Herein lies India’s jobs challenge—a very large number of working-age people need to find productive jobs that they can do at their existing levels of skill or education.
The figure on page 151 reveals why there is no easy way out of India’s employment challenge. It maps the relative placement of key sectors of India’s economy on two dimensions. The more productive the sector—that is, the greater the value of goods and services it produces (gross value added or GVA) per hour or day of workers’ time—the higher it is in the chart, and the more its workers are likely to earn as wages. The more skill-intensive the sector—in other words, the higher the share of skilled workers in its total workforce—the further to the right it is placed. In the absence of any quantifiable measure of skill, we use the achievement of a secondary level of education as a stand-in.
In the bottom left quadrant, where most of India’s workers are to be found, is the unorganized and informal economy, a place where few people have a secondary education. In the upper right quadrant are the fast-growing, high-productivity, organized sectors, which employ less than a quarter of the Indian workforce, but where up to 90 per cent of workers have a secondary education. 3
Between them is a vast gap.
India’s Challenge: Productive Employment Is Skill-Intensive, While the Workforce Is Not
This is the larger force to which Rajappa is beholden. For him, construction was a step up from agriculture, but it’s nowhere near the productivity level of a formal factory job. He does not have options in front of him that can act as stepping stones—or, for a more modern metaphor, escalators—to move from construction to more productive parts of the economy.
This reflects a country that runs on two tracks. At one end is the organized sector, intensely productive, well-paying, high-skilled, with fewer workers. Diagonally opposite is the unorganized sector, marked by large numbers of less qualified and lower-paid workers who add less value (per worker) to the economy.
The formal sector, meanwhile, has a different problem: Vacancies. There are over 5,800 vacant seats for judges; the vacancy rate for general physicians in the Indian public health system is over 32 per cent; elementary schools in Uttar Pradesh and Bihar need nearly 400,000 teachers. In the private sector, 56 per cent of employers say they find it difficult to fill vacant roles. 4 And even when those roles are filled, new hires undergo rigorous training programmes—the equivalent of another semester or even another year of education—to prepare them for work.
India Has a Skewed Profile: Too Few Have Completed Secondary Education 5
The lopsided employment scene is the reason why the act of job hunting has become a spectator sport in India. The fascination is with the spectacle of the large numbers India unleashes given the smallest of outlets, like a river bursting through a single tap. A recent news story highlighted the responses to a job posting announcing sixty-two messengers’ job in the Uttar Pradesh police department. The role required applicants to have a primary school education and experience riding a bicycle. It paid ₹20,000 ($285) a month. More than 50,000 graduates, 28,000 postgraduates and 3,700 doctorates applied. 6 There are so many educated unemployed that they easily crowd workers with lower qualifications out of the clutch of secure jobs they could have found.
This situation has arisen partly because India invests heavily in tertiary education while not investing enough in primary and secondary education. As a result, the country’s education profile is peculiar: Citizens tend to be either highly educated or minimally educated, with not many in between.
Given the low and inconsistent quality of educational outcomes, employability (or lack thereof) is a rampant issue. Facing workers with low employability and the need to invest in on-job training, employers struggle to offer jobs that match the aspirations of workers who have already invested substantially in their education by getting a college degree.
Government Spending Reflects the Tilt towards Tertiary Education 7
Consequently, the economy grapples with human capital mismatches across the board. There are positions that remain vacant for lack of personnel who want to fill them, to mid-level roles held by underqualified workers, to highly skilled professionals who—while well-suited to their responsibilities—cannot achieve maximum productivity because they are occupied with tasks that could be done by others.
India cannot complete the critical work to build the nation and its economy when the country is hampered by an undersupply of proficient human capital and systemic misallocation of talent, with no ability to build a proper pipeline of high-calibre workers. The talent shortage is real, resulting from a lack of access to relevant education and skills training, and it results in inadequate staffing up and down the employment spectrum.
One of the ways India can right this talent mismatch is by focusing on its secondary-educated workforce. The incremental impact of a secondary and higher-educated workforce on national growth tends to be greater for countries like India. These workers can become the technicians, sales executives, and customer service agents that will be needed as the middle class expands, but which might not meet the aspirations of a college-educated person. This isn’t a new idea; we’ve seen it play out this way before. The ‘Asian miracle’ that led South Korea, Japan and Taiwan, among others, on the path of sustained high and equitable economic growth had more to do with investments in primary and secondary education than with investments in higher education. 8
On the back of these experiences, India’s secondary education strategy needs to centre on both raising the quality of educational outcomes and facilitating transitions for people with secondary education to the labour market.
For India, there is—at this moment—no clear path between informal and formal work, no road map to help people bridge the gap to prosperity. Its jobs landscape has a participation gap, a skills gap and a gap between the informal and formal sectors. We need to simultaneously ramp up skills, focus more on secondary education, and free up room for more employers to move informal work closer to the formal end of the spectrum. This is the key to India’s jobs puzzle.
