Current State of Employment
The government has acknowledged employment as a key issue, evident in the 23 mentions of the word in the 2024-25 Union Budget.
India has a massive workforce of nearly 56.5 crore, primarily distributed across agriculture (45%), services (28.9%), manufacturing (11.4%), and construction (13%).
The official unemployment rate of 3.2% doesn't reflect the ground reality due to underemployment and the inclusion of casual and informal workers in the employed category.
Almost one in five workers, mostly women, work without pay in household enterprises.
Urban unemployment stood at 6.7% in Q4 FY24, while youth unemployment was 10% in FY23.
The percentage of people in regular salaried jobs has decreased from 22.8% in 2017-18 to 20.9% in 2022-23, despite government efforts.
Government's Employment Schemes
Three schemes offer wage subsidies for hiring first-time employees, with a total target of 1 crore beneficiaries, wage subsidy of up to ₹15,000 paid to the employee
A specific scheme targets first-time employees in manufacturing with wage subsidies for both employees and employers, for four years, with a maximum incentive of 24% of a ₹25,000 monthly wage
Employers hiring new workers (not necessarily first-time) can get reimbursement for EPFO contributions, up to ₹3,000
The fourth scheme aims to upgrade Industrial Training Institutes and boost skilling efforts, with 20 lakh students expected to benefit
Fifth scheme is aimed at on-the-job skilling, with an ambitious target of one crore youth to be given internships in India’s top companies with a monthly allowance of ₹5,000 for one year
Challenges in Scheme Implementation
Schemes have conditions like mandatory financial literacy courses and refund obligations for employers, hindering their effectiveness.
The manufacturing scheme's requirement of hiring 50 employees or 25% of existing strength is a significant hurdle for small firms.
Effectiveness of the Schemes
Economists argue that low wages are not the primary barrier to hiring, but rather insufficient demand and lack of private investment.
The schemes might be more effective for small firms with thin margins.
Creating formal jobs to absorb the large workforce leaving informal sectors is a major challenge.
Necessary Steps for Job Creation
Job creation should prioritize labor-intensive sectors and MSMEs in small towns.
Raising wages in sectors like MGNREGA can stimulate demand and create jobs.
A focus on grassroots-level economic activities is essential for job creation.
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