Santosh Mehrotra Prof of Economics, Centre for Labour Studies, Jawaharlal Nehru University, New Delhi

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1 Santosh Mehrotra Prof of Economics, Centre for Labour Studies, Jawaharlal Nehru University, New Delhi 1

2 1. Trends in employment and its structure Statewise trends 2. What explains the trends? Agriculture Manufacturing Non-manufacturing Services (modern vs. traditional 3. Skill gaps in India 4. Policy implications 2

3 Employment in India stands at mn in Change in Employment (in million) Change in employment (in million) 2000 to 2005: 60 mn joined LF (12mn p.a) 2005 to 2012, 2 mn people joined the LF p.a. 3

4 : agricultural workforce increased by 5.1 million : increased by 22mn : it declined by 23.7 mn (first time since Independence) : it further declined by13 mn 4

5 Absolute volume of non-agricultural employment (mn) Mfg Non-Mfg Services

6 Change in employment (in million) Mfg Non-mfg Services Total non-agri All sectors Employment increase in non-agriculture : 37.6 mn increase (7.5mn rise p.a.) : 51.8 mn increase (7.5 mn rise p.a.) 6

7 Agriculture Mfg Non-Mfg Services Total work force

8 Bihar, Uttar Pradesh, Karnataka, Andhra Pradesh, responsible for 44% decline in agri empl. Agriculture to to Bihar Uttar Pradesh Karnataka Andhra Pradesh Rajasthan Gujarat Maharashtra Kerala Punjab Tamil Nadu Orissa Haryana Assam Himachal West Bengal Madhya Pradesh All India

9 Uttar Pradesh,Tamil Nadu, Rajasthan, Gujarat witnessed decline in manuf empl during 04/05 to 09/10 and then revival. West Bengal only state showing increase in manuf empl during both time periods to to Uttar Pradesh Tamil Nadu Rajasthan Gujarat Orissa Madhya Pradesh Kerala Maharashtra Bihar Himachal Punjab Assam Karnataka Haryana Andhra Pardesh West Bengal All India

10 Non- manuf increased across all states. UP, Bihar, TN, AP agri declined the most. Increased maximum in nonmanuf to to Uttar Pradesh Rajasthan Bihar Tamil Nadu Andhra Pardesh Madhya Pradesh Karnataka West Bengal Orissa Kerala Punjab Haryana Maharastra Gujrat Himachal Pradesh Assam All India

11 Services empl increased in Maharashtra, Gujarat, Bihar during 04/05 to 09/10 Post 2010: Tamil Nadu, Madhya Pradesh to to Maharashtra Gujarat Bihar Karnataka West Bengal Rajasthan Uttar Pradesh Kerala Assam Haryana Andhra Pardesh Orissa Punjab Himachal Pradesh Tamil Nadu Madhya Pradesh All India

12 24mn women joined LF, particularly in rural areas in agri bw 2000 and 2005 agri gr rate only 2%pa , rural distress Post 2005, 23 mn decline in female empl in rural (though 2.8 mn increase in urban). Factors determining demand for labour: mechanization in agriculture, shrinkage in labour dd mainly due to increasing rural wages Decline in dairying: fewer small/marginal farmers have grazing land, cpr fell; women did dairying, now less so (affects ss emp) Factors determining supply of labour: increasing female education (after age 15), incidence of child labour among girls is declining, increase in hhld income, time constraint for women (sibling care earlier done by elder girl) 12

13 Fewer people joined labour force in second half of the decade compared to the first half. Workforce in the age cohort below 15 and between 15 and 24 is decreasing consistently. In , 208 million children in age group (less than 15 years) were attending educational institutions and therefore not part of labour force, it rose to 238 million in Size of Work Force by age Cohort Age < > Attending Edu Insti and therefore not in LF Age < >

14 : rural distress caused by lower agricultural growth and constant low wages led 22 mn women to join LF Post 2005: agri saw abs fall in emp, 1 st in history: pull factor: increase in rural wages beginning NREGA rising dd for labour in construction sector (MGNREGA, PMGSY; pvt. real inv. (rural+urban); infra inv, pub & pvt.) Shortage of labour due to higher participation in education Decline in poverty- income effect in urban areas but now in rural too. Push factor: Increasing mechanization in agri; fall in dairying 14

