(Guest post by Sarah Brooks*) – The world is watching as the General Election unfolds in India, with many hoping that a possible election of Narendra Modi as Prime Minister will give the Indian economy
the jolt it so desperately needs. The new leader will definitely have his work cut out for him, as India has many problems, not the least of which is a sluggish job market. Here are five challenges currently facing the job market in India.
Big global companies are making significant job cuts. For years India has been an abundant source of labor for international companies, but many of these firms are either bringing the jobs back to their home countries, or cutting the positions entirely in an effort to focus their resources on other areas of growth. One such company making an announcement to cut jobs globally – including in India – is IBM.*
- Overall job growth in India has slowed dramatically. Job creation in India has been lackluster for several years, growing by just 2.2% between 2010 and 2012, as reported in February 2014 in The Times of India. Economist Alakh N Sharma, director of the Institute of Human Development and principal author of India Labour and Employment Report 2014, says there is an over-emphasis on service jobs and a neglect of the manufacturing sector. While the service sector provides only 26% employment it contributes 58% of GDP, says Sharma; on the other hand, manufacturing’s share of the GDP is a mere 16%. By contrast, manufacturing’s GDP share in Southeast Asian countries such as China, Korea and Indonesia is 40%-50%. Moreover, while agriculture’s share in employment is going down in India for the first time, those moving out of that sector are migrating to low-productivity employment instead of manufacturing. The truth is that the manufacturing sector in India is not presently capable of absorbing them.
- Unemployment among the educated is very high, particularly for women. A good education doesn’t necessarily guarantee a good job. Economist Sharma, speaking at the interview in the article cited above, explains that, as people in India become more educated, unemployment is only growing. Currently it is highest among women graduates – about 60%. Next to Pakistan and various Middle Eastern countries, India has the lowest female employment rate.
- Wages are low, particularly for uneducated workers. Sharma notes that a persistent problem in the Indian job market is India’s apparent belief that keeping wages low is the way to be competitive in the international market. Yet China, whose wages are two and a half times those in India, is more competitive than India in the international market. Sharma explains that wage cost is a small share of the total cost of production, and this proportion has fallen steadily since 1981. It’s time for India to face up to the fact that saving on labor costs and producing impoverished workers is not the key to becoming competitive on the world market.
- India has a shortage of skilled labor. While the problems listed above focus on the challenges faced by job seekers, India’s current economic and political climate can be challenging for employers too. One problem is that a shaky job market at home is prompting many talented graduates to seek greener pastures abroad. For instance, about 25% of Indian business grads find jobs in America, according to a March 2014 report in Business Today. There is evidence too that India’s educational system is not adequately preparing students for the job market; as reported by Job Market Monitor in June of 2013, the employability solutions firm Aspiring Minds concluded that fully 47% of India’s 2013 graduates were “unemployable” for any job. Of course studies don’t tell the entire story, and the “brain drain” hasn’t affected all employment sectors, but some employers are finding it challenging to fill positions, and the problem is likely to get worse. Creating a more skilled workforce should be a top priority for India, which cannot rely on the government alone to reach the National Skill Development Mission’s ambitious goal of teaching skills to 500 million Indian youth and making them employable by 2022.
There is hope for India, but improving the job market will require a multi-faceted approach. There are no easy answers.
For information on recruiting trends for 2014, see this January 2014 report in the Economic Times.
This is a guest post by Sarah Brooks from best people search. She is a Houston based freelance writer and blogger. Questions and comments can be sent to brooks.sarah23 @ gmail.com.
- Indian CFOs Expect Growth and Some Lay Offs – India Real Time – WSJ;
- India’s Economy Leaves Job Growth in the Dust – Bloomberg View and
- India /millions of young people are unable to find a job
- India / A “demographic dividend” ?
- India Inc presses layoff button; IT jobs take a hit – The Times of India.