Job losses in India too ?

My good friend who goes by the moniker of Vaingluory, at least on my travel blog, messaged me drawing attention to this story .  The opinion piece from a headhunter is titled 'Expect 100,000 to 200,000 Jobs to be Lost Every Year For The Next Three Years' .

There is a lot of hyperbole in this - I don't think India is going to lose jobs at that rate. Certainly not from the IT industry . But there is an undercurrent of truth , and there is a chill wind coming.

In the last 10-15 years, India, especially in the IT and BPO sectors has seen a pace of job creation that has been unmatched in its history. The impact this has had on people's lives is very visible in India's cities. In any other country, these job numbers would have been a spectacular miracle that would have transformed the country. India has a huge population and hence this is only a small wave in the ocean.

The young have come to believe that this scorching pace is the natural order of things and that anybody can get a job for the asking. Of course, this can't last for ever. The IT industry has matured and the rate of job growth has slowed down. That is only to be expected.  The days of "Tresspassers will be recruited" are long gone ! Companies are not recruiting in the same numbers. They are asking some underperformers to leave. Some have to cut their costs and so some layoffs have happened too. I do not see any evidence that there is going to be a large shrinkage of jobs ; there will be a much slower rate of growth and there will be some layoffs. But the overall numbers is not going to shrink in a short span of time.

But some global trends are inevitable and they will have a big impact. The most important of them is automation. This is an inexorable trend and will affect all industries including IT. This is going to be the single largest impact on jobs. It's a global problem without any easy answers.

The second problem in India, is agriculture. Agriculture has always been the sponge - the vast majority of the Indian population is employed (more accurately underemployed) here.  This sector is increasingly becoming financially strained, for reasons that are peculiar to India . Small land holdings, a major water crisis, inability to make significant profits, and the extent of risks for which there are no commensurate rewards. All these make agriculture likely to shed jobs on a scale that will be gargantuan. This has profound consequences for India. Manufacturing or services simply cannot absorb this load and even if they could, there is a massive skill gap for agricultural workers to migrate to other sectors.

India has one big advantage - an already strong services sector which will keep growing. This has the capacity to absorb skilled manpower. Touch any area and India has actually a huge potential for job creation. Judges, policemen, health care workers, retail industry workers, logistics industry workers, even professions like carpenters, plumbers, electricians - everywhere we have a shortage of qualified people even today.  Jobs will keep getting created in each of these trades. Many of them will be self employed . Many of them  may be in the government ; for example if we have to have a policemen to population ratio that is even remotely comparable to other countries, we will need to add millions of policemen. Ditto judges. Ditto nurses. 

The issue is skills. India has a young population that is extremely keen on education and willing to work hard. It lacks a real effective skill building initiative. The National Skills Development Corporation, if it really does its job, can transform India.

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Two and three quarters cheers for Dan Price

It would be really churlish to sing anything but the loudest praise for Dan Price. And yet this blogger is falling short of raising three cheers for him.

Dan Price is the CEO of a privately held small company called Gravity Payments with about 120 employees. About two weeks ago, he called all his employees for a huddle and told them that he was raising everybody's salary to $ 70,000 a year, because that will make a big difference to their lives and help them be happy. Simultaneously he also announced that he would cut his own salary from $1m to $ 70,000. Considering that the average salary in Gravity was $48,000, he certainly made 120 people very happy. To read more about this heartwarming story click here.

In a world of cynical CEOs, astronomical pay differences , of treating employees like (pallets, or worse, shit, ) this is a refreshingly good story. Mr Price must be commended for what is undoubtedly a noble act. He is a CEO with a difference, unlike the many who sometimes don't seem to belong to the species we normally understand as Homo Sapiens.

And yet ............... , this blogger, while praising Price's actions to the sky, thinks he is wrong to do this.

People who are employed, even in Walmart, actually have a good deal in today's world. They have a job. They earn a salary, which while seeming to be inadequate, is at least something. They have the government looking out for them in terms of labour legislation designed to ensure that they are treated fairly. They have the unions watching their back. Although they may not believe it, they actually are in a great position.

