9-2
Excerpts from Gujarat Social Infrastructure Vision-2010Chapter 9 ( Employment and Training )
9.1 Introduction
World economy is undergoing a lot of changes. This change is affecting all economies irrespective of whether it is a transition economy, controlled, socialist or market economy. The result of it is paradigm shift in employment structure of most of the countries. What is required at this point of time is aligning it strategically so that maximum advantage is taken from its competencies and existing weakness is removed or nullified.
A common trend observed worldwide is that employment is moving away from traditional agriculture to industry and more to services. This is the result of
- Static wages and efficiencies of Agricultural sector which need much lesser number of people
- Rapidly increasing demand for services world over and associated higher wages.
This trend is more visible in developed countries where a significant proportion of employment has shifted to services. This phenomenon is throwing up a lot of challenges and opportunities for nations which is forcing each to take stock of its capabilities and weaknesses lest that will be unveiled by market forces. One such example is South Korea, which boasted of booming economy until a few years back and then crumbled. Each of the countries has to evaluate itself on efficiency and cost factors.
9.1.1 Advantage India
There are four stages of performance any economy occupies at any time. The quadrant, which India occupies currently, is relevant in case of Gujarat also. Focus of Gujarat should be to graduate into the third quadrant in the immediate future as in figure 9-1.
Figure 9-1 Efficiency v/s Cost
High Cost, High EfficiencyUnited States, Japan / High Cost, Low Efficiency
South Korea
Low Cost, High Efficiency / Low Cost, Low Efficiency
India, Philippines, Sri Lanka
Efficiency
The reason for low cost in case of India has been low wages and low land rents even though a higher interest rate is offsetting this to an extent. This throws a niche segment opens for Indian economy. There is a great opportunity to be tapped by leveraging our core competencies and entering vacant slot of low cost and high efficiency.
Even though each country has its own market structures some common factors do exist in this rapidly “ Globalizing Economy”. One such factor is Human Capital. Growth potential of a country is changing form its financial and technological strengths alone to availability and quality of its manpower. This is great opportunity for India and especially for Gujarat. By proper planning perennial problems of unemployment can be eliminated while giving a great boost to the economy.
9.1.2 Employment Generation Strategies
There are two popular models, which can be adapted to Gujarat’s conditions.
- The so-called “ Input based model” involves high mobilisation of labour and capital in high growth export oriented manufacturing industries and controlling domestic services sectors through strict regulations. This results in high employment growth. Flip side of this strategy is resulting growth is difficult to sustain.
- Second model which is “productivity based “ relies on fully liberalised capital, labour and product markets and encourages best practice companies to enter the country and invest in all economic activities. But corresponding increase in employment is less relative to Input based model.
Case of Gujarat requires that both models be combined to ensure that a high rate of employment generation is achieved while increasing productivity and giving a suitable environment to best practice companies.
9.1.3 Framework
The Framework for Labour Market has been diagrammatically laid out in Figure 9-2.
Figure 9-2 Framework for Labour market
9.2 Roadmap to success
Need of the new economy is both number and quality of people. There is a lot of scope for improvement both in number and quality. As per the census information only 20% of the workforce had metric and above education, 8.9%had middle but below metric education and only 5% were graduates. Situation is worse when it comes to technically educated. A drop out rate of 47% by fifth standard and 59% by seventh standard is not a satisfactory situation. Bottom line is education has to be given importance. Strategies to be adopted to transform the current scenario will depend on the following factors.
9.2.1 Limits on employment rate?
Unemployment and inflation are two variables that have been discussed maximum. Relation between these two variables was investigated by British economist A.W.Philips and it is known as Philips curve. He hypothesised that when wage rates rose rapidly ,unemployment rates were low and wage rates rose slowly when unemployment rates were high. Modified Philips curve indicate a relationship between rate of inflation and unemployment rate. As per this relation unemployment rate increases when rate of inflation is less and vice versa. It implies that unemployment rate cannot be brought below a certain level without increasing inflation and full employment was possible only with infinite inflation.
