Employment generation should be the central objective in all economic policies
Interlinkages in job creation
A policy framework for job creation should consider the employment linkages across different sectors. For instance, every additional person to be hired in the IT sector requires about 100 sq. ft. of office space. In short, 10 lakh jobs automatically create a need for 10 crore sq. ft. of office space. This in turn creates demand in the real estate sector and leads to further employment generation in the construction sector.
At present, job creation is more of an incidental outcome and not the central objective of policies. Take for example our policies on foreign investment. The key objective should not be the amount of FDI we require, rather, it should be how many jobs can be created with that investment. Therefore, an FDI which creates one million jobs v/s an FDI which creates 10 million jobs, needs to be treated differently.
Need to celebrate job creators
Another aspect I would like to highlight is that we do not celebrate job creators. For instance, Infosys has created three to four lakh jobs. Similarly, Edelweiss has 7,000 people working and along with these direct job opportunities, we have created 4,000 indirect jobs as well. In total, these 11,000 jobs are supporting 20-30,000 people at present. We need to talk about job creation much more than what is being done at present.
In sectors such as hospitality and healthcare, we need a lot more jobs. This needs to be balanced aptly with the automation led by technology, innovation, etc., which could and will reduce jobs both in our country and around the world.
Demand, supply and clearing
To find effective solutions for job creation, we need to understand three problems – the problems of demand, supply and clearing.
- Demand Side – We can create and generate more demand through government driven policies as well as training in new skills. For example, disruptive innovations like Ola Cabs have created a whole new paradigm of job creation that was non-existent earlier. They have created numerous jobs for youth who would earlier not even have considered driving cabs as a feasible or economically viable option. At the same time, government investments can act as natural hubs for new job creation, both at skilled and unskilled level.
- Supply Side – On the supply side, the focus should be on skill development. However, the problem is that there is a significant lack of investment in skill development. A lot is being done but it is insufficient. Our education system needs to be aligned to industry needs. Various skill development initiatives have been introduced by the government but these have not yet reached their potential and scale, which is the need of the hour. The need is to recognize and incentivize these initiatives. In our organization too, we train the housekeeping people with soft skills such as English language, which helps them seek better earning jobs in places like Café Coffee Day, etc. The underlying philosophy is to add on to the existing skill sets of these employees, which helps not only in job enhancement but also their overall personality development.
- Clearing mechanism – The third issue is that of clearing house mechanisms. In the agriculture sector, for instance, wheat and rice farming constitutes a large share while pulses comparatively do not have a substantial share. The Indian farmer is happy cultivating wheat and rice rather than pulses owing to a good MSP (Minimum Support Price) in the former. This creates a shortage of pulses – we have, in fact, not been able to allocate the resources efficiently till date. The problem somewhere lies in switching over from existing work. In India, many businesses which are outdated or unviable and are barely sustaining, face a huge problem in exits. Thus, the problem is ensuring a smooth and clean clearing mechanism in our system, whether it is farming or banking or any other field of work.
The solution lies in becoming more market or demand oriented rather than state oriented. We need to allow the economy to reallocate resources. If a person who is working at Café Coffee Day wants to take a loan to buy a car and join Ola or Uber, he should have all the means going forward in terms of access to credit, approvals, etc. This requires some amount of smoothening and tweaking over the entire ecosystem. There is a lot of frictional cost present in the economy which needs to be gradually brought down. The barriers for people to become self-employed need to be reduced. Most importantly, clearing needs to be quick and easy to enable efficient allocation of resources.
India is on the brink of a phase of strong long-term growth. However, we need to ensure that the benefits of such growth accrue to the entire ecosystem, percolating down to even the grassroots levels. Job creation would be one of the key metrics in ensuring that. By ensuring simultaneous participation of the government & private sector, working towards a common goal and creating a secure, reliable measurement mechanism, we can develop an inclusive society where the benefits of growth are available to all.
Rashesh Shah, Senior Vice-President, FICCI and Chairman & CEO, Edelweiss Financial Services writes this piece for FICCI publication “Economy of Jobs”.