Need for a National Employment Policy

New Delhi, July 16, 2020

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.

There is evidence that other countries are also moving away from tackling employment issues solely through the use of active labour market policies such as direct job creation and providing subsidies to generate employment. 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 the labour market responding to the short, medium- and long-term prospects and priorities.

As the Indian economy grows, the standard of living of its labour force, estimated to be around 500 million, will increase. This labour force is part of the global supply value chain and acquires a greater role because there is a phenomenon of "race to the bottom" in terms of costs. China’s experience shows that their wages have been increasing in recent years, which is giving India an edge. When we talk of India, these dynamics and international benchmarks, we need to come out with a White Paper, vis-à-vis other competitive countries.

Indian Experience of Formulating NEP

The proposal to bring an NEP was introduced in 2008. During the tenure of the United Progressive Alliance (UPA)-I, an inter-ministerial group had examined the proposal but nothing concrete had emerged from it. In UPA-II, then Minister of Labour and Employment Mallikarjun Kharge informed the Rajya Sabha, in reply to a question on December 8, 2010, that the formulation of a National Employment Policy was under consideration of the Government. Moreover, the then minister also spoke about the process of the formulation of NEP in his address at the 99th Session of the International Labour Conference at the ILO General Assembly in Geneva in June 2010, which was attended by 170 countries.

In 2016, the idea of NEP took shape at the first meeting of the BRICS employment working group, after which the National Democratic Alliance (NDA) government started to work on it.

Since then, the government, policymakers, industry bodies, media and other stakeholders are continuously debating and making suggestions about the need for a comprehensive NEP document, especially on the occasion of subsequent Union Budget announcements. The national level think-tank NITI Aayog, industry bodies such as CII, the ILO, and other institutions have also advocated such a policy.

Employment Planning

Employment generation has been one of the important priorities and principal concerns of planning in India since the beginning. During the Fourth Five-Year Plan (1969-74) and early years of the Fifth Five-Year Plan (1974-79) alone, as many as fourteen employment-oriented schemes were initiated. In every plan document, employment has been one of the overriding priorities throughout plan periods.

One of the main objectives of the recent five-year plan, i.e. twelfth five-year plan (2012-17), was the generation of decent and productive employment in the non-agricultural sector. The primary interest is the transition from informal employment in the unorganised sector towards formal employment in the non-agricultural organised sector. Over a period of time in India, the nature of employment generation has changed and is creating new challenges as well as opportunities.

Need for NEP

The question about why India needs an NEP has many answers as there are serious concerns about employment in the country today, which are different from those in earlier decades, with many new emerging developments. National policies such as National Youth Policy, National Education Policy, National Health Policy, which are dynamic, are already in place and institutionalised to guide for short, medium- and long-term vision for education and health. However, Independent India in its over 70 years of existence is yet to have a National Employment Policy.

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

Other important issues are jobless growth, structural transformation, underemployment, informal employment, skilled workforce, high levels of educational enrolment and aspiration of youth, sectoral issues, decent jobs and so on. In addition, the female participation in the employment is not only low but also declining since, 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 the future. In the process many people will also lose their jobs in traditional sectors, especially those who are involved in routine tasks, and 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, when we took the skill advantages in information technology sector worldwide.

The achievement of government using ICT for development is immense, such as JAM trinity, direct benefit transfers, unemployment exchange & allowance, GSTN, EPFO, 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 is at risk of social exclusion. For Ease of Doing Business and Ease of Living, NEP is important. This is important to capture the sector-wise and region-wise labour market dynamics, and facilitate registries for manufacturing sector, MCA, informal sector, unemployment exchange, unemployment allowances, appropriation of jobs, etc.

In addition to online MIS and Dashboard for regular monitoring and evaluation of employment outcome, every department should provide the annual target and achievement every year. Continuous feedback through M&E exercise is important as are usage of information from multiple dynamic sources, sectoral and administrative data and harnessing from insights and similar for survey data for demand side information and periodic reporting of various important facets.

Coordination is crucial and needs to be detailed out. There is a need for inter-ministerial and inter-departmental coordination and cooperation for providing a strong Decision Support System for various sectors and industries and for proper channelization of resources. The NEP would lay out such platforms and processes for matters related to labour and employment in an integrated and harmonious manner.

In this context, a policy document NEP with practical vision and a comprehensive macroeconomic and sectoral policy roadmap for achieving the country’s employment goals is urgently required.

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, 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 a formal economy.

•Rising Open Unemployment: India’s open unemployment has increased manifold and reached its highest level of 6.1% in 2017-18, followed by a marginal decline, 5.8% in 2018-19. In particular, the 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, the youth unemployment is substantially higher than other age-groups.

•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, have been discouraged from entering the labour market.

•Lack of Structural Transformation and Underemployment: Around half of India’s workforce is still employed in agriculture for their livelihood, which contribute just less than a fifth of the national income. Due to the unavailability of enough jobs in non-agriculture sectors, most people in rural areas are still engaged in farm activities. In addition, most of the workers in informal sector work at low wages. Underemployment, that is, too few hours of work per week available for an average employed person along with low wages with full-time job, is a huge problem.