“Stagflation” in 70s belied expectations when a high unemployment rate co-existed with high inflation. It was proposed that Philips curve exist only in the short run and in the long run there is no trade-off in which case Philips curve is vertical.
9.3 Training
As we have seen that both number and quality are important to achieve the objectives training needs to be given a priority such that unemployed acquire necessary skills for employment, skill level of existing workforce is augmented so that there is an increase in productivity and value added to the economy and new areas of employment is explored.
9.4 Analysis of Gujarat’s labour market
Gujarat has been dependent on Primary sector over the years for a major portion of employment. But there is gradual shift from this sector to secondary and tertiary where the per capita income is higher. This is shown by the decreasing percentage of employment generated by this sector which has come down from 59% in 1991 to 56% currently. This is an expected development considering that 56.50% of population, which was involved in primary sector , contributed 23.93% of NSDP where as secondary sector with 19.21% employment contributed 33.41% and tertiary sector with 24.29% of the employees contributed 42.65 %. This shows that even though agriculture employs the maximum number of people its contribution towards NSDP is less than other sectors. This is due to high underemployment and low productivity.
Table 9-1 Percentage Share of GDP
Sectors / Percentage share in NSDP / Percentage share in employmentPrimary / 23.93 / 56.50
Secondary / 33.41 / 19.21
Tertiary / 42.65 / 24.29
Source: Directorate of Economic and Statistics, Government of Gujarat
9.5 Indicators of Employment
Employment scenario can be analysed by comparing standard indicators with other countries and states.
9.5.1 Employment – to- Population Ratio
Table 9-2 Employment – to – Population Ratio
No. / District / Total Workforce / Employment-to-Population Ratio1 / Jamnagar / 513997 / 36.39
2 / Rajkot / 846419 / 36.85
3 / Surendranagar / 420688 / 40.58
4 / Bhavnagar / 798736 / 38.02
5 / Amreli / 421235 / 39.56
6 / Junagarh / 779233 / 38.16
7 / Kachchh / 411951 / 36.42
8 / Banaskantha / 686986 / 39.32
9 / Sabarkantha / 601721 / 44.00
10 / Mahesana / 981024 / 43.19
11 / Gandhinagar / 121966 / 46.46
12 / Ahmedabad / 1493992 / 36.98
13 / Kheda / 1154106 / 41.27
14 / Panchmahal / 984406 / 47.80
15 / Vadodra / 1070330 / 44.23
16 / Bharuch / 575237 / 43.38
17 / Surat / 1329836 / 42.71
18 / Valsad / 836280 / 47.10
19 / Dangs / 67549 / 50.45
20 / Gujarat / 14095692 / 41.17
Source: Directorate of Economic and Statistics, Government of Gujarat
· Global Scenario
Analysis of international scenario throws up some interesting observations in that many countries had a decreasing employment-to-population ratio for men and a rising ratio for women. In many countries this was caused by declining participation of men aged 55 to 64 years and in some others even 25 to 54 years old contributed to this decline. This is an indication of tendency towards early retirement among men, which is counteracted by movement of women into the labour market.
· Benchmarking Gujarat with other countries
Figure 9-3 Benchmarking Gujarat with other states and countries
Source: Directorate of Economic and Statistics, Government of Gujarat, OECD
Position of Gujarat, as far as employment– to- population ratio is considered, is not satisfactory. Average employment – to- population ratio of Gujarat is very low compared to some of the European countries. A major reason for this low figure is low women participation in labour force. This as explained else where can be reduced if not eliminated by suitable measures like providing training and suitable career avenues for women.
9.5.2 Labour Force Participation Rate
· Global Scenario
An interesting observation is that labour force participation rates for males at prime age, 25 to 54 years are almost the same in all countries. There are variations in the pattern of labour force entering and leaving labour market across countries depending variables like extent of schooling and economic activity. One example is that of Burkina Faso where a gradual entry into and exit from labour force reflects a combination of schooling and economic activity among younger population and limited coverage of retirement schemes. In some other countries like Germany and Russia it has sharp slopes showing massive entry and exit at some age ranges.