Consider the larger number of people who are unemployed. They have nothing. Nobody looks out for them. They are called scroungers and worse. Its damned difficult to get a job. Nobody who is not unemployed can understand the feelings of worthlessness, desperation and worse.

Mr Price - you have a heart and are a good man. If you had not raised anybody's salary, but instead employed 120 more people,  you will deserve to be a saint in my books. Those who have a job should be paid fairly - I know that there will be a big dispute as to what constitutes fair pay, but pay them fairly by whatever standards you consider appropriate. But even more important, hire lots of people. Give them jobs. Give them a hope in life.

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Give the unemployed a break

One of the great degrading experiences in life is to be without a job, apply hopefully for one, and not even get a response. The sense of emptiness, the feeling of no hope, is a low point in life. If you are in a position of being able to hire, at least send a rejection note politely worded and pointing out why they didn't fit your requirements. Call as many as possible for an interview (just the mere fact of being called is a climb out of the pit of despair) . Treat them fairly even if you are not going to hire them. Please.

When there is a clear discrimination against you, it becomes even worse, and really hard to bear. All through the past, gender discrimination was a big issue. It's now still there, but has at least reduced, so much so that its not the biggest discriminating factor I believe. Two other categories suffer worse discrimination

- The "old". If you are above 45, you have no hope of getting a new job if you have lost your current one

- Those with a gap in their CV - either because they lost a job and couldn't get another one for some time or , for women, for taking a career break for children.

The former will be the subject matter of a future post, but this time I want to highlight the plight of those who have been unemployed for some time. A month or two is OK. When it crosses six months, then you virtually have lost all chance of  getting another job. This is especially acute in Europe and the US - research after research has shown that those unemployed for 6 months or more don't even get called for interviews even if overqualified for the job.

Obama has struck a deal with US companies who are agreeing to review their hiring practices to eliminate this discrimination. This is a good move in a country where post the financial crisis, many people lost their jobs and have had great difficulty in finding another one.

My argument has long been that companies should actively seek out such people rather than discriminate against them. Other things being equal, people to whom life has dealt a blow, are invariably better workers than those who have had a smooth time. When you have faced the bitter experience of unemployment, you will value the job much more. You work diligently and try your best to keep it rather than go on strike. You have a rounded attitude to life - you are likely to treat colleagues and business partners with more regard and respect. You are likely to take a more long term view. All extremely desirable qualities in employees. My experience in my working life has invariably been this - people who have struggled to get jobs, or who faced personal tragedies or who suffered on some account or the other were, almost without exception, better performers pound for pound. So much so that I started to positively discriminate in favour of them !!

So here is a plea. Treat those applying for a job with greater sensitivity and care. Even if there are 1000 applications for every job. And do not discriminate against the unemployed. Its a small cost to do this and it's the human thing to do. Especially if you mouth inanities as "people are my greatest asset" and crap like that. HR types - are you listening .

Its also a smart thing to do, for you never know when you would be on the other side of this equation.

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Hail the entrepreneur

One of the largest job creators in the world is, well, you. You don’t need to necessarily work for somebody else – you can work for yourself. Millions do. Entrepreneurship is truly a magic bullet to overcome unemployment.

Entrepreneurship is a long and complicated word. It hints at some grandiose big startup ; it doesn’t need to be. The largest number of entrepreneurs run an organization of 1 – themselves. It’s the corner shopkeeper, the street trader, the plumber, the carpenter, the doctor, the taxi driver, who are truly the greatest of entrepreneurs. They don’t moan about unemployment. They don’t demand 6 weeks of holidays a year. They don’t demand travel privileges in first class. They just work hard and earn their own living.

Entrepreneurship need not necessarily need huge capital. It doesn’t need breakthrough ideas. It doesn’t need a MBA. It however needs commitment, guts, hard work, luck and some breaks.