It’s a high-wire act, given the time, and India will have to do more than just offer its citizens traditional vocational training in preparation for the future.
23
Twice Exposed
By 2012, the family was reunited in Pune. Bhoomi and Bijay left their grandparents and the village to join their parents and brother in the city. The change was as stark for them as it had been for Rajappa. For one, few of the locals spoke Kannada. Then there was the cramped room they called home. At night, the three siblings slept on the floor, half their bodies stretched out below their parents’ bed. They learned to check how much water was left in the blue barrel in the alley outside—their sole source of water for the day—and to make sure never to miss the water delivery man when he came by to refill it.
The year his family came together again, Rajappa was cutting through a wall with a power saw when the blade jammed and splintered, slashing his right hand. He was rushed to a hospital nearby: it was one he had helped waterproof, and some of the staff knew him. When Sangamma arrived, her husband was on a stretcher. His hand would require surgery. The cost of the operation was ₹50,000 ($715). The family’s savings could not cover these expenses; a neighbour loaned her the money after Sangamma promised to repay twice the amount over twenty months. She later recalled there was no time to think about the heavy cost of the loan.
The day after the surgery, Rajappa returned to work. ‘The doctor asked me to rest at home for a week. What a joke! Who has that kind of time?’ he wondered. It did not matter if he could effectively use his hand. He always had the other one. He was more troubled by the terms of the loan, which were beyond anything he could earn. Rajappa took a bank loan to repay the neighbour. The interest rate was 8.5 per cent, far lower than the absurd rate their neighbour had charged, but he soon fell behind on those repayments as well.
A precarious financial existence begets unexpected en
tanglements. The emergency loan for the surgery wasn’t the first of these. There were agricultural loans to repay for bore wells Rajappa had built back home. He had never quite managed to leave agriculture behind—he had hoped that proper irrigation with the borewells might just turn his family’s luck around. But as of now, he only had the loans to show.
Then there were the moneylenders, who came by to collect their 3 per cent interest every month. There was also the matter of being the eldest son, a responsibility that meant he sometimes had to shoulder his siblings’ financial obligations.
Six years after his accident, Rajappa earned ₹20,000 ($285) in a good month—two-thirds more than the average Indian’s monthly income. 1 Yet the family struggled with poverty. His debts had ballooned to ₹550,000 ($7,850), more than two and a half times their yearly income. Whichever way Rajappa looked at the debt situation, a permanent solution was never in sight.
To pay the price for raising three teenagers, meeting household expenses, managing the rent, and avoiding defaulting on bank payments, the Biyali household juggled its finances endlessly. They prioritized one lender one month, another the next, always working for a sum that never felt enough. ‘We live with this constant pressure,’ Rajappa said. The agricultural loans in Karnataka and the debt in Pune had left him twice exposed.
24
Escalator Sectors
India does not resemble the traditional story analysts tell about economic progress.
In that story, an economy grows as more people work to produce more goods and services. People move from farms to factories. Labour is more productive, even if it isn’t more educated or skilled. The additional income this generates over time lets families invest in better standards of living—better housing, more nutritious food—as well as better education for their children. This better-educated generation then take up even more skilled and specialized roles, including in services like healthcare, scientific research, and finance and investment.
It is a story of growth.
Looking at India’s GDP growth over time, a surprising pattern emerges: Economic growth does not reflect job growth. While India is abundant in unskilled and inexpensive labour, GDP growth has instead been powered by industries that prize skill and capital—scarce resources unavailable to a vast swathe of the country. The countless tales of success in the IT sector, automobile manufacturing, refined petrochemicals, telecommunications, and financial services are based on legitimate progress, but a progress that does not include much of India. It is not surprising then that the World Bank estimates that India needs to sustain GDP growth above 10 per cent every year for the next twenty years, just to maintain current levels of employment. 1
The most curious part of this story is India’s organized manufacturing sector. With its conveyor belts, repetitive tasks and predictability, manufacturing has, the world over, been seen as the poster child for an ‘escalator’ sector: It is more productive than agriculture, and has the potential to employ large numbers of workers, even if they have limited skills.
In India, however, the escalator from agriculture to manufacturing is stalled. Spurred by better access to capital, and coupled with the need to compete in increasingly integrated global markets, India’s manufacturing industries have taken a route less dependent on labour. Construction has, in part, filled manufacturing’s void by providing an immediate release valve for the workforce. This window will be open only temporarily, because incomes in agriculture and construction are converging. ‘Retail trade’—the sector that sells goods to people—has been the other outlet, and like construction, is overwhelmingly informal. It is dominated by small-scale, often part-time work, like selling vegetables from a cart, or household provisions from a shop.
