27 Feb 2018 19:14 IST

India’s jobs crisis is serious

But India is just not creating enough jobs for our growing youth. Bloomberg reported in September that the nation’s jobs outlook was at a 12-year low | GRN Somashekar BL on Campus

Tightening regulations in the US, the UK and Autsralia are only compounding the problems

Last September, the World Economic Forum (WEF) released its annual Global Human Capital Report. The exhaustive 200-page document starts off by defining ‘human capital’ as the knowledge and skills people possess to (obtain jobs and) create value in the global economic system.

Of the 130 nations ranked, India stood at a dismal 103 — far behind Sri Lanka, which was at 70. For skill application and accumulation among the adult population — what the WEF calls ‘deployment’ — India falls further to 118, behind Swaziland and ahead of Gabon. Norway tops the charts. The US is ranked at 4, Germany at 6 and China at 34.

Giving a boost

The Modi government launched its ambitious ‘Make in India’ programme with much fanfare to address employment, global competitiveness and the balance of payments issue. But small-scale manufacturing had been down during most of 2017, thus bringing down the number of people employed in this sector.

It is little wonder that the Micro, Small and Medium Enterprises Development (MSMED) department got a boost in this year’s Budget. This agency provides incubation assistance, marketing support, grants, technology transfer assistance and procurement guarantees — all vital to an entrepreneur, and consequently, job creation. The MSMED is also the primary vehicle through which the government provides skills and job training at rural locations, which is, again, crucial for WEF’s Deployment index.

But India is just not creating enough employment opportunities for our growing youth. Bloomberg reported in September that the nation’s jobs outlook was at a 12-year low. For the entire Q3 quarter in 2015, just 1.34 lakh new jobs were created across eight major industries (according to India’s Labour Bureau). Meanwhile, our colleges and universities release up to 50 lakh new graduates each year. Millions more never go to college but still look for work, mostly unskilled.

The trickle-down effect

And as though to prove the old adage — ‘When it rains, it pours’ — true, regulations in foreign labour markets are beginning to have an impact in India. In 2015, no one had anticipated Brexit (which happened in June 2016) or Trump’s rise to power (November 2016). The UK and the US have since been severely tightening their immigration policies, squeezing new arrivals and ending generous temporary work visa rules which had helped provide jobs to millions of Indians in the last decade.

The US

This week, the US further tightened its H-1B temporary work visa programme, strengthening its rules for ‘employees working at third-party worksites’. These affect a large number of Indians placed by Indian IT companies to work at US client locations on staff augmentation engagements.

Such assignments typically involve an American client requesting the Indian IT company to send over a person with a particular skill — such as a Java developer — who would temporarily work under supervision by the American client. The government clarified that these kinds of arrangements would no longer be allowed saying that “a legitimate employer-employee relationship must be maintained (at the third-party worksite).”

It is not difficult to assess if an employer-employee relationship exists. Generally, this would involve employees not just receiving a salary but also benefits, such as health insurance, paid vacation, perks (mileage reimbursement), house rental assistance, paid training and promotional opportunities to advance. An engineer who drives trains is in an employer-employee relationship with the Indian Railways, but an Uber taxi driver who takes you on a ride to the airport is not in a similar relationship with you.

The US government is saying that it will start disallowing H-1B applications of individuals who will be assigned to work at client locations as independent contractors. This would limit Indian IT companies to only send teams of people on ‘projects’, where the outcome of the project is the company’s responsibility and the IT company’s manager would oversee the employee’s work performance to advance the project’s goal.

And here again, the government restricted its rules by saying that H-1Bs would no longer be given out automatically for three-year periods but be limited to the actual length of a project. Most IT projects do not last three years.

In London

The government has stepped up scrutiny of applications for Indefinite Leave to Remain (ILR) permits, which grant beneficiaries permanent resident status in the UK. Dozens of Indians protested last month in front of the UK Home Office under the banner, ‘Justice for highly skilled professionals’, demanding that their permanent resident visas be quickly granted. They made the same old arguments — that they devoted their professional lives to UK’s growth, are law-abiding citizens and have paid taxes.

London: Hundreds of Indian doctors, teachers, entrepreneurs and other professionals gathered outside Parliament to protest against "unfair" immigration rules that have left them in limbo regarding their residency status in the UK on Wednesday.PTI Photo(PTI2_21_2018_000229B)

 

 

In Australia

Starting next month, immigrants can no longer obtain a work visa without a Master’s degree, delivering a blow to thousands of Indian techies who were previously qualified to obtain eventual permanent residence because of their work experience.

Last April, the government announced that the Temporary Work subclass 457 skilled visa would be abolished and replaced with the new, tighter Temporary Skill Shortage (TSS) visa in March 2018. In effect, a person wishing to work in Australia must study there for at least 16 months to obtain a Master’s degree. Then, the person has to obtain an employer sponsor, get a temporary 485 visa, work for at least three years and only later apply for permanent residence.

Compounding crisis

All of these restrictive policies abroad have the effect of compounding India’s job crisis. For years, these countries were magnets, attracting India’s hungry labour force each year. Now, rejected at the source, thousands of Indians are being forced to find work at home in an already scarce job market.

Worse, when skilled Indians already in these countries are forced to return to India, there will just not be enough jobs to keep them all gainfully employed. And because they are likely more skilled than the domestic workforce, they will begin displacing those already employed, even as excess labour supply brings downward pressure on wages.

Elections have consequences and campaigns are all about priorities. The NDA government’s priorities have thus far largely been about improving public integrity and expanding the tax net to spend more on social programmes.

Tightening the cash-based informal economy has had a severe negative impact on jobs. As challenges go, India’s jobs crisis is a serious problem, something that could impact the country’s position in the family of nations. It could also turn out to be a significant election issue next year.

Recommended for you