Vijay Kumar Gaba

 As I mentioned yesterday (see here), unemployment in India is a multidimensional problem. Unemployability (skill deficit), underemployment, disguised unemployment, gender disparity, regional disparities, are some of the contours that define the state of unemployment in India. The genesis of the reasons responsible may be traced to traditions, education system, colonial legacy, economic policies, and demographics. Obviously, the solution for a multidimensional problem also needs to be multidimensional. The classical solution, i.e., industrialization alone is definitely inadequate for managing the complex unemployment situation in India.

Employment framework in India

As per 6^th Economics Census (2013), there were 58.5mn business establishments (excluding public administration, crop production & plantation, defense and compulsory social service activities) operating in the country. Of these ~96% establishments were privately owned while just ~4% were government owned. These establishments employed 131.29mn people (52% in rural areas and 48% in urban areas).

·         About 60% of business establishments were in rural areas while about 40% operated in urban areas. Out of these, about 78% establishments were engaged in non-agriculture activities, while ~22% were engaged in agriculture related activities (excluding crop production and plantation).

·         During the 8yr period between 2005-2013, the business establishments grew by ~42% from ~41mn to ~58mn. In this period agriculture establishment grew ~116% while non-agriculture establishment grew ~29%.

·         Out of total ~58mn establishments about ~72% were Own Account establishments (meaning with no hired worker). These Self Owned Establishments (SOEs) grew 56% during 2005-2013. About 63mn people (48% of total employed people) are employed in these SOEs.

·         About 96% of establishments had less than 5 workers. Another 3% have 6-9 people employed.

·         The government or public sector employed only 7% of the people. 79% people worked in proprietary establishments. Organized private and cooperative sector employed only 14% people.

·         About 36% of business establishments were operated from the home of the Self Owner, while another ~18% were operated from outside the home without any fixed structure.

·         Livestock accounted for ~87% of the agriculture activity.

·         Retail trade (~35%) and Manufacturing (~23%) were dominant non-agricultural activities.

·         Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From this data, I decipher that—

(a)   About 96% establishments have less than 5 workers. Another 3% have 6-9 people employed. Only three states - Tamil Nadu (13.81%), West Bengal (11.07%) and Maharashtra (10.02%) have more than 10% establishments with 10 or more workers.

Most of the legislations relating to employment and social security provisions (ESI, EPF, Gratuity, Bonus etc.) apply only to the establishments with 10 or more hired workers. Implying that only ~1% of the total private workforce is eligible for statutory social security benefits. Even the new labour code (The Code of Social Security, 2020 that would subsume most of existing laws) covers only the establishments with 10 or more workers.

(b)   Livestock accounts for 87% of the agri sector related establishments. The whole of it cannot be dairy farming. Obviously, meat (including bovine meat) is a big business in terms of employment.

(c)    Out of 1.87mn handicraft/handloom establishments, employing 4.2mn people, 79% were family affairs without any hired worker.

From my experience I know for sure that a large number of these establishments employ household children as workers. In my knowledge none of the legislative provision or policies designed to prevent child labour and promote child safety and security deals adequately with a parent employing his child for his business, as the child is not a hired worker in this case.

The worst part is that if the parent business is impacted due to any adversity, the children are affected most, as they are mostly unemployable in other businesses.

(d)   About 36% of business establishments were operated from the home of the Self Owner, while another ~18% are operated from outside the home without any fixed structure.

From my experience I know that most of these business establishments may not exactly be "authorized" from civic and town planning view points. This creates a number of problems from everyone. Grocery and other daily need shops operating from homes; tailoring shops; automobile repair shops create nuisance for the neighborhood; pose environment and safety hazard; put pressure on civic amenities like power, water and sanitation; motivate corruption; and above all lead to serious problem of child labor, underemployment and disguised unemployment. Town planners, civic administrations, and government often fail to recognize & accept this phenomenon and therefore are unable to find acceptable solutions.

(e)    Retail trade (~35%) and Manufacturing (~23%) are dominant non-agricultural activities in the country.

Organized retail and automation in manufacturing are a potent threat to these traditional sources of employment to traditionally skilled and semi-skilled workers. The redundant traditionally skilled and semi-skilled workers would obviously be competing with the unskilled labour in construction and “gig work” space, leading to massive underemployment, mis-employment and unemployment.

Some more on this on Tuesday.

Trivia

Regardless of the government data, the telecom sector may have created most of the incremental employment opportunities in India in the past two decades. From Gangotri to Kanyakumari and From Tawang to Kutch, wherever you go, it is common to find small shops selling telecom products (prepaid cards, mobile phones and accessories) and phone repair services. Telecom is also at the core of the entire new economy and startup ecosystem. However, unlike the traditional employment provider textile, the government has never promoted the telecom sector. To the contrary, efforts have been made to weaken the sector.