According to the International Labour Organization (ILO), about 63 countries across the globe have prepared National Development Framework or National Employment Policy (NEP) to decide the roadmap for employment generation mainly after the global financial crisis, 2008.

They are moving towards development and adopting comprehensive national employment policies bringing together various sectoral measures, programmes and institutions that influence the dynamic demand and supply of labour and the functioning of labour market responding to the short, medium- and long-term prospects and priorities.

Need for NEP

India is currently undergoing a dual challenge of employment creation, one set of people are unemployed labour force (i.e. highest in last 45 years, 6.1% in 2017-18) and, another set are around 10 million of new entrants in the labour force every year.

Other important issues are jobless growth, structural transformation, under-employment, informal employment, skilled workforce, high levels of educational enrolment and aspiration of youth, sectoral issues, decent jobs and so on. In addition, female participation in employment is not only low but also declining since, the 2000s.

The emerging new technologies such as high-end information and communication technology (ICT), internet, industry 4.0 technologies, automation and task-based jobs such as gig jobs are adding new dimensions to the future of work.

The adoption of these technologies will increase in future. In the process, many people involved in a routine task in traditional sectors will also lose their jobs. At the same time, many new sectoral and technology-based jobs will also be created with newer skills. So, this is a great opportunity for Indian youth to tap the new emerging opportunities by learning new skill-sets like in the past we reaped the skill advantage in the information technology sector.

The achievement of the government using ICT for development is immense, such as Jan-Dhan, Aadhar and Mobile (JAM) trinity, direct benefit transfers, unemployment exchange & allowance, Goods and Service Tax Network (GSTN), Employees' Provident Fund Organisation (EPFO), Employees' State Insurance Corporation (ESIC), etc., which is leading to more formalisation of the labour market.

India’s labour market scenario is facing multi-faceted, multi-sectoral challenges and NEP is important to capture the sector-wise and region-wise labour market dynamics, and facilitate registries for the manufacturing sector, Ministry of Corporate Affairs, informal sector, unemployment exchange, unemployment allowances, appropriation of jobs, etc.

Critical issues

• Huge informal employment: A majority of India’s workforce (460 million) is engaged in informal work that is not covered by any social security benefits and, is more likely not even earning the minimum wage. Roughly nine out of 10 workers are informally employed and lack any social protection. This creates a huge transformation problem from a largely informal to formal economy. 
• Rising open unemployment: India’s open unemployment has increased many folds and reached its highest level of 6.1% in 2017-18, followed by a marginal decline, 5.8% in 2018-19. In particular, unemployment among educated and women is very high. This will likely go up substantially further after the Covid-19 pandemic. As estimated by the Centre for Monitoring Indian Economy (CMIE) the unemployment rate touched as high as 24% in May 2020. In particular, youth unemployment is substantially higher than other age-group.
• Low female work participation rate: The female work participation rate is just 18.6% in 2018-19 compared to 55.6% of their male counterparts. There are many arguments put forth such as social norms, larger involvement in household responsibilities, increase in households’ income, more participation in higher education and unavailability of suitable jobs. Given the relative absence of job opportunities, women, especially the urban educated, are discouraged from entering the labour market.
• Lack of structural transformation and underemployment: Around half of India’s workforce is still employed in agriculture, which contributes less than a fifth of the national income. Due to the unavailability of enough jobs in non-agriculture sectors, most of the people in rural areas are still engaged in farm activities. In addition, most of the workers in the informal sector work at low wages. Underemployment is a huge problem.
• Low productive and low-quality job: Only around 24% of workers are engaged in a regular job, while the rest are self-employed or into casual labour. This disproportionately high informal sector employment is a major problem in India. Almost half of all new non-agricultural jobs added in India during the second half of the 2000s were in the construction sector, which is characterized by relatively low wages and poor working conditions. Since quality formal employment is rare in India, access to regular jobs is highly unequal among social groups, and across regions.
• Shortage of highly educated and skilled workforce: Most workers lack adequate education or skills - less than 30% of the workforce has completed secondary education, and less than a tenth has had any vocational training despite the existence of many skill development and vocational training programmes. It is important to bear in mind that the jobs crisis is intricately linked with the learning crisis in education.
• Job growth has slowed dramatically: The number of people entering into the labour force or looking for jobs is increasing over the years. However, the growth of additional employment number is less than half as fast as the labour force. Given the rate, at which demographic structures are changing, the largest additions are to the population of the young. The last decade is also sometimes referred to as jobless growth period. This economy is not generating enough jobs and the jobs that are being created are of extremely low quality. So, the employment problem is not only about the number of jobs but also about the quality of jobs. Creation of adequate, high-quality employment is one of the most formidable challenges for economic policy in India today.
• Stagnant growth of manufacturing and missing middle: Manufacturing sector, which has transformed the labour markets in East Asia and China has contributed only about 16% to GDP, and this has been stagnating since the economic reforms began in 1991. No major country managed to reduce poverty or sustain growth without manufacturing.

