Under-Employment, not Unemployment is the main problem facing India: Niti Ayog


  • NITI Aayog had recently stated that not unemployment but a “severe under-employment” is the main problem facing the country.

What is underemployment?

  • Underemployment is a measure of employment and labor utilization in the economy that looks at how well the labor force is being utilized in terms of skills, experience and availability to work.
  • Labor that falls under the underemployment classification includes those workers who are highly skilled but working in low paying jobs
  • These workers are highly skilled but working in low skill jobs or as part-time workers who would prefer to work full time.

How is underemployment different from unemployment?

Underemployment v Unemployment

  • Unemployment refers to the economic situation in which an individual who is actively searching for employment is unable to find work
  • Underemployment is a situation where there is a mismatch between the employment opportunities and the skills and education level of the employees.

Under employment v employment in India’s context

  • Severe underemployment and not unemployment is a more serious problem as a job that needs to be done by one person is often performed by two or more workers
  • Contrary to some assertions that India’s growth has been ‘jobless’, the Employment Unemployment Surveys (EUS) of the National Sample Survey Office (NSSO) have consistently reported low and stable rates of unemployment over more than three decades.

What is the present status of underemployment in India?

  • According to 2006-07 ,NSSO survey of service firms, the 650 largest enterprises accounted for 38 per cent of services output but only employed two per cent of service workers.
  • An estimated 433 million of India’s urban population belongs to the age group between 15 and 34. This figure is expected to rise to 464 million by 2026.
  • Second in 2010-11, firms with less than 20 workers employed 72 per cent of India’s manufacturing workforce but contributed only 12 per cent of manufacturing output
  • More than 85% of them were working in the informal sector with low pay and little security, according to the National Sample Survey Organisation’s 66th round conducted in 2009-10.

What are the major factors behind under employment in India?

Conventional paradigm of the society

  • In a so-called well established education system of India, we apparently, constrain our self too much into a conventional paradigm of the society, resulting in detachment, passion and determination.
  • Societal pressure also may lead to graduates rushing to get their hands on whatever jobs they get instead of looking for what they may actually be capable of. This leads to many employees working on positions they are overqualified for.

Over population

  • Underemployment is when there is a low market-place demand for employees as employers are often responded with overwhelming applications leading to hard-hitting competition
  • This allows the employers to raise the bar by raising the academic requirements of many occupations higher than is really necessary to perform the work
  • Technological change also causes underemployment, as many entry level jobs are replaced by machines and technology.
  • This forces many workers to look for alternatives.

What are the Government initiatives for handling underemployment?

Creation of Coastal Employment Zones

  • Niti Aayog in its ‘Three Year Action Agenda’ recommended for the creation of a handful of Coastal Employment Zones (CEZ), which may attract multinational firms in labor-intensive sectors from China to India.
  • The presence of these firms will give rise to an ecosystem in which local small and medium firms will also be induced to become highly productive thereby multiplying the number of well-paid jobs

Import-substitution strategy

  • Focus on the domestic market through an import-substitution strategy would give rise to a group of relatively small firms behind a high wall of protection.
  • Import substitution refers to the use of domestic products to replace imported goods
  • Import substitution policies were adopted by many developing nations from the 1930s until the late 1980s.

The Make in India initiative

  • The ‘Make in India’ campaign was initially launched to boost the deprived manufacturing sector of India.
  • The campaign thus needs to succeed by manufacturing for global markets, leading to high and low end jobs.

Reforming labor laws

  • India have about 85 -90 % of the workforce employed in informal sector on which these laws are not applicable. These are micro firms employing as low as 5-10 persons.
  • This includes standards on minimum wages, working conditions, overtime controls, right against unjustified retrenchment, strengthening of Labor unions, Right of worker to compensation in case of accident at work place, post-retirement benefits, Personal progress, skill development, Social security and Dignified and respectful job                                                                      

Amendments in Apprenticeship Act

  • In apprentice system, trade workers, engineers (both diploma holder and graduates), 10+2 passed vocational students, need to undergo training in industry to enhance their skill.
  • Apprentice Protshan Yojanaand the Effective Implementation of revamped Rashtriya Swasthaya Bima Yojana (RSBY) for labour in the unorganized sector were also launched.

Labour issues in India

How effective have the government initiates been so far?

Prime Minister’s Employment Generation Programme (PMEGP)

  • Jobs created by the Prime Minister’s Employment Generation Programme (PMEGP), which generates employment in rural and urban areas by initiating new micro enterprises and small projects, has fallen by 4% from 428,000 in 2012-13 to 323,362 in 2015-16.
  • Economic Survey (2016-17) also indicates a shift in the pattern of employment from permanent jobs to casual and contract employment.

Make in India

  • The main aim of the Make in India programme was to generate employment in the manufacturing sector.
  • The target was to increase the share of manufacturing to 25% of GDP by 2020 from 15% under the UPA-led government.
  • The parliamentary standing committee of commerce (2017) indicated that the manufacturing sector has grown only by an average of 1.6% in the last 5 years till 2015-16.

Digital India

  • The government aimed to stress on automation through the introduction of Digital India. As a result, major IT companies such as WIPRO, Tech Mahindra and HCL Technologies hardly hired any new employees from 2015-16.
  • India is not yet equipped to transition to Digital India. At present, there isn’t enough spectrum or wired connectivity to support the initiative, thus failing the government’s aim to create home based jobs and encourage more entrepreneurs to start online businesses.

Startup India

  • Under this programme, the government encouraged banks to provide finance to young entrepreneurs to start their own business ventures. The lack of innovation and lack of skilled labour resulted in the shutdown of many new startups.
  • A total of 25 startups have shut down. Startups such as TinyOwl, Dazo and Peppertap had to close down due to lack of funds and appropriate skill set.

Suggestions/Conclusion/Way ahead

  • There are often two to three workers performing a task of one worker. This translates into low productivity and low wages.
  • What needs to be done is creating high productivity jobs that would also mean creating jobs in the formal sector, especially in labor-intensive manufactures
  • There are industries where India stands strong; such as engineering goods, auto and auto parts and pharmaceutical, such secors needs to be strengthened, especially by removing obstacles they still face as exporters.
  • Stringent labor laws are one of the reasons that has failed to creating formal-sector jobs. A more reformed labor laws is the need of the hour
  • The presence of Coastal Employment Zones will give rise to an ecosystem in which local small and medium firms will also be induced to become highly productive thereby multiplying the number of well-paid jobs.
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