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The Indian Government's #1 Job Is More Jobs

03/06/2016 7:57 AM IST | Updated 15/07/2016 8:27 AM IST
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Unemployed youth are wasted human resources and fuel for social unrest. The governments of developing as well as developed countries are realizing that the creation of more jobs may be their job #1. A survey of Indian citizens' views of the performance of Prime Minister Modi's government reveals they are most dissatisfied with its inability to produce more jobs. They want the government to make the creation of more jobs its highest priority now on.

India's economic growth has been quite impressive. In fact, India now has the fastest growing economy in the world. However, the pattern of growth of the economy has not been conducive for job creation. In fact, the employment elasticity of the Indian economy (the rate of jobs growth in relation to GDP growth) has been less than the global average from 2000 to 2010. The average employment elasticity of the global economy was 0.3 in this period, while India's was only 0.2. Even more worrying is the declining trend of employment elasticity of India's growth. It declined from 0.44 in the five years 1999-00 to 2004-05, to only 0.01 in 2004-05 to 2009-10 -- close to "jobless" growth.

While the Indian government is pressing on the accelerator to induce the growth of more jobs... technological advances may be throwing a spanner in the works.

While the Indian government is pressing on the accelerator to induce the growth of more jobs, with its Make in India, Skill India, and Start-Up India campaigns, technological advances may be throwing a spanner in the works. Rapid advances in digital technologies and automation are displacing people from work in all sectors of the economy -- in manufacturing, in services, and even in knowledge industries. Studies in the USA and Australia estimate that by 2035, 35% of all work in their economies will be automated, and this can impact over 50% of present employment. The International Labour Organization (ILO) says, in its Future of Work report, "the unfurling technological revolution... is so far-reaching in its labour-replacing potential that it is inherently different from what has been experienced in the past."

The UNDP's 2015 Human Development Report asks, "Are workers, employers and policy-makers prepared to respond to the challenge of the emerging world of work?" Technology evangelists would dismiss those concerned with the disruptive effects of technology as "Luddites". (Luddites were 19th-century English textile workers who protested against newly developed labour-economizing technologies). The evangelists point out that new technologies create new jobs, and better ones, while old jobs disappear. It all works out very well in the end, they say.

[T]he effects of automation technologies will be more disruptive than previous waves of technological innovation. Governments have to be prepared to make the transition as painless as possible.

If Luddites were like ostriches with their heads in the sand hoping the new technologies would go away, the technology evangelists are also ostriches with their heads in the sand, not wanting to see the effects of the new technologies on people's jobs and incomes. There are two problems with the technology ostriches' limited view of the world: a political problem, and a conceptual problem.

The political problem is this. While it may work out well in the end, the transition from old technologies to new ones can take many decades. For example, mechanization and application of chemicals in agriculture, a hundred years ago, greatly improved US farms' productivity. Much fewer workers were required on farms, and masses of people had to move to cities, where they lived in squalid conditions, to find work which they were not trained for. In the end it worked out all right, but many millions of lives were disrupted during the transition. The ILO projects that the effects of automation technologies will be more disruptive than previous waves of technological innovation. Governments have to be prepared to make the transition as painless as possible. Citizens expect them to. Policy-makers cannot keep their heads in the sand, hoping the displacements will sort themselves out somehow.

How will people earn if they have no work to do? And, who will pay for the output of the machines if people do not have adequate incomes?

There also is a conceptual problem with a picture of the future in which computers and machines will do everything. It is projected that rapid advances in technology will make it possible to substitute human beings in all activities -- even driving cars, performing medical surgeries, taking investment decisions, and providing homecare and companionship to elderly people, in addition to substituting people in service and manufacturing jobs which is well underway. The problem with this picture is that it shows what machines will be doing in the future. It does not show what human beings will be doing when machines seem to be doing everything! How will people earn incomes if they have no work to do? And, who will pay for the output of the machines if people do not have adequate incomes?

Plausible scenarios of the future have to imagine the interplay of several drivers of change, including social, political, environmental, and technological forces.

The size of a country's GDP is only a "top-line" measure of economic performance. It does not explain what is happening to the "bottom-line" -- to the jobs and incomes of people at the bottom of the economic pyramid. Capital-intensive automation will increase productivity per unit of labour in enterprises. Returns to capital will increase, and incomes for labour will reduce. Thus, "Industry 4.0" will aggravate economic inequalities which are already causing political tensions within countries. Amongst all nations, India has the largest and most complex challenge of job creation and inclusive growth. Hundreds of millions are still on farms, while others are already into the world of Industry 4.0. Though the Indian economy may not be immediately affected as much by Industry 4.0 technologies as more advanced economies may be, India's complex jobs agenda will require the best methods of systems' thinking-based scenario-planning for designing its policy-matrix.

Forecasts of the future, like many Industry 4.0 projections, that give too much attention to technology, and too little to other drivers of change, cannot project what a real world, which must have humans in it too, will be. Plausible scenarios of the future have to imagine the interplay of several drivers of change, including social, political, environmental, and technological forces. The real world will be shaped by interactions of policy-makers, employers and workers. To respond to the demands for more jobs, they must work together to envisage the future they can shape together.

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