Why in the News?

The Union Budget for 2024-25 showed that creating jobs is a top priority for the government, as the finance minister mentioned it 23 times in the budget speech.

With many people unhappy about rising unemployment, PM Modi has supported a package of schemes focused on employment.

What’s in Today’s Article?

• Employment in India (Present Status, Latest Schemes, Challenges, Suggestions, etc.)

Current State of Employment in India:

• According to the Economic Survey, India's workforce in 2022-23 was approximately 56.5 crore:
  • 45% employed in agriculture,
  • 11.4% in manufacturing,
  • 28.9% in services, and
  • 13% in construction.
• Although the official unemployment rate was 3.2%, these statistics often mask the reality of underemployment and informal work.
• Many job seekers are either engaged in farming, casual labor, or unorganized retail, and nearly one in five workers, primarily women, are unpaid in household enterprises.
• Urban unemployment for the quarter ending March 2024 stood at 6.7%, with youth unemployment at 10% in 2022-23.
• Despite policy efforts to formalize the workforce, the percentage of regular salaried workers dropped from 22.8% in 2017-18 to 20.9% five years later.
• Many salaried workers lack contracts or social security benefits, which are essential characteristics of formal employment.

Employment Schemes Announced in the Budget:

• First-time Employee Subsidy: A wage subsidy of up to ₹15,000 for hiring first-time employees, expected to cover one crore individuals.
• Manufacturing Sector Subsidy: Wage subsidies for first-time employees in manufacturing, with incentives up to 24% of a ₹25,000 monthly wage for four years.
• New Worker Incentive: Reimbursement of up to ₹3,000 of the employer's monthly EPFO contribution for hiring new workers.
• Industrial Training Institutes (ITI) Upgrade: Enhancing ITI facilities to boost skills, benefiting 20 lakh students.
• Internship Program: On-the-job skilling for one crore youth with internships in top companies, offering a monthly allowance of ₹5,000 for one year.

Challenges in Implementation of Such Schemes:

• Economists and small industrialists highlight potential obstacles in these schemes.
• For instance, the first-time employee subsidy, paid in three installments, requires the employee to complete an online financial literacy course for the second installment, which may be impractical across different sectors.
• Additionally, employers must refund the subsidy if the employee leaves within 12 months, deterring small employers from participating due to the financial risk involved.
• The manufacturing job creation scheme requires hiring at least 50 people or 25% of the existing workforce, which is a significant burden for small firms seeking marginal benefits.

Effectiveness of the Schemes:

• These schemes aim to reduce the cost of hiring new employees.
• However, economists argue that wage costs are not the primary constraint.
• The real issues lie in insufficient demand, low consumption, and lack of private investment. Skilling, while important, is not the central barrier to hiring.
• Additional Measures Needed:
  • To create meaningful employment, efforts should focus on the MSME sector and labour-intensive industries, particularly in small towns.
  • Increasing wages in these areas and infusing capital into MSMEs can have a multiplier effect on the economy.
  • Another recommendation is to enhance the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) wages and create a similar scheme for urban workers to stimulate consumption and demand directly.

Conclusion:

• While the government's employment schemes are a step in the right direction, addressing deeper structural issues such as low demand, underinvestment, and the need for formal job creation in labor-intensive sectors is crucial for sustainable employment growth in India.