Jobless growth is a situation where in the overall economy shows an expansion but the number of jobs created is very less or nil in comparison to the growth rate of the overall economy. This issue can be analysed from three different perspectives
- This could be truly an anomaly from the economic point of view.
- Or, it could also be a situation that is projecting an incorrect data due to flawed method of data collection.
- In addition to these two situations it could also be a result of a situation where there is a fundamental shift in the kind of economy that is emerging due to various other factors.
The impact of economic reforms on jobs growth or losses might be marginal or negligible in comparison to other factors according to me.
Jobless Growth – An Anomaly
The phenomenon of jobless growth in past decade can actually be an anomaly. The growth seen could be seen as a result of growth in commodity prices , productivity or a boom in the stock market evaluations.
For example , if the real estate prices increase drastically due to higher demand , the growth of the sector will be shown high in GDP calculations. This may not actually reflect in the growth of number of buildings built. The same number of employees may be producing same amount of buildings which are sold at a higher price.
Growth in productivity per employee can also reflect as a growth in economy of the country without creating new jobs. Mechanization or automation in any industry may produce more goods without producing any new jobs.
In addition to the above two , a stock market boom , valuation of currency , growth in earnings from exports etc could also be reasons for an anomaly in growth and job generation statistics.
Is the data flawed ?
In India, almost 90% of the jobs are in the unorganized sector. The government job collection mechanism does not include jobs of unorganized sector in its surveys. As a result, the service sector is supposed to be having only 26% of jobs though it accounts for 64% of GDP in the country. This is because , casual laborers, roadside vendors , contract laborers who are not shown on the rolls of firms are not accounted in the jobs data.
The legal barriers to expansion of on roll employees is also a big problem in India. As the labor laws compliance is costly, many companies prefer to employ temporary workers from third parties. Jobs in this domain may also not reflect in jobs surveys.
Another factor that might be fundamentally changing the growth-job relationship is technology. The economic growth in the so called fourth industrial revolution is expected to come from technological leaps like robotic manufacturing and artificial intelligence. The transition to this era might have actually begun in some sectors like IT services and manufacturing. Based on a Nasscom research close to 69% percent of jobs in India.
Lack of up-skilling and re-skilling has been lacking in the past few years. Thus as the playing field alters at a fast pace vis-a-vis other nations, the employees of the industry might find it difficult to meet demands of the new era. The companies might also be lagging behind competitors in altering their strategies and business models. This phenomenon is being seen in IT sector. Thus there are reports of job losses in these sectors.
Economic Reforms and Job Creation
Economic reforms of the 90s like privatization and disinvestment would have caused many job cuts in PSUs. This kind of situation has not been encountered in the past decade. Job creation or loss have occurred due to many reasons in addition to Economic reforms.
It is also said that the current GST has also made local MSMEs less competitive and results in slow growth of jobs or even job losses. Anecdotal evidence suggests that demonetization has also made unorganized sector less competitive and slowed the growth of jobs and economy.
But these are mere speculations which don’t have much data to support them. However, we can say that some damage would have happened to some firms or persons as a result of economic reforms. But the impact is only marginal.
Reforms can only assist business to expand or contract. It can create a situation which hampers or facilitates creation of jobs. But it is not the sole reason for either creation or loss of jobs. Growth of exports, competitiveness , innovation , global demand, domestic demand, credit growth are other factors that impact growth of the economy. That in turn has its spillover effect over job creation.
Jobless growth at the outset might appear like an anomaly in comparison to the earlier standards. In the 21st century, with increase in automation and IT use in various sector, the notion that higher growth leads to higher employment is not always valid. Several other factors like skills, demand, government regulation and lack of formalization of economy are also a reason for poor jobs growth figures. The lack of reliable data and grey areas in definition of a ‘job’ is by itself a major challenge in capturing the trends in employment and job creation data.
As time, technology and nature of economy changes, the definition of regular and anomaly will also change. The future growth in economies are expected to come from technology driven developments like artificial intelligence and automation. In that scenario job reduction will become a normal phenomenon.
Hence, it is the need of the day to evolve and adapt economic activities of companies and countries to stay relevant in the rapidly changing scenario. The meaning of employment itself is set to change in coming days. Governments need to undertake economic reforms that address these fundamental changes in world economy. Government policy can either be an enabler or an impediment to growth and job creation. But it can’t be held responsible for the generation or lack of jobs completely in the Indian context.