· Gujarat
Table 9-3 Labour Force Participation Rate
District / Male / Female / TotalJamnagar / 92.78 / 21.33 / 58.15
Rajkot / 91.91 / 22.79 / 58.11
Surendranagar / 93.92 / 28.44 / 62.68
Bhavnagar / 98.35 / 29.81 / 65.07
Amreli / 97.75 / 24.57 / 61.51
Junagarh / 90.92 / 20.96 / 56.78
Kachchh / 94.01 / 24.33 / 59.74
Banaskantha / 97.72 / 20.15 / 60.30
Sabarkantha / 92.24 / 28.74 / 60.60
Mahesana / 91.51 / 23.93 / 58.26
Gandhinagar / 82.21 / 14.25 / 49.70
Ahmedabad / 84.49 / 15.15 / 51.84
Kheda / 91.16 / 19.90 / 57.01
Panchmahal / 94.91 / 27.11 / 62.10
Vadodra / 90.34 / 20.58 / 57.33
Bharuch / 93.29 / 29.62 / 63.04
Surat / 95.09 / 30.20 / 65.04
Valsad / 92.13 / 32.89 / 63.16
Dangs / 82.14 / 62.73 / 72.56
Gujarat / 92.06 / 23.95 / 59.27
Source: Directorate of Economic and Statistics, Government of Gujarat
World over male participation rate is much more than female participation rates. Gujarat follows same pattern as far as male and female participation rates are concerned with male participation rate at least thrice that of female participation rate in most cases. An exceptional case is that of Dangs where female population is forced to work to meet sustenance needs. Labour Force Participation Rate for Gujarat is represented below
Gujarat has a very high participation rate for men (92%), which rank among the best in the world, where as the same for women is very less compared to other countries.
· Benchmarking Gujarat with other countries
Figure 9-4 Benchmarking Gujarat with other countries
Source: - Directorate of Economic and Statistics, Government of Gujarat, ILO and OECD
The figures represent a creditable picture of Gujarat in comparison with other countries even then there is a lot of scope for improvement.
· Analysis
Even though figures represent a rosy picture, due to entrepreneurial spirit of Gujaratis, situation leaves much to be desired. Most of the labour force is engaged with low value addition. The case of Underemployment is widespread, with agriculture accounting for the maximum. Case of Dangs is an example of extreme underemployment, which expectedly has a high labour force participation rate. Most of the population is employed without much earnings, a situation which is very much like some of the African countries.
9.5.3 Employment by Sector
The Employment by sector indicator groups the economically active population into three broad groups namely primary, secondary and tertiary. The primary sector consists of Agriculture, hunting, forestry and fishing activities. The secondary sector comprises of mining and quarrying, manufacturing, construction and public utilities. The tertiary sector consists of whole sale and retail trade, restaurants and Hotels, transport, storage and communications, finance, insurance, real estate and business services, and community, social and personal services.
· Global Scenario
Employment by sector is frequently used as an indicator of a country’s stage of development. In case of most of the developing countries agriculture is the main occupation of population. Downside of this is, a major portion of population supposedly engaged in agriculture represents underemployment. There is a shift in most of the countries from sectors that produce goods (primary and secondary) to the tertiary sector. Except sub-Saharan countries, relative employment in primary sector is declining everywhere and tertiary sector is contributing half of the employment.
· Benchmarking Gujarat with other countries
Figure 9-5 Benchmarking Gujarat
Source: - Directorate of Economic and Statistics, Government of Gujarat, ILO and OECD
· Analysis
A look at the above figures reveals that Gujarat as a state has a long way to go compared to other countries. Most of the countries analysed for the purpose had a heavy dependence on agriculture in the past and it has gradually come down. There are three major reasons for this.
1.Value added by an individual in agriculture is less than that in industry which is less than that in services and hence rapid growth of economy can come from services and industry in that order. Hence there is an incentive for workers to shift towards Services.
2.Income earned by individuals are comparatively more in services.
3.Agriculture, mostly being commodity based the growth in demand comes mainly from population growth and not from per capita consumption.