Demographic Dividends - Opportunities and Challenges
iasparliament
March 05, 2018
What is the issue?
By 2020, it is estimated that the average age in India will be just 29.
The dependency ratio will be as low as 0.4.
While this demography provides an opportunity, there are multiple challenges that need to be addressed.
What is the labour force scenario?
12 million young people enter the labour force each year.
Millions transfer out of low productivity agricultural jobs to better paying alternatives.
There is hence a need to create a large number of jobs to accommodate these people and drive productivity up.
But even the most liberal estimates of employment generation do not suggest that the increase is commensurate with the requirement.
Inability to deliver as many good jobs as required is partly responsible for India’s labour participation rate falling to around 50%.
Labour force participation is the ratio of working age population that is employed to that of those not employed.
India has one of the lowest labour force participations (world average is 63).
Women have been dropping out of the labour force in large numbers.
What are some positive trends?
Despite the overall low job creation, allocation of labour is improving in areas where it is difficult to measure it, i.e the informal sector.
The informal sector combines services of old and new types.
Sometimes the old type gets converted into new internet based businesses.
Business is also migrating to where labour is rural.
Rapid growth in rural non-agricultural employment is a promising prospect for enhancing incomes.
Notably, 70% of India’s workforce is rural based.
But agriculture labour now accounts for only around 64% of rural employment.
Unfortunately, as skill shortage is a big hindrance and skill sets needs to be enhanced by training programs.
India is also urbanising rapidly and the rapid growth in “census towns” again suggests a rapid pace of non-rural employment growth.
Steps to increase productive employment is essential for social cohesion, sustainable growth, and to constructively harness the country’s youthfulness.
What are the ways for enhancing productivity?
Short term measures - Addressing skills shortages, and ensuring flexible adaptability to industry requirements for the immediate needs.
Three-month training can equip first-generation literate rural school-leavers with skills for working in retail malls and related services.
Also, similar three-month nano degrees can also re-train and equip industry workers with new skills that enhance their adaptability.
Ensuring timely delivery of completion, certificated to the concerned workers is key to this initiative.
This is mainly because, coordinating with multiple private agencies that are involved in the skilling programmes is proving difficult.
There are also other issues to be addressed like lack of common standards, which is making in-house training in one industry irrelevant in another.
Medium term - Employment elasticity in Indian manufacturing sector is estimated to be only 0.09, as compared to a world average of 0.3.
This points to the need for encouraging relatively low-skill labour-intensive industries like textiles, chemicals and food processing.
Construction already has high employment elasticity of 0.19 and hence stimulus to low income housing is needed to improve job creation.
The service industry will continue to be a major employer.
Health and education services are currently severely under-provided.
While their expansion at all levels will generate a lot of jobs, there is a dire need for capability enhancement of the workforce to fit the sector.
The Indian Medical Council that creates entry barriers and chokes the expansion in the supply of doctors and nurses needs to be reformed.
New teaching facilities should be judged on the basis of accreditation, and outcomes and structures for the same need to be strengthened.
Long-term measures - The quality of primary education needs to improve.
This requires government schools to be freed from state control, and allowed to compete and innovate in response to community needs.
It is feared that automation will destroy jobs (especially low-skill ones), and the role of robotic is slated to increase drastically in manufacturing.
Even in the services sector, answering robots are already replacing workers in call centres and even IT sector is seeing some automation.
But historically, although technological change makes some occupations obsolete, it also creates new jobs, and raises income levels.
Hence, rising levels and quality of education are essential for seamlessly adapting to the new highly productive jobs of tomorrow.
