TODAY'S EDITORIAL: Good Job on Jobs
For critics of reforms and globalisation, OECD’s latest study of global employment trends could come as a shock. While there’s no disputing that India’s GDP growth rate has picked up in recent times, naysayers habitually complain that this is "jobless growth", resulting in profits for the capitalist class but no jobs for workers.
But the OECD report shows India to be a stellar performer on the job creation front. It generated 11.3 million net new jobs annually between 2000 and 2005. This is over 60 per cent more than the seven million new jobs created in China every year. There’s more good news. India generated half the jobs in the so-called BRIC nations (Brazil, Russia, India, China) and BRIC nations’ employment gains during 2000-05 were more than five times those of OECD, which represents a rich club of 30 developed nations.
That, incidentally, nails another myth which anti-globalisers like to propagate — that globalisation favours rich nations. While the study dispels the notion that reforms and globalisation have been bad for India, there are several areas of concern.
Employment generation in India has been rapid but it starts from a low base. India’s employment to population ratio was a mere 50.5 per cent in 2005. Moreover, data for China and India are presented for urban areas only, while 79 per cent of Indians are estimated to be working in the rural sector, where underemployment is pervasive. We must also note that India needs to run faster to stay at the same place.
While other BRIC nations have an almost stagnant labour force — Russia’s is falling — India has a pronounced youth bulge and needs to generate jobs for a growing labour force. The report finds that extra jobs generated with every 1 per cent growth in GDP — the elasticity of employment in relation to growth — are relatively low in China and India. In other words, India needs to grow at a minimum of 9 per cent to maintain the pace of job generation.
For most categories of workers in India, real wages did not grow significantly between 2000 and 2005. This needs to change. Reforms per se are not the problem, but the mess left by half-finished reforms can only be resolved by more reforms. Businesses must face less red tape when they set up or move in and out of sectors, and labour laws simply have to be relaxed to generate more employment. Opposition to the latter can be defused by extending generous social security benefits to all categories of labour, particularly casual workers and the unemployed. In other words, create a safety net. This is an area in which successive Indian governments have been hopelessly remiss.
But the OECD report shows India to be a stellar performer on the job creation front. It generated 11.3 million net new jobs annually between 2000 and 2005. This is over 60 per cent more than the seven million new jobs created in China every year. There’s more good news. India generated half the jobs in the so-called BRIC nations (Brazil, Russia, India, China) and BRIC nations’ employment gains during 2000-05 were more than five times those of OECD, which represents a rich club of 30 developed nations.
That, incidentally, nails another myth which anti-globalisers like to propagate — that globalisation favours rich nations. While the study dispels the notion that reforms and globalisation have been bad for India, there are several areas of concern.
Employment generation in India has been rapid but it starts from a low base. India’s employment to population ratio was a mere 50.5 per cent in 2005. Moreover, data for China and India are presented for urban areas only, while 79 per cent of Indians are estimated to be working in the rural sector, where underemployment is pervasive. We must also note that India needs to run faster to stay at the same place.
While other BRIC nations have an almost stagnant labour force — Russia’s is falling — India has a pronounced youth bulge and needs to generate jobs for a growing labour force. The report finds that extra jobs generated with every 1 per cent growth in GDP — the elasticity of employment in relation to growth — are relatively low in China and India. In other words, India needs to grow at a minimum of 9 per cent to maintain the pace of job generation.
For most categories of workers in India, real wages did not grow significantly between 2000 and 2005. This needs to change. Reforms per se are not the problem, but the mess left by half-finished reforms can only be resolved by more reforms. Businesses must face less red tape when they set up or move in and out of sectors, and labour laws simply have to be relaxed to generate more employment. Opposition to the latter can be defused by extending generous social security benefits to all categories of labour, particularly casual workers and the unemployed. In other words, create a safety net. This is an area in which successive Indian governments have been hopelessly remiss.
Labels: employment, India
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