India’s Labor Market & The Demographic Dividend

By: Alex Porter and Haley Reim

India’s Labor Market

Overview● The labor market varies greatly state by state and sector

by sector. The enforcement is generally better in the larger, organized sector industries.

● Different values of taxes inconsistent regulations, though there have been improvements in recent years

● Highly segmented along gender and caste lines -- hierarchy plays a huge role in management and treatment of employees

● Many trade unions exist

Overview (Continued)● Only about 9% of India’s workforce is in the organized

sector; the remaining 91% are in the unorganized sector, self-employed, or employed as casual wage laborers

● Majority of workers in the agriculture industry, while there has been low growth of in manufacturing.

● Despite the increased education, India will face challenges with youth unemployment

● Large upcoming young working class

India’s Labor Market● The growth of India’s workforce has

slowed from lack of investment in infrastructure.

● Although the population continues to increase, there has been no acceleration in employment growth.

● 5.5 million new jobs created per year, though about 12 million join the workforce every year.

● Prime Minister Narendra Modi continues to use his political capital to push for labor market reforms.

Trade Unions

● 19 major trade unions● About 80% of unionized

workers are infiltrated in one of the main five trade unions

● Four of the five major unions are associated with a political party

● In addition to trade unions, there are employers’ organizations and legislation that has been passed to protect rights & improve conditions

Past Labor Market● In the early 1950s, India embarked on a

socialist strategy of state-directed, heavy industry–based industrialization.

● Large push to join the working class movement against the British rule in India.

● Many Indian’s worked on the construction of railways, coals, as well as cotton and jute.

● During the 1980s there was a decline in employment elasticities due to employers investing in capital-intensive technologies.

Present Labor Market● Enforcement of labor law varies

from state to state and from sector to sector.

● Many have been lifted out of poverty, though there was a low point in 2013

● The service sector shows high growth, but the bulk is in retail trade, construction and personal services, which are transitory, low-paying jobs.

Women in the Labor Market● Women often face discrimination at work in rural and

urban India, including unequal pay.● Safety traveling to and from the workplace.● Average daily wage of 524 rupees ($8) for men vs. 391

rupees per day for women.● lack of recognising of household work, sexual harassment,

women tend to be in the lower paid and less skilled jobs, less organised, women are often supplementary workers

● However, with child laborers there is no difference seen between boy and girl workers

● SEWA (Self-Employed Women’s Association) -- an organization and a movement

Demographic Dividend

What is the demographic dividend?- The freeing up of resources for a country's economic development and

the future prosperity of its populace as it switches from an agrarian to an industrial economy.

WHAT DOES IT MEAN FOR INDIA?- In the initial stages of this transition, fertility rates fall, leading to a

labor force that is temporarily growing faster than the population that is dependent on it (children, elderly, etc.). All else being equal, per capita income grows more rapidly during this time

Fertility Rate- India’s fertility rates fell to 2.3 in 2013 (meaning for every one woman,

2.3 children were born) which is a significant decline from 3.6 in 1991. However this is fertility rate is still short of the replacement level of fertility at 2.1.- Replacement Level of fertility: rate at which a population can exactly

replace itself from one generation to another.

Population growth of india by decadeAfter the population growth began to decrease, It became evident that the large working age population with fewer dependents would be a great advantage.

Asset or liability?- In the year 2000, India's population officially exceeded 1 billion people.

For a few decades, whether or not a majority of the population of India would survive was a huge question.

- U.S. economists thought India’s large population should be allowed to starve. That aiding such a huge group of people in poverty was a waste of funds and such money should be used in different countries where it may make a difference.

- But soon after the turn of this century, economists discovered that while the world was growing older, India's population was growing younger.

increasing Human capital with an increasing workforce- Developing India’s human capital is essential in the coming decade. To

make manufacturing a genuine engine of growth, the government has announced new policies as part of the 12th five-year plan (2012-2017) that aim to create 100 million work opportunities by 2022 — many in labor-intensive manufacturing sectors such as textiles, gems and footwear.

- On top of creating more and more jobs, the majority of them labor intensive, the government also aims to expand access to educational training for workers in rural areas.

the problem?- There are not enough skilled workers! To reap the benefits of its

demographic dividend, the workforce needs to be more prepared. Although there are many programs put in place to help with this situation, it may not be enough.

- The ILO (International Labor Organization) predicts that there will be a demand for 500 million skilled workers by 2022. This leaves a very wide gap of about 497 million from 3.4 million, the current supply of skilled manpower.

The benefits?- Most countries with high skilled capital are

prosperous in both GDP and per capita income. This will then lead to a better quality of life for citizens. And a better quality of life comes back full circle to enabling more people to receive an education and the ability to contribute to that quality of life.

- It is predicted that by 2022 the average Indian’s age would be 29, compared to 37 for China and the US.

- India could become an economic power, comparable to China and even the US

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challenges.html- http://www.yourarticlelibrary.com/history/working-class-movement-against-british-rule-in-

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