around 8.6% from the period 2004-2012. This has happened because the dependence of rural population on agriculture has been subsiding. More number of people are now engaged in secondary, tertiary sectors or are self employed. A large number of women have withdrawn from the farm sector in the past. Almost similar is the scenario of the manufacturing sector, where jobs have been growing at a languishing rate of 4% per annum.

Where have these jobs gone?

Most of the jobs from the two basic sectors have shifted to the construction sector. Yes, this is true. Jobs in this sector have been exploding at a shocking rate of 17% per year. Particularly, in the rural areas, construction jobs increased from about 9.4 million in 1999-2000 to a massive 37.2 million in 2011-2012. This is a growth of almost 300%! Also, there has been a 6% increase in the availability of jobs in the transport, storage and communication sector. The section of the population, which is being affected greatly in this scenario, is the youth. When young minds face a dearth of jobs right at the beginning of their career, their confidence and quality of skills start fading away. In some cases, there is a huge problem of mismatch between the kind of skills possessed by young people and the ones that employers need. Most companies are redesigning their working processes in a way that they are now using technological skills more than human skills. This is the reason why young people are often seen engaging in entrepreneurial ventures and migrating to other countries for better job opportunities.

However, we never know what awaits us in the coming future. So if not optimistic, let’s be less pessimistic and hope for the best.

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