Vanishing Jobs

Global consultancy firm Price Waterhouse Coopers has said that India has the potential to become world's No 2 economy in 2050 after China if it adopts the required structural reforms. The question is which structural reforms? The "structural" reforms of demonetisation and GST, though touted as path-breaking etcetera have led to a secular decline in GDP growth rates. Not for nothing international agencies like these had supported these steps of the Government.

The challenge of the decade is how to manage the new technologies. A driverless Metro Train was inaugurated in the country recently. Good. But Matthew D Johnson, Professor at St. Stephen's University, Canada has forecast that robots will displace 50% of jobs by 2035. The situation will be much worse by 2050 when India has the potential to become No 2 in the world. The total employment in the organised sector has been declining in the country in the last many years while large numbers of youth are entering the labour market. If anything India is adding to the unemployed by killing the existing jobs, in part, by adopting new technologies. Robots are making pizzas and serving to the customers in human-less shops in the United States today. Wherefrom will the crores of India's small shop owners and youth make a living then? A restaurant in Kerala recently introduced robotic waiters. So, jobs are vanishing. On the other hand, the small industries that are in the forefront of job creation are under pressure from big companies that manufacture through global value chains. A large pharmaceutical manufacturer in India may be importing raw materials from China, containers from Brazil, electronic equipment from Germany and logistics software from India. They roam the world looking for the lowest prices for raw materials and highest prices for their finished goods. They also get "economies of scale." The cost of production is less when undertaken on a large scale. A small pharmaceutical company cannot possibly compete with these large companies because it has to buy raw materials locally even if they are expensive; and sell the finished goods locally even if the price is less. The small entrepreneur may be a graduate who is the purchase manager, production manager, human resource manager, accountant, finance manager and marketing manager of his small unit. If small industries come under pressure, if the job-creation suffers then the youth entering into the job market will engage in counter-productive criminal activities instead of productive activities. This is the logical result of adopting efficient production by hi-tech global value chain driven big companies. Thus, global consultancy firm Arthur D Little and Bank of America have said that local production should be encouraged and small industries should be provided assistance. But "encouragement" and "assistance" may not be effective given the huge and ever-increasing gap in the technologies and global value chains developing between small- and large companies. A report commissioned by the Manmohan Singh Government that suggested that clusters of small industries must be established to enable them reduce their cost of production by making community water pollution treatment plants, is there for all to see. That did not work. The government will necessarily have to provide "protection" rather than "encouragement" and "assistance" to small businesses to enable them to stand competition from large companies in order to provide jobs to youth.

The demographic dividend being touted as India's strength is slowly but inexorably moving towards becoming a demographic disaster. Demonetisation, GST and Covid Pandemic have dealt three heavy blows to the people. Those who have lost their jobs are eking out a living by selling vegetables. According to one district-level official of the BJP from UP, the daily earning of vegetable sellers has declined from Rs 2,000-a-day to Rs 500 today. Today there are 20 vegetable vendors where there were only two previously. This decline in people's income will certainly explode-even if it takes a few years for that to happen.

The challenge for the next decade is to find a pathway between the efficiency of the job-eating large businesses; and the inefficiency of the job-creating small businesses.


Vol. 53, No. 30, Jan 24 - 30, 2021