Let us understand this economic phenomenon first. What is jobless growth?As the population of a country grows, people need work in order to support their families and themselves. Economic growth is necessary to employ all those who seek work. Without sufficient economic growth, people looking for work will be unable to find it. In any economic condition, it is the individual workers possessing employable skills that will find work first. If the supply of jobs is plentiful, then more opportunities open up for those with less attractive skill sets.In a jobless growth economy, unemployment remains stubbornly high even as the economy grows.India is the fastest growing large economy, posting a growth rate of over 7 per cent, yet jobs are not growing as fast as GDP.
Why It is happening in India-Manufacturing should take greater responsibility of job creation as agriculture already employs over half of India’s workforce, and services can’t absorb the million youth who are joining it every month.-
The Centre is trying its best to push manufacturing through the Make in India initiative. But that doesn’t seem to be working, at least when it comes to job creation.What went wrong?- India’s rigid and often confusing labour laws enforced by a myriad agencies have done irreparable damage to the cause of labour. Our labour laws discourages entrepreneurs to employ more workers because then they have to comply with more stringent laws,waste of time and money.
Solution- States must tweak their labor laws according to the demand. Rajasthan, MadhyaPradesh, Maharashtra and Gujrat government have come up with favorable labor laws.-
Imports are hurting job creationThe domestic market is flooded with competitively priced imports (often subsidised by countries such as China) that reduce the market size for indigenous manufacturers. This is not to argue that imports should be banned. But it certainly calls for a serious examination into why domestic businesses are not able to compete with imported products.
Solution-Make in India.It will take time.Remember the story of Chinese bamboo.-SMEs and first-time entrepreneurs, are not able to compete with imported products because of high transaction cost arising out of inefficient logistics and India’s overall poor record on ease of doing business.More employed workers even at lower wages are a better option than less employed workers at higher wages. The Government should focus on productivity-enhancing skills upgrade measures rather than fixing minimum wages.Prudent macroeconomic policy will bring in more FDI that will aid job creation if major concerns on the demand and supply sides are addressed.