Leveraging Employment Growth: 12th Five Year Plan and beyondIssues and Challenges –

Dr. Santosh Mehrotra, Director General, Institute of Applied Manpower Research

If you would like to cite this presentation, please first email Dr. Mehrotra at santosh.mehrotra@nic.in

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Structure of the presentation•Employment growth – positive & negative

news▫Employment & GVA growth

Agriculture Industry (manufacturing & non-mfg) Services

▫Structural transformation in the economy•Employment in Organized-unorganized sectors

▫Formal informal employment •Constraints in employment generation•Challenges to be addressed in 12th FYP

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Jobless gr in period of fastest economic gr• Total emp: increase in empl by

60mn during 2000-05, period of fastest economic gr 2005-10 witnessed jobless gr with only 2 mn additional job opportunities created.

• Agri emp increased by 21mn in 1st half of decade, while declined by 14 mn during 2005-10.

• Mfg emp increased by 12mn in 1st half, but declined by 5mn in next half - increase of 6.7 mn workers in decade. ▫ National Manufacturing

Policy targets mfg emp of 100 mn by 2025

• Services emp increased dramatically in 1st half (19 mn) while it increased by only 3.5 mn in 2004-5 – 2009-10

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

21.3

11.7 9.1

18.8

60.7

-14.1

-5.0

18.3

3.5 2.8

Change in emp (in mn)1999-00-

2004-5

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Only saving grace in emp gr – construction sector• Rise in investment in infrastructure from 4.4% of

GDP (2007-8) to 7.5% in terminal yr of 11th Plan (2011-12) resulted in massive rise in construction emp

• Those moving out of agri found work in construction (even org segment) -rise in emp by 26.5 mn workers during 2000-10 – 8.5 mn during 2000-05 & 18 mn during 2005-10.

•Emp in construction roads, highways, ports, housing etc) likely to expand with invt in infrastruc to continue to grow from total $500 bn during 11th Plan to $1 trn in 12th Plan, nearly 10 % of GDP

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Employment elasticity of output falling

Sectors 2000-2005 2005-2010

Agriculture 0.84 -0.37

Manufacturing 0.76 -0.21

Non manufacturing 0.92 1.26

Services 0.45 0.06

Total 0.44 0.01

• Employment elasticity of output (defined as emp growth for 1% growth in GVA) is falling

• Reflects jobless growth in economy with nearly 8% growth in GDP per annum during 2002-12

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Limited growth in emp explained by declining Subsidiary Status emp

• PS: activity status on which person spent relatively longer time (major time criterion) during the year (>180 days)

• SS: economic activity for 30 days or more during reference period of 365 days (>30 and <180 days)

• Decline by 11mn in SS emp, explains limited growth of overall emp

PS SS PS+SS

-20

-10

0

10

20

30

40

50

60

70

32.5

-8.79999999999

999

23.7

48.3000000000001

11.7

60

13.1

-10.8

2.30000000000007

1994-2000 2000-2005 2005-2010

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Mixed News: Declining Child labour, but also female emp fallen

•While male emp increased by 23.2 mn during 2005-10, female emp declined by 20.7 mn, during 2005-10

•female LFPRs decline from 29% to 23% (for all age groups) –▫ 44 % explained by increasing participation in educational

institutes▫ 31% opted out for attending to domestic activities

•Incidence of child labour has consistently declined from 6% in 1993-4 to 3% in 2004-5, further to 2% in 2009-10 – largely explained by rising enrolments & retention in school educ

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Mixed News: Structural transformation in eco happening - though slowly

Requires that share of agri in output & empl declines over time, and share of industry & services increases correspondinglyWhile share of agri in GDP has fallen, 53% of workers in agri are still engaged in producing 15% of GDP- contrast to 40% agr workers producing 10% of GDP in China

Agricultu

re

Manufac

turin

g

Non m

anufac

turin

g

Servic

es

0

10

20

30

40

50

60

7060

115

24

53

11 11

25

Shares in total em-ployment by Sector

1999-2000

Agricultu

re

Manufac

turin

g

Non m

anufac

turin

g

Servic

es

0

10

20

30

40

50

60

70

2416 12

49

15 16 12

57

Shares in total output by Sector

1999-2000

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Positive news 1: falling unemployment rate & rising real wages

  Unemp rate (%)(CDS)

Salaries & Wages

Regular Casual

(Rs. Per day, for male rural workers)

1993-94 6.06 33.23 13.17

1999-00 7.31 46.98 16.78

2004-05 8.2 45.43 17.25

2009-10 6.6 50.44 20.55

• Unemployment by Current Daily Status measure has declined

• Real wages are rising, not just in salaried work, but also in casual work

• Average number of months without work in the past year for casual workers declined between 2004-05 and 2009-10

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Positive news 2: regular wage & salaried emp rising

• Regular wage & salaried empl rising, albeit marginally

• Rise in share of casual labour

• Rising consumption exp, hence falling poverty

0

10

20

30

40

50

60

53

15

33

56

15

28

51

16

33

1999-00 2004-05 2009-10

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Positive news 3: rising share of enterprises employing more than 20 workers

• Of all non-agri workers, share of workers in enterprises employing less than 10 workers declined from 82% in 2004-5 to 76% in 2009-10

• It was accompanied by rise in share of enterprises employing more than 20 workers

• This is consistent with falling share of self employed & rise in share of regular & casual emp

Less than 10 10 & above but less than 20

20 & above 0

10

20

30

40

50

60

70

80

9082.3

5.811

76.1

6.8

17.1

Workers in non-agricul-tural enterprises, by size

of emp (%)

