Monday, 1 February 2010

The challenge of job creation

Every nation is battling with this problem – how to create jobs for its people. Growth is all fine, but without jobs, there cannot be real progress. The problem with much of capitalism and economic development in the last decade has been that job creation has lagged behind growth. By definition, this leads to inequality, resentment and ultimately a backlash. The recession last year exacerbated the problem through significant job losses, especially in the developed world.

The single most important economic challenge for nations is job creation. Being unemployed is one of the most demeaning of situations for any human being. A lot of the world’s ills can be attributed to joblessness. Create full employment and hunger will largely go away, terrorism will subside, lifespans will increase, the quality of life will transform and the world will be an altogether nicer place.

But how ? A problem everybody has grappled with for a long time. Some thought socialism was the answer – only to be proved completely wrong (that hasn’t deterred many people from dreaming of it again). Does capitalism inherently not care about jobs ? What sort of policy initiatives would be sensible for nations to undertake.

This blogger strongly believes that the route to job creation is through capitalism. Many learned experts have propounded many excellent theories. I am no learned expert, but blogging is all about airing one’s views, however ill informed they may be. So, with all humility, here are some thoughts for policies that will aid job creation.

Manufacturing is key. This is the sector that has the maximum potential for job creation. Services may be sexy, but doesn’t create the same number of jobs.

Labour pricing has to be sensible. High labour cost coupled with social tariffs by governments is actually more harmful to labour than beneficial. Labour must not price out enterprise.

Labour flexibility is fundamental to job creation. Protecting jobs protects a few and excludes many, Paradoxically allowing companies to shed people, actually creates more jobs. Organised labour just does not get this.

Governments must incentivise employment, as much as they incentivise investment. Today most government policies encourage investment. But they are neutral, or even negative, towards employment.

A massive investment is called for in vocational training. In training specific skills for specific jobs. And efficient reskilling and retraining opportunities for people who lose jobs to be employable elsewhere.

Infrastructure development is a great way to create jobs. Both hard and soft infrastructure. Hard such as upgrading roads, railways, bridges, ports and soft such as education, health care, etc.

Entrepreneurship is a magic bullet. Not necessarily big start ups. The corner store, the self employed artisan, the trader, the maid – these are true entrepreneurs who create jobs for themselves. There are more jobs created this way than in the industrial sector.

Over the next few days, I'm hoping to explore each of these areas in separate posts.


gils said...

thalaivaray...unga writeup chancela..semma authority with all humility!!! making sense and athey samayathula easy on the mind too!!! chaancelesss mix :) eagerly waiting for the detail parts

An Indian in China said...

There is a story in the God's own country - A person was carrying a jack fruit on his head that he bought for Rs.5 and was trying to load it onto a bus. He was stopped by the head load workers union in the bus station who reserves all rights for loading and unloading goods onto and from the buses and was asked to pay Rs.25 as loading charges by the then CITU union in the Municipal busstand in Palakkad! The poor fellow decided to give them the jackfruit instead!

This is a classic case of what you have mentioned in one of your points in your blog - " Labour must not price out enterprise."

I can identify with many of your other points as well. Another fantastic post. Great reading.

Sandhya Sriram said...

the steps you are suggesting are very big and very very politically sensitive. Labour flexibilty and incentivising employemend will be termed will be called capitalist friendly - the last thing a govt will want, manufacuturing growth is not a single step - there also has to be demand generation which again is the visious curve linked to job availability. there is enormous money being pumped into ifnrastructure and education (including vocational training) year on year but the goverment has no way to track the effectiveness of the spends. Entreprenuership development in a democracy is linked to growth and demand.

With two top class economists at the helm, the problem which india faces is not what to do, but how to effectively do it at a such a scale and depth that it creates the impact

Adesh Sidhu said...

Nice point of view.
I think best way to create jobs is to promote small businesses and entrepreneurs. In this world we need more people who can create jobs and less people who search for jobs.

Exkalibur666 said...

Agree to all the points stated above, we should promote manufacturing, infrastructure and investment and go for moderate sustainable growth than volatile high growth..

Vishal said...

Very impressed by the range that you possess for any topic. I agree that each one of suggestions of yours is capable of creating tons of jobs. However, interesting part of the story is how they can be executed at grass root kevel. Look forward to your upcoming posts on this subject...

Ramesh said...

@gils - I have zero authority, but that's the beauty of blogging. You can pontificate to the world happily :)

@Vinod - We can write a million words about the stupidity of such organised labour as in your example.

@Sandhya - Very right; massively politically sensitive. And the key is implementation; I'll try and address some possible ways of implementation ; thanks for this very valid insight

@Adesh - I truly believe that. In communities which have a history of self employment like the Marwaris and the Patels, you don't see such unemployment.

@Exkalibur - Thnaks. But I think we can go for very high growth AND achieve higher employement. I'll try and address this in the coming posts

@VA - You and Sandhya have mentioned the key problem ; implementation. Shall try to address this.

J said...

Very nice post. A very topical issue and a huge problems that needs to be confronted without delay. I agree that manufacturing, infrastructure and entrepreneurship are key elements of the solution. Am eager to get the discussion going on each one of your suggestions. You have been really prolific of late - lots of posts to catch up on :)

Ramesh said...

@J - Thanks. Rambling a fair bit these days as I am somewhat idle. Next week, I hit the road, so will be tardy.

Reflections said...

"Create full employment and hunger will largely go away, terrorism will subside, lifespans will increase, the quality of life will transform and the world will be an altogether nicer place."

Oh yes, oh yes, yes.....sounds so good but to make it happen is an different ball-game altogether. Whenever I read what u write I go back to my economics class in college where we brainstormed with the lecturer about these topics, mainly umemployment. I remember now how green and idealistic we were with the ideas we wd suggest;-).

And as usual a thought-provoking post!!!!

Ramesh said...

@Reflections - This series is idealistic too and as many have pointed out, impractical. But then that's the beauty of blogging isn't it ? Anything can be written !!

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