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A new report brought out by the Centre for Sustainable Employment at the Azim Premji University, State of Working India, shows how desperately India needs to rethink its jobs and labour strategy, with labour law reforms being the key thrust. Allaying, at least for now, the fears of automation eating up jobs, the report says the replacement of workers in organised manufacturing by machines has been slowing down even as the number of jobs supported by Rs 1 crore of real fixed capital (in 2015 prices) had fallen from 90 in the 1980s to 10 in 2010; this ratio has not fallen since, indicating some rise in job creation in manufacturing.

However, the jobs created are more precarious than before. The share of contract and other relatively less stable employment has grown sharply since 2000—from around 16% to nearly 30%. Industries are side-stepping harsh labour laws, including heavy-handed mandatory social security contribution laws and those having very little flexibility on hiring/firing, by increasing contractual workers in their workforce. This, in turn, has depressed wage growth in organised manufacturing—labour productivity has risen six times since the 1980s, the report states, while real wages of workers have grown by just 1.5 times. Even the growth of salaries for managerial and supervisory roles lags labour productivity. At the all-India level, 67% of the households reported incomes below Rs 10,000 a month, while the lowest salary recommended by the Seventh Central Pay Commission was Rs 18,000. The situation is worse in the informal sector—the report cites a case from Bengal, where a woman undertook tailoring, brick kiln work, daily labour and mid-day meal cooking at a government school and earned just Rs 2,700 a month on average.

Growth now creates lesser jobs than it used to—and this is going to get worse as automation picks pace and the skills gap between the workforce and the jobs created widens. The report shows that while, in the 1970s-80s, growth ranged 3-4%, employment growth stood at around 2% per annum. Contrast that with the growth between 2011 and 2015 averaging 6.8% and the employment growth falling to 0.6% per annum—this means an employment growth-GDP growth ratio of less than 0.1. No wonder, around 16% of the youth are unemployed, as the report’s authors estimate from NSS and Labour Bureau data. Factor in the many millions who are “under-employed”, given they are over-educated/-skilled for the jobs they hold, and India’s employment problem seems ominous. And, as it is in many other areas, gender disparities mean women bear the brunt of the jobs-problem in the country.

Unless steps such as junking the draconian restrictions on hiring/firing and shifting the burden of social security contributions from employers and low-wage workers to the government are taken—the government’s special package for the textiles sector did this—the country could sink into new lows of unemployment. Another step the government must consider seriously is an income support programme for the unemployed and those earning significantly below a living wage.