India’s labor market paradox: Rife underemployment and yet shortage of manpower..

Rahul Jacobs has a story on this Indian paradox. On one hand, we have underemployment where people are holding part-time jobs despite being highly qualified. On the other hand, there is shortage of labor is most sectors.

We are actually creating more low-skilled jobs:

It is a sight typical of departure gates at every airport in the country and yet, like so much about India, it evokes wonder. A uniformed tugs lazily at your backpack or handbag to doublecheck that it was put through a security scanner and has been duly stamped. Foreigners are utterly baffled by this practice.

If a representative of the was needed for a Republic Day parade, the toiling landless farm labourer would stand for those in the rural economy while the would be a better example of the proletariat than factory workers. In urban India, one sees Dilbertesque caricatures of people working by mostly not doing anything especially productive – just like the CISF. TeamLease’s estimates this useless rubber-stamping costs Rs 1,200 crore annually in wasted manpower, paper and ink. He has written to the Directorate General of Civil Aviation and CISF to no avail.

In India, there are more security guards per square kilometre than any place with relatively few crimes affecting the well-off could justify; Mumbai, despite its income disparities, is not Rio de Janeiro, New Delhi, thankfully, is not Nairobi. According to a study by EY, the “manned guard” industry will almost double by 2018 from revenues of Rs 36,500 crore in fiscal 2013.

India is a laggard in creating factory jobs; Mr Sabharwal points out that we have fewer as a percentage of the total workforce than the United States, despite its mostly post-industrial economy. But, the country is at least creating more low productivity, low energy and low activity occupations – chauffeurs, lift operators and automatic teller machine attendants, for example – than any large economy in the world, a respite of a sort from the otherwise ugly clouds hovering over job creation. One in every three passenger vehicles sold last year is driven by a chauffeur, adding 800,000 jobs. Add the recruiting spree this year by Ola and Uber and driving someone else around often seems the hot new job in India today.

What jobs as chauffeurs and ATM attendants will do in the long-run for India’s trade deficit and in creating a middle class remains to be seen. (Many cab drivers have seen salaries double, even quadruple, in the past year.) Aggregate labour productivity grew a handsome annual rate of 6.6 per cent in India between 2001 and 2010, faster than anywhere else but in China, according to the World Bank. Growth in the future, however, must come from increasing physical capital per worker and ensuring workers are better educated and better trained.

Well, security jobs are being created as overall police services has failed in most parts of the country. In Bangalore, we now see office security guards doing duty of traffic police trying to manage traffic around their offices. So perhaps thanks to our inefficient police services (and several such other public services), we are seeing some job creation atleast.

The overall story is the same. The moment you start scratching the hype of India growth story, things start falling apart. Paradoxes after paradoxes flow into your face.

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