UPSC Editorial Analysis

Importance of ‘Skill Creation’ to solve India’s Unemployment

GS Paper 3 - Employment, Growth & Development, Human Resource


India’s cities are a picture of aspiration. Contemporary cities are teeming with economic activity, drawing a constant stream of recent graduates looking to make their way in life. For a great number of young Indians, the city lights are the light of hope. After years of schooling and aspiration, they come with hopes of a better life. Nevertheless, the hard reality of urban unemployment is pushing these dreams further and further away. Creating high-quality jobs is a major challenge for India, particularly given its youthful population. The failure of economic growth to keep up with the creation of jobs has been a persistent problem for decades. India must now concentrate on developing a workforce that is prepared to meet the demands of the country’s changing economy. By tackling this issue head-on, India can make sure that its cities remain engines of opportunity and growth.

Reasons behind Insufficient Job Creation

  • Paradox of High-skill, Low-Employment Sectors – Services and capital-intensive manufacturing, which normally produce fewer jobs in relation to their economic output, have been the main drivers of India’s economic progress. For example, the IT industry makes a substantial GDP contribution but only directly employs roughly 4.5 million people. 
  • Premature Deindustrialization – In comparison to industrialized nations, India is undergoing premature deindustrialization, which is the reduction of manufacturing’s share of GDP and employment at a far lower level of per capita income. This tendency, which is partially due to automation and global competition, restricts the industrial sector’s ability to take in excess labor from agriculture, which has historically been a major source of employment growth in developing nations.
  • Impact of Global Economic Trends – Global economic trends are exerting an increasing influence on the job market in India. Protectionist measures in developed economies have impacted India’s export-oriented industries, which has had an effect on the generation of jobs in these fields. Furthermore, the economic downturn (more than 4.25 lakh tech workers lost their jobs in 2023) and disruptions to the global supply chain have brought attention to the employment potential and risks in particular industries. 
  • Skill Mismatch – The workforce no longer possesses the skills that employers are looking for due to the rapid speed of technological change. With only 4.7% of India’s workforce having completed formal skill training, the 2015 Report on National Policy on Skill Development and Entrepreneurship exposed a serious lack of employable talents.  
  • Dominance of Informal Sector – With less job security, lower productivity, and fewer social safeguards, the informal sector employs more than 90% of India’s labor force. In addition to having an impact on worker welfare and job quality, the predominance of informal labor has a negative impact on overall economic output and the capacity to produce long-term, high-quality jobs.
  • Challenge of Demographic Dividend – Every year, India adds almost 12 million new workers, which puts tremendous pressure on the country’s ability to create jobs. The economy has to create 10–12 million jobs annually to accommodate these newcomers and reduce the rate of unemployment that now exists. But the generation of jobs has never quite reached this goal.
  • ‘Missing Middle’ and MSME Subsidence – The industrial landscape of India is characterized by a notable lack of mid-sized businesses and a preponderance of extremely small businesses (those employing less than 50 people) and a few very large organizations. The ‘missing middle’ phenomenon hinders the creation of jobs because, generally speaking, mid-sized businesses have the greatest potential for expanding and creating jobs.    
  • Impact of Automation and AI – New technologies are changing the nature of work in several industries, including automation and artificial intelligence. According to the McKinsey Global Institute, automation may displace 9% of India’s labor force by 2030. Although these technologies provide new career opportunities, they frequently call for a high degree of skill, which could make unemployment among those with less training worse.   

Measures to boost Job Creation in India

  • Localized Skill Ecosystem – Establish micro-level centers for skill development in line with the demands of the regional industry. By providing customized training programs based on the unique needs of the businesses in each area, these hubs would guarantee a direct flow of competent people to nearby firms.
  • Green Jobs Transition – Create a special fund to assist employees moving from carbon-intensive industry to green employment. With the provision of retraining, relocation aid, and short-term income support, this fund would minimize unemployment and promote a more seamless transition to a sustainable economy.
  • Gig Workers Cooperative – In the gig economy, encourage the establishment of worker-owned cooperatives. While retaining the flexibility of gig labor, these cooperatives would give gig workers more bargaining power, common resources, and a safety net.
  • AI Job Augmentation Program – Launch a nationwide initiative to prepare employees for jobs with AI assistance. This project would put more of an emphasis on developing new job categories that mix human skills with AI capabilities, boosting employment and productivity overall, rather than seeing AI as a job destroyer.
  • Micro-Manufacturing Networks – Promote the establishment of small-scale, decentralized industrial facilities connected by digital networks. With the help of credit guarantee programs, MSMEs may spearhead this network and enable distributed production, which would eliminate the need for massive factories and provide employment in smaller cities and rural areas.
  • Precision Agriculture Employment Initiative – Start a national initiative to teach and hire young people in precision agriculture using high-tech methods. This would entail the use of drones to monitor crops, data analytics to optimize yield, and Internet of Things (IoT)-based farm management, thereby establishing a new class of technologically proficient agricultural workers.

Way Forward

To ensure India’s urban centers remain beacons of opportunity, a multifaceted approach is essential. Localized skill development centers tailored to regional industry needs, transition funds for green jobs, and cooperatives for gig workers can provide a safety net while enhancing employability. Embracing AI job augmentation and micro-manufacturing networks will foster new employment avenues. Additionally, initiatives like the Precision Agriculture Employment Initiative can revolutionize traditional sectors. Collectively, these measures can bridge the gap between economic growth and job creation, turning demographic challenges into dividends.

SOURCE: The Indian Express

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