Home Blog Let’s aim at labour intensive economic growth

Let’s aim at labour intensive economic growth

According to Periodic Labour Force Survey (2018-19) 24 % of the workforce is engaged in regular wage salaried jobs offering a steady flow of income and a mere 2.2% in regular salaried jobs with a written job contract for a period of more than three years and access to all social security benefits.

In other words, a disproportionately large share of the workforce is likely to face job and income losses as a consequence of the present dual shock of the pandemic and lockdown. This is one of the most vulnerable segments in our economy and the government needs to do lot more to take care of them. The cessation of economic activity that has followed the outbreak of COVID-19 has presented an unexampled shock to labour markets and levels of unemployment have surged. India’s dualistic labour markets have disproportionately large proportion of workforce that is engaged in informal work arrangements and therefore, are woefully ill-equipped to cope with a shock of this magnitude.

They are likely to be particularly severe for workers in more precarious forms of employment that offer little or no security of tenure, no written contracts or basic social protection.

Job losses are not going to be restricted only to casual workers, who account for a quarter of the workforce. In these challenging times, given the sharp decline in aggregate demand, firms may lay off many regular formal workers, except perhaps those who have a long term relationship with firms and have acquired firm specific skills.

One can also expect further widening of disparity in the labour market between the relatively less educated workers who predominantly work in informal work arrangements in sectors such as agriculture, manufacturing, construction, trade, hotels & restaurants which have been most vulnerable to the first wave effects of the pandemic and lockdown, on the one hand, and the small proportion of better educated who have regular formal jobs in sectors that are more amenable to remote work.

While monthly allowance by means of direct benefit transfer is one of the right means of providing immediate support to the vulnerable and displaced, there is also a need to provide wage support to enterprises to prevent further job losses.

It should be noted that the COVID-19 crisis has come on the back of pre-existing high unemployment and underemployment, there is a need to put in place a clear and comprehensive plan of productive employment generation. It’s also true that creating well paying good jobs is not just an end in itself but is also a means of boosting aggregate demand and enabling economic recovery.

The strengthening and expansion of employment guarantee programmes and adoption of an industrial policy which focuses on construction and labour intensive manufacturing should form as important elements of such a strategy. There is also a need to extend social security to informal workers to make labour markets more secure.

Employment guarantee schemes too, will play a critical role in providing support to those rendered unemployed. Economy has to be revived and the recovery needs to be job rich and employment intensive. Adopting an industrial policy with a greater focus on sectors such as construction and labour intensive manufacturing will not only generate employment for large masses of India’s unskilled/low skilled and semi-skilled workforce but also help strengthen domestic demand.

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