•Low Productive and Low-Quality Job: Only around 24% workers are engaged in regular jobs, which are considered better quality jobs compared to self-employed and casual labour. Further, the disproportionately high informal sector employment is a major problem in India. The decent new employment created in the country has not been high. Almost half of all new non-agricultural jobs added in India during the second half of the 2000s was in one sector, construction, 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 High Educated and Skill 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 several skill and vocational training programmes. It is important to bear in mind that the jobs crisis is intricately interlinked with the learning crisis in education. This shows the low education and skill level among the workforce in India.

•Job Growth has Slowed Dramatically: The number of people entering the labour force or looking for jobs is increasing over the years. However, the growth of additional employment 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. Therefore, the last decade is sometimes also referred to as the "jobless growth" period. This problem of the economy not generating enough jobs for the growing labour force is serious. Further, the vast majority of the jobs that are being created are of extremely low quality. So, the employment problem is not only about the quantity 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 -- the sector that transformed the labour markets in East Asia and China the most -- has contributed only marginally to employment creation in India in recent times. The contribution of manufacturing to GDP is only about 16 per cent, stagnating since the economic reforms began in 1991. As argued, 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 percent of the sector’s output, employ only 2 percent of its workers.

•Exclusion of Vulnerable Sections: The vulnerable sections of the society such as minorities, Dalits, tribal and differently-abled are still largely engaged in informal employment or low-paid jobs. Many studies suggest that they faced 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-old labour laws in recent times to woo investments in their respective regions as they fight economic downturn due to the COVID-19.

•Threat of Automation: The technological advancement is posing a threat of automation or robotisation substituting human workers with robots. As research studies show that one industrial robot can replace six workers, in the case of India up to 52% of the activities can be automated having the greatest impact on low-skilled jobs and simple assembly tasks.

•New Emerging Jobs: The new emerging gig economy or freelance jobs, which are temporary and flexible and considered as independent contractor. The people involved in such jobs are not considered as an employee or workers and also not covered by any national labour laws. In addition, these emerging jobs are also not counted in the national statistical system.

COVID-19, Employment and Livelihood

The Indian economy had slowed down before the COVID-19 outbreak but the ongoing pandemic has pushed it further into a recession. As per the data from the CMIE, the employment rate has touched as high as 23.5% in the two months of lockdown in April and May 2020.

Apart from this, CMIE has also estimated that 27 million youths in the age-group of 20-30 years have lost their jobs in April 2020 because of the lockdown. This will have greater impact on livelihood and jobs in the future. Further, these problems are differing across regions and sectors of employment,

Therefore, recognising these challenges and putting in place appropriate policy responses to tackle them is of utmost priority. 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 should set targets and monitor them.

NEP amidst Coronavirus Pandemic

The current COVID-19 pandemic has posed extreme challenges across the world with huge losses of jobs and livelihood. The targeting and assisting of the labour force are important because in times of crisis like COVID-19, the focus has been on "Gareeb Kalyan". Since numerous programmes for the social protection of workers are already in place, NEP would be important for understanding the dynamics of benefits of workers, employers and governments.

The recent push for the NEP last month by the Minister of Labour and Employment on a fast track is a welcome move. Now the government is again working towards a comprehensive NEP at the national level to provide a future roadmap for encouraging employment generation in the post-COVID-19 period. The labour minister has asked the officials to look at the employment policy while keeping in mind the challenges and disruptions that have occurred because of the COVID-19 pandemic.

India has ample intellectual and practical knowledge to formulate such a policy that takes into consideration gender, caste and ecological concerns. A lack of such a policy could result in a warped economic transformation resulting in avoidable stress on employment, social and gender harmony.

‘Shramik Shashatrikaran’ – Labour Empowerment

It is very important to have an Inclusive Policy, which caters to the challenges and needs of the marginalised, women, differently abled and so on. The aspirational districts and the priority sectors needing more attention must be identified. This will go a long way in achieving the principles of "Sabka Sath, Sabka Vikas, Sabka Vishwas".

NEP will have an immense role in advisory and roadmaps for clarity. Moral suasion and appropriate signalling are important to ensure consistency, predictability and stability and a strong future outlook for ensuring confidence at par with India competitors. This would detail the direction of the economy in a holistic manner. New investment areas, entrepreneurship and innovation initiatives, start-up ecosystem, gig economy, conventional sectors, studies and projects would identify the new and emerging focus areas for continuous feedback into the system.

Research and development is the core of the entire NEP. The policies, schemes of the relevant ministries and committees need to be streamlined and would be important to be studied to collect evidence and provide essential inputs for policymaking, since it is an ongoing process.

NEP will also be crucial for Implementation, Monitoring and Evaluation. This is important for 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 the PM’s vision of New India and achieving a $ 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 and enabling environment and holistic impactful approach towards decent employment and vision of New India. The Sustainable Development Goal (SDG) Goal 8 14 states -- promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

The consultation paper for draft National Urban Policy Framework 2018 is an important document template for NEP to start taking shape. In the past, most policy documents pertaining to conceiving an NEP, by and large, have been suggestive in nature. There is an urgent need for a comprehensive NEP based on responsive real-time data analysis, integrating sectors that will help emerge sectoral employment policies and programmes amid the COVID-19 pandemic. 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 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 a part of the policy document.

Such a policy document will effectively help formulate appropriate employment strategies which ensure decent work, empowerment, and sustainability towards Atma Nirbhar Bharat and contribute significantly to achievement of the goals of the 2030 Agenda for Sustainable Development.

NNN