The 'casual' risk to India's workforce

Wed, 29 Jun Pre-Open

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India's growing and young workforce may be a cause of envy to many. Especially to economies in the West. For they believe that most of their jobs are being taken away by Indians and Chinese. However, one look at the data from the CSE on the quality of Indian workforce reveals a different picture altogether. Mind you, here we are not even referring to the employability or skill sets of Indian employees. The very fact that most of Indian workforce is not even on regular payrolls is a much bigger concern than that.

As per the government data, there are more temporary (casual) workers in India today than there was five years ago. To put the numbers in perspective, over the last 5 years, the number of casual workers grew by 21.9 m. During the same period, growth in the number of regular workers nearly halved to 5.8 m. Also, the number of the self-employed, dominated by agricultural workers, declined by 25.1 m. The numbers present a stark contrast to the Planning Commission's target of creating 58 m jobs in the five years between 2007 and 2012.

The country's archaic labour laws and the exclusive nature of economic growth seem to have caused this change in workforce dynamics. Important to note that the casual workers do not enjoy the same benefits or security as employees on payrolls; causing economic insecurity.

40 m of the incremental workforce in India is typically absorbed by its service sector. But, the contribution of the manufacturing sector to employment generation is not commensurate. India's manufacturing contributed 16% of the GDP in FY10. For the first time ever it outdid the share of agriculture. However, its contribution to employment is least impressive at 12% of total workforce. Extensive labour laws that discourage hiring casual workers have forced manufacturers to opt for technology. Thus rendering thousands jobless. Even the most labour intensive sectors such as textile and jewelry making have halved their labour requirement. Here again the fact 80% of manufacturing lies in the unorganized sector and at least 30% of the employees in the manufacturing sector are casual workers dampens the employment numbers.

However, it is not that the casual workers have not seen their income levels rise over the years. It would not be uncommon to find entry level jobs fetching double the salary than they did 4 years ago. The rise in compensation levels in India is amply evident in the uptick in per capita income. The wages for unskilled jobs have also seen a respectable growth. However, the economic insecurity and uneven distribution of socio economic benefits make casual workers a key risk to Indian workforce.

Be it export of software, textiles and gems and jewelry or BPO services to MNCs, the low cost model of hiring casual workers is unlikely to sustain we believe. A change in labour laws that allow the manufacturing sector more flexibility in hiring is therefore imminent. Rise in compensations may make Indians more expensive than some labour classes in other parts of the world. But ensuring that most of the labour is skilled and part of the regular workforce in the organized sector is the answer to our woes. Unfortunately the government policies and investments in this direction leave a lot to be desired. Probably it is the private sector that needs to have this in the long term goals to ensure better employment scenario for India.