15 : emp in mfg increased by 11 mn : fall by 3 mn : incr by 9 mn to reach 59.8 mn Same sectors (wearing apparel, textiles, leather/footwear, furniture, non-metallic mineral products and wood products) that drove emp in 2000 to 05 did so in this period but effect on manf empl was muted as it was not mass demand; barely any decline in pov 1999/ /5 But post 2004/5 fall in poverty was dramatic, pace picked up, hence demand 15

16 Reduction in export demand led to a fall in business expectation and lower capacity utilization in industrial sector growth of manufactured goods exports 16

17 Mfg sector rapidly integrated into global economy - avg trade ratio - rose from 92% in 1994/95 to 180 % (2008/9 to 2010/11) Import penetration in manfg almost doubling whereas exports increased by 20% If Petroleum, Oil and Lubricants (POL) exports are excluded, net exports to mfg GDP a trade surplus till turns into a deficit post 2003/04 Year X-M/ Mfg GDP (X-M) less POL exports / Mfg GDP

18 Rural wage Urban Wage

19 Labour to Capital ratio Capital-output ratio

20 Rise in consumption expenditure from to and further to faster than before Decline in numbers of poor from 407 mn to 356 mn in to 269 mn in Rise in real wages Rise in consumption expenditure reflected in rising output and empl in food processing, leather, furniture, textiles, garments Simple consumer goods by new non-poor produced by unorganized sector SSIs using lab 20

21 India s share of services exports in total global exports of services faster than rise in share of India s merchandise exports in world exports. exports, after a dip in , started reviving, faster than growth in India s world exports of services. 21

22 the share of the labour force (age 15-59) that was not even literate was 29.1 per cent, or million of mn labour force. In addition, another 23.7 per cent of LF had either primary or below primary level of education (102.4 mn). A further 17.6% % had only a middle level of education (i.e. upto class 8). 70 per cent of the labour force in India, as recently as had less thansec education Vocl education in higher secondary level had remained stunted, with only 3% of those in hi sec (11 th and 12 th ) in vocational education stream, VS. 43 per cent of youth at the secondary level of education in China in VET (Kuczera and Field). 22

23 Only 2% of India s workforce had acquired formal VET, and an additional 8% of workforce had acquired vocational training informally on the job. Only10 per cent of WF and 20% of non-agri WF had acquired VET of formal or inf kind. However,about 40% of industrial workforce did have VET - either formal or informal 23

24 GOI s National Skill Policy (2009) estimated requirement of SD of 500 million. But if entire workforce in 2015 is ~ 500 mn, the estimate that almost all LF needs to be skilled seems exaggerated. A gross over estimate, since it is highly unlikely the size of LF in 2022 will exceed 570 million. Illogical that 500 of the 570 million would need, or could feasibly be provided, general and vocational education and training. Also, the 500 million number assumes that all farmers in agriculture need training, or they move out of agriculture to non-agricultural occupations (highly unlikely given rate of absorption of workers in industry and services). 24

25 New NSP in July Revised target downwards to 400 mn to be skilled by No major change from 500 mn. Also there was little change in the approach to TVET system, which was in need of radical reform Based on LF for , linear projection to 2015 In two sectors (agri plus non-agri) it estimates LF to be trained as Mn and Mn. Assuming that we are going to skill( RPL, reskilling and upskilling) WF <45 years (or 70% of the LF) we obtain Mn in farm and 170 Mn to be trained in non-farm sector. Altogether we will have to skill million of the existing workforce. (RPL) 25

26 MSDE calculates fresh entrants in LF in the following way. Population in 0-14 year age group as per 2011 census 194mn Male, 172mn Fem, 366mn Total. Aver entry in working age group pa in mn MALE FEM TOTAL Est LFPR 90%, 30%. Estimated annual entry in workforce Male 12.5mn, Fem 3.7mn, Total16mn (% going to Hi educ route, at 2015 levels (7.5%) 0.94mn, 0.28mn, 1.21mn) Estimated annual entry in workforce (net of higher education) Male11.5mn, Fem 3.4mn, Total 14.95mn. Total fresh entrants between requiring skilling/vet Male 80.75, Fem 23.87, Total 104.6mn Hence total = 400 mn approx 26

27 Five Pillars of TVET and their problems Secondary school VE ITI NSDC funded pvt VTP Central ministries EBT 27

28 Target for 2022 Additional training requirements (million) Formal Vocational Training 136 Voc Trng for those Informally trained 55 General education secondary & beyond 100 Total

29 Thank You 29