There is backlog of minimum 6 crore persons waiting to
be employed. In addition, one crore youth are entering the work force every year. Creation of about 2 crore jobs every year is required so that the backlog can be cleared in about 6 years. Number of jobs being created in the organized sectors, however, is paltry. According to the Economic Survey published by the Ministry of Finance about 5 lac jobs were added in the organized sectors every year between 2008 and 2012. But the government needed to create 2 crore jobs; they are creating 5 lacs! This despite the growth rate being ‘respectable’ at 7.7 percent in the same period. This establishes that pursuit of growth itself will not create jobs.
Increasingly automatic machines are being deployed in the factories. Few highly skilled jobs are created in maintenance and operation of these machines while a large number of unskilled workers are thrown out of jobs. It is profitable for companies to use more machines and less labour. This is the natural trajectory of development. "Development" means that people are rich. More capital is available. Consequently, interest rate becomes low. On the other hand wage rate becomes high as people attain higher standards of living. Consequently it is profitable for companies to use more machines and less labour as an economy develops. More production takes place, growth rate is high but there are few jobs. This is a global phenomenon that is afflicting all developed and developing countries alike. Attaining a high growth rate is obviously not a solution. High growth rate means more production from automatic machines and more jobs being eaten away.
The way forward is to divide the economy into two sectors—the "growth" sector and the "employment" sector. The "growth" sector would comprise of industries such as petroleum, steel, railway, and construction. Automatic machines may be freely used in this sector. This sector will provide high production, high growth, and high taxes. Objective of this sector will be to attain highest rate of growth of GDP, irrespective of number of jobs created. The "employment" sector, on the other hand, would comprise of areas such as weaving, soft drinks, apparel, bicycles, leather, gem and jewelry and the like. The explicit objective of this sector will be to create jobs, even if the cost of production is high. Use of automatic machines in this sector may be banned or heavily taxed. A heavy tax imposed on power looms will lead to a hefty increase in the price of machine-made cloth and spontaneously make handlooms competitive and create millions of jobs. A heavy tax imposed on soft drinks will lead to a hefty increase in the price of bottled soft drinks and spontaneously make street corner rasvantis competitive. Sectors where large number of jobs created and increase in cost due to ban on use of automatic machines is less should be placed in the "employment" sector. For example, the increase in cost will be huge if bore wells are taxed heavily and water is to be drawn from 500 feet manually. Therefore, bore wells may be allowed to be made. But the increase in cost will be nominal if harvesting is to be one manually instead of by harvester combines. Therefore, harvesters may be banned. The Niti Ayog must be directed to make a study of all sectors of the economy and come up with a blueprint of the restrictions that may be imposed to create 3 lac jobs a year with least cost to the economy. Similarly a target wage can be fixed. More numbers of restrictions on automatic machines will lead to more demand for labour and an increase in wage rates. Let there be no doubt this job creation will entail a cost. Cloth and soft drinks will become expensive. That is a cost people of the country must pay to provide jobs to the young generation.
The trick is to tax job-eating machinery instead of subsidizing it. Presently incentives like accelerated depreciation, tax holidays, and Special Economic Zones are provided to industries making large capital investments. In effect, the government pays industries to eat jobs. Instead government must tax job-eating machines. Job-creation will then become a revenue earner instead of requiring huge revenue expenditures as in MNREGA.
A study by Indian Council for Research on International Economic Relations done for the Government of India has pointed out that unavailability of skilled labour was a major bottleneck in the expansion of employment in labour-intensive sectors like sports goods, apparel, leather, bicycles and gem and jewelry. Indeed skill development is required. But these sectors cannot solve the gigantic problem of unemployment that is staring in Nation's face.
The skill development programme can create large number of jobs if it is focused on the global services market. Large number of services can be supplied to the global consumer via the net. These include translations, architectural designs, legal research, processing of medical records, etc. It is entirely possible for an Indian national to translate a manual from Japanese to German. The Government must implement a programme to teach foreign languages to Indian youth. A "Center of Foreign Languages" must be opened in every district of the country. The center should provide education in various foreign languages. It should be made compulsory for every graduate in the country to learn a foreign language. Such a requirement is made in American universities.
Vol. 48, No. 8, Aug 30 - Sep 5, 2015