The Curious Case of Indian Manufacturing—The Faster the Growth, the Fewer the Workers 2
The stalled escalator results in a situation where agriculture, which contributes 18 per cent to GDP, employs roughly 44 per cent of the workforce. Against this, the services sector contributes 52 per cent of GDP, but employs less than a third. 3
India needs to create an environment for other sectors to flourish as escalators. Only then will workers step up from low-productivity industries to intermediate, and more productive work.
25
The Saju Mini Supermarket
The idea first came to Saju, Rajappa’s younger son. Working after school hours at a local store, sorting plastic items for an extra buck, Saju picked up more than a pay cheque. He combed the neighbourhood for a viable business idea, anything that could keep his family afloat. He was all of eleven then, but intuitively it made sense to him—a vegetable stall wouldn’t be tough to run.
Construction work had not put a dent in Rajappa’s passion for farming. He liked the idea of selling vegetables—it seemed like a natural alternative to growing them. He hired a cart and tested the waters with a batch of leafy greens. But they sold less quickly than he had anticipated, and began to rot. Rajappa quickly changed track—vegetables with a longer shelf life made more sense. He woke up early to scour the markets for better potatoes, onions and tomatoes, to establish contacts with sellers, and to pursue business opportunities with bulk buyers.
Vegetables had not been Rajappa’s first choice of business. He had tried selling colas and soft drinks, renting a small shop and investing in a refrigerator—the Saju Mini Supermarket was named after his youngest. That business had wrapped up quickly. They were in a poor neighbourhood, where everyone wanted things on credit. In no time, outstanding payments and receipts turned into a burden too heavy to bear. That was when Saju came up with the idea of the vegetable shop. Everybody was enthusiastic, but no one had anticipated how hard it would be.
The entire family chipped in—Saju before he left for school, Bijay between school and evening classes, Sangamma in the late afternoons, Bhoomi on the weekends, and Rajappa almost all of his waking hours when he wasn’t buying vegetables or taking up waterproofing projects. He was so busy that he liked saying he couldn’t afford friendship. The shop stayed open for over ten hours a day. They paid for the shop space, for transporting the vegetables, for the electricity, for the trade licence. To keep the rats at bay, the family even adopted a cat. But for all of this trouble, the Biyalis earned ₹500 ($7) a day at best, a sum Rajappa earned alone as a waterproofer on a decent day.
Only the promise of a regular income made running the shop worthwhile. It seemed to Rajappa, some days, that he was finally his own master, although Sangamma better saw the accounting: ‘Owning a business’ didn’t really supplement Rajappa’s earnings through construction work because now he rarely got any projects. With all their combined expenditure, Sangamma was certain they would not save a penny in this life.
Rajappa was proud of how well the children had fared at school, and insisted they study hard. But he wanted them to help out with the family business too. ‘I feel they should spend half their time on studies and the rest on supplementing our incomes,’ he said. ‘We need them to help run the house and work to pay off our loans.’ It made Sangamma uncomfortable. She wanted her children to escape this life. She wanted them to study. So what if they didn’t save; they were investing in their future.
A few months after Bhoomi expressed doubts about her ability to continue with school, it became clear that Sangamma had prevailed over Rajappa, at least for the time being: Bhoomi returned to the eleventh grade for one more year of studies.
26
Investing in Fundamentals
Will India solve its jobs challenge by growing its way out of it? Probably not, given that economic growth does not translate to jobs in the same way as in the past.
Should India focus on sectors that have the potential to absorb large numbers of workers? (The debates in the front pages of India’s newspapers, raging over exactly which sectors to pick, seem to suggest so.) This comes down to the nature of the jobs challenge. If people are unable to reach a basic standard of living because they want—but are out of—work, it mak
es sense to explore what activities will give rise to a greater number of jobs or provide more hours of work. In the case of India, this argument works for specific demographics that could be working, but are not: Women and youth, in particular. This is what the front-page debates miss—the arguments have merit, but these are not the target audiences that the headlining debates are always racing to solve for.
However, if large numbers of people are not reaching a minimum standard of living, despite working (and working hard), the country needs to look harder at productivity. This means looking at the quality of jobs, beyond looking at the quantum. This is the story of the Biyalis: They are a microcosm of the raw talent, industriousness and the motivation throughout the country, and their journey highlights some, but not all, of the realities of the transition from rural to urban, farm to non-farm. They embody India’s jobs challenge.
Channelling the tremendous potential of the Biyalis throughout India requires not only more jobs, but better jobs. This means playing the right cards when it comes to both the strategic sectors that can drive employment as well as the nature and size of the country’s firms.
A piece of the puzzle has been plainly in sight all along.
Bridgital Nation Page 10