India’s manufacturing sector has been characterised by the missing middle- a concentration of small/micro-firms at one end of the spectrum, and some large firms in each sector at the other. Small firms (those with 20 or fewer workers) together employ nearly three-quarters of all workers within manufacturing but produce a little more than a tenth of the total manufacturing output. Furthermore, the largest services sector firms, while together producing almost 40% of the sector’s output, employ only 2% of its workers.

• Exclusion of vulnerable section: The vulnerable section of society such as minorities, dalits, tribals and differently-abled are still largely engaged in informal employment or low paid jobs. Many studies suggest that they face discrimination in the labour market in terms of access, earning and status of jobs etc.
• Multiple labour laws and regulations: There are over 200 state laws and close to 50 central laws. And yet there is no set definition of “labour laws” in the country. India is in the midst of reforming its labour regulations and some states have relaxed the decades-long labour laws in recent times to woo investments in their respective regions as they fight economic downturn due to Covid-19.
• The threat of automation: Technological advancement is posing a threat of automation or robotisation substituting human workers with robots. Research studies indicate that one industrial robot can replace six workers. In the case of India, up to 52% of the activities can be automated leading to a great impact on low-skilled jobs and simple assembly tasks.
• New emerging jobs: The new emerging gig economy or freelance jobs are temporary and flexible. They are considered as independent contractors, and not as employees covered by national labour laws. In addition, these emerging jobs are not counted in the national statistical system.  

Covid-19, employment and livelihood

Indian economy had slowed down before the Covid-19 outbreak, but the on-going pandemic has pushed it further into a recession with unemployment rate touching 23.5% (CMIE) in the two months of lockdown in April and May 2020. Apart from this, CMIE has also estimated that 27 million youth in the age-group of 20-30 years have lost their jobs in April 2020 because of the lockdown. This will have a greater impact on livelihood and jobs in future.

Further, these problems are different across regions and sectors of employment. There is a need to recognise these challenges and put in place appropriate policy responses to tackle them. As multiple forces ranging from technological advances to climate change to demographic changes transform the world of work, the absence of decisive policy action will further disrupt livelihoods and exacerbate inequalities. The government needs to take appropriate steps urgently to assess the current employment situation in the country, including the macroeconomic environment, demographic context and sectoral challenges in employment generation, following which it will set targets and monitor them.

NEP amidst coronavirus pandemic

The recent push for the NEP last month by the Minister of Labour and Employment on a fast track is a welcome move for encouraging employment generation in the post-Covid-19 period. India has ample intellectual and practical knowledge to formulate an employment policy that takes into consideration gender, caste and ecological concerns.

‘Shramik shashatrikaran’ – Labour empowerment

It is very important to have an inclusive policy, which caters to the challenges and needs of the marginalised, women, divyang, etc. The aspirational districts and priority sectors needing more attention must be identified to achieve the principles of ‘Sabka Sath, Sabka Vikas, Sabka Vishwas’.

Research and development is the core of the NEP and the policies, schemes of the relevant ministries and committees need to be streamlined to collect evidence and provide essential inputs for policy-making.

NEP will also be crucial for implementation, monitoring and evaluation. This is important for addressing the Digital India objectives and outcome-based decision making as per the MoSPI and NITI Aayog’s recent efforts for data and planning. For this, the maintenance of a real-time database and repository and monitoring of the employment status of the labour force is important. It would require enormous efforts in the beginning but would yield more than proportionate results in the immediate future. There are many schemes for employers and workers, eg. EPFO, ESIC, PMJDY, MSME, Startups, BOCW, PMSYM, PMSBY, SHGs, and so on.

In times of disasters and state and national emergencies, the NEP would provide a backbone and architecture to complement the efforts of the government and maximise relief to the affected families and enterprises. This would minimise economic losses and optimise the use of limited resources. This would complement PM’s vision of New India and achieving the $5 trillion economy having special emphasis on Shramik Samman Evam Sashaktikaran (Labour Respect and Empowerment).

AtmaNirbhar Bharat and New India

National Employment Policy can provide a 360° framework, having inclusive and sustainable planning, enabling environment and holistic impactful approach towards decent employment. The consultation paper for draft National Urban Policy Framework 2018 is an important document template for NEP to start taking shape. The preparation of the NEP warrants a broad-based national consensus among various stakeholders. This can be ensured through a consultative process by taking various stakeholders’ views and the constituents’ demands into consideration during the policy formulation process.

The most important part of the policy is to formulate a link between the policy options and budgetary allocation and/or financial mechanism considering the convergence among various department or sectors. Further, an institutional framework detailing the roles and responsibilities for the implementation and monitoring of progress should be also part of the policy document.

Such policy document will effectively help formulate appropriate employment strategies, which ensures decent work, empowerment, and sustainability towards the Atma Nirbhar Bharat and contribute significantly to achieve the Sustainable Development Goal (SDG) Goal 8.

Authors: Prof. Balwant Singh Mehta and Dr. Arjun Kumar

Balwant Singh Mehta is Research Director (H) at Impact and Policy Research Institute (IMPRI), New Delhi and Senior Fellow at Institute for Human Development, Delhi.

Arjun Kumar is Director, Impact and Policy Research Institute (IMPRI), New Delhi and China-India Visiting Scholar Fellow, Ashoka University.