2004- 05 2009 -10

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Structure of the presentation•Employment growth – positive & negative

news▫Employment & GVA growth

Agriculture Industry (manufacturing & non-mfg) Services

▫Structural transformation in the economy•Employment in Organized-unorganized sectors

▫Formal informal employment •Constraints in employment generation•Challenges to be addressed in 12th FYP

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Positive news 4: rising share of organized sector emp –but still v. low, rising slowly

• Share of emp in org sector increased from 14% in 1999-2000 & 2004-5 to 16% in 2009-10 - Reflected by rising no. of salaried workers

(Org sector as defined by NCEUS)• Share of informal emp (emp

with no social security benefits) is 93%, risen from 91% in 1999-2000

• This share is much higher than other Emerging Market Economies (Brazil 55%, Thailand 60%, Phillipines 70%)

1999-2000

2004-05 2009-1010.0

18.0

26.0

34.0

42.0

50.0

58.0

66.0

74.0

82.0

90.0

13.6 13.7 15.8

86.4 86.3 84.2

OrgLinear (Org)UnorgLinear (Unorg)

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Structure of the presentation•Employment growth – positive & negative

news▫Employment & GVA growth

Agriculture Industry (manufacturing & non-mfg) Services

▫Structural transformation in the economy•Employment in Organized-unorganized sectors

▫Formal informal employment •Constraints in employment generation•Challenges to be addressed in 12th FYP

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Constraints in employment generation

• China’s share in world mfg increased from 3% in 1991 to 14% in 2011▫Share of India in world mfg is 2% which increased

by 1% in 20 yrs

• World Economic Forum’s Global Competitiveness Report ranks India 56/142 countries in 2012 (49 in 2010). ▫Inadequate Health & Educ facilities▫quality of power supply▫Inadequate infrastruc, corruption, inefficient

bureaucracy, tax regulation & inflation–Labour mkt restrictions come later in the list

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Constraints in employment generation.. What changed after 2005?

1. Costs of production escalated heavily because of rising real estate (land) prices

2. Increasing import dependence because global integration asymmetrically affected mfg whose trade ratio for 2008/9-2010/11 is 180% compared to 20% for services

▫ Mfg gr faced continuing import competition (imports from China, Korea etc affected domestic producers)

3. Wage/salary rises sharper post 2005, raising capital intensity of output

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Structure of the presentation•Employment growth – positive & negative

news▫Employment & GVA growth

Agriculture Industry (manufacturing & non-mfg) Services

▫Structural transformation in the economy•Employment in Organized-unorganized sectors

▫Formal informal employment •Constraints in employment generation•Challenges to be addressed in 12th FYP

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Challenges to be addressed in 12th FYP – seize the Demographic Dividend available only till 2040• By 2022, workforce projected to grow from 460 mn to 570mn.

110 mn job opportunities need to be created over next 12 yrs (less than 10mn per year, not 12.5 mn)• China created jobs in Non-agri to seize DD

• How to improve agri gr with productivity, diversification & modernization of agri? – must create empl in allied agri activities – need for SD

• With only 6.7 mn job opportunities created in mfg sector in past decade, biggest challenge is to meet targets of NMP

• Urgent reforms covering land, power, skill development, regulatory regime & credit facilitation needed for expansion of output & generation of emp

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1. Challenges for SMEs to be addressed in 12th FYP•98 % of units with less than Rs 25 lakhs invt in

plant & machinery also employ less than 10 workers. Access to credit most often hinders expansion plans (discussed in greater detail in last session)

•Micro enterprises must receive much greater recognition in terms of promotive support during 12th Plan than now

•Cluster based devpt strategy (identify & develop innovative clusters) need to be adopted to push gr in mfg & services sectors

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2. Challenges to be addressed in 12th FYP to increase female emp

• Creating emp opportunities for educated females in & around villages (or tier 2/3 towns) – both existing and new entrants to WF

• Imparting skill training which can improve employability of young educated females▫There are very few women ITIs , also not many courses

that girls & women prefer are taught in those ITI s.▫Girls prefer female trainers – need to ensure female

instructors in training institutes▫Expanding VE from mfg trades to services’

• Ensuring a safe working environment – need to create suitable infrastructure (transport facilities, hostels etc) for women

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3. Challenge to Expand public exp on Health & Educ

• China spent 5% of GDP on health (2010) – India 1.3% of GDP

• Industrialized countries: 1880-1980 public exp to GDP ratio rose from 11% to 45%▫Driven by Health & Educ exp + Social insurance▫India: Public exp/GDP is 27% (Centre + States),

but public spending 5% of GDP on H & E, compared to 12% in industrialized countries

• Need to 1st improve health, nutritional & educational status of the population before investing in SD

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4. Skills challenge-National Policy on Skill Development target of 500 million to be skilled by 2022 ?? Is it realistic?

• no definition of ‘skill’ that underlies this estimate• over-estimates no. of those to be skilled in non-

agri workforce. Assumes majority agri workers will exit agri

• There were 244mn workers in agri (53% of total WF) in 2009-10, & in best case scenario that will fall to 190 mn in 2022 (33% of total WF)

• no estimate of how many are currently already trained who are in WF; only has estimate of annual flow of training capacity of various ministries & NSDC

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The Scale of the Skills Challenge

• National Policy on SD lays out a target of 500 mn to be trained

• NSDC has a target of 347 mn

• 12th FYP has laid out a target of skilling additional 50 mn by 2016-17 for the additional job opportunities being created

• IAMR estimates based on NSS data targets skilling 291mn people –taking into a/c both those existing in WF & new entrants

Target for 2022 Additional skilling requirements (mn)

Formal Vocational Training

136

VT for those Informally trained

55

General education higher secondary & beyond

100

Total 291