I’ll tell you the story of an entrepreneur I know. He comes from Bihar, one of the poorest states in India. He came to Bangalore, a few thousand miles away, to try and earn a living. Without real qualifications, he did not stand much chance of a job. So he took to being an entrepreneur. He made snacks and came to the office area in the evening and sold it to hungry office workers. He didn’t have a place to sell from; nor had he a roadside stall. Instead, he brought his stuff to the staircase in the office building and caught the attention of the smokers who usually inhabit this place. Little by little his business grew. Come rain or shine, he was there. The office folk started to regularly buy from him. He was meticulously polite. He was always there, everyday. He looked upon each person buying his stuff as “God” – who was enabling him to survive. Little by little he grew his business. He started doing well with a steady clientele, a steady income . So much so that he caught the attention of a catering outfit who found him an ideal candidate to run one of their shops. He is still humble, polite to a fault and still looks on you as “God” when you buy something from him. He is truly an unsung hero and he shows the way how to overcome unemployment.

In this entire series on jobs, I have been preaching that governments should do this or not do that. Entrepreneurship is one area where my position is that governments should do nothing. Just stay out of the entrepreneur’s hair. Not do like what has happened in Europe - any entrepreneur there will tear his hair out trying to follow a million directives from Brussels and a million more from his own country. Stop putting barriers in front of entrepreneurs and then let them find their own way.

This series on creating jobs has dragged on, but I submit that this is a justified topic to examine in some detail. One of the most degrading of situations is to be unemployed. One of the most "punch in the pit of the stomach" feeling is losing your job for no fault of yours. Being gainfully employed is fundamental to any person. Besides the economic necessity, it brings a sense of identity to a person. Some measure of social standing. An anchor in this difficult world.

Full employment is not an utopian dream. It is something every society must strive for. It is possible to achieve this to a large measure. It is a holy grail worth toiling for.

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Build baby, build

Build and they’ll come. Economists hate this phrase. They won’t come; they say. Maybe not to the land of the politician who said "Drill baby, drill" and to whom the title of this post owes apologies to. But in most parts of the world, they will indeed come.

Infrastructure development is surely the policy area where most countries have performed poorly in. In developing countries it is because of lack of prioritisation (wasteful subsidies are considered more important) and rampant corruption. In developed countries – it is the NIMBY problem – do it anywhere, but not in my backyard. Everywhere infrastructure has been allowed to dramatically deteriorate (witness America’s airports, Britain’s M25, California’s power cuts, …..) Two stellar exceptions – Britain in the colonies in the early twentieth century and China of today.

That a robust infrastructure is fundamental for economic growth is well known. But I argue here for infrastructure building as a great way of creating jobs.

China has created a huge number of jobs in the construction sector. It cushioned the unemployment caused by the recession primarily because of stepping up infrastructure development to an even higher level. In India, despite the leakages, the National Rural Employment Guarantee Scheme has been successful primarily because of the big jump in road building happening in various parts of the country. China is successfully exporting this concept – it goes around the world scouring for minerals and oil and offers infrastructure development in return, which incidentally also sucks up a fair amount of Chinese labour.

India has a crying need of infrastructure development – both urban and rural. It can safely be depended upon to provide millions of jobs for the next 20 years Bottlenecks such as land acquisition and corruption can be overcome and should not be conveniently explained away as the “price of democracy”. That’s sheer bunk.

Developed countries have allowed their superb infrastructure of 50 years ago to wither away. No country typifies this more than the US. Because any lobby with half a dozen supporters can block anything, America has allowed its infrastructure, especially airports, railroads and power plants, to drop to third world levels. With its high potential for adding jobs, the current economic climate is a great opportunity to correct this aberration.

What about the money ; the sheer size of investment required. Much of this can be recouped by economically pricing the services – tolls on roads, fair price for power, etc etc. Capital is always available if there is a possibility of adequate returns. Its unbelievable that infrastructure investments cannot yield a proper return – after all what competition can there be for an airport or a road or a port ?? The trouble has been mistaken pricing policies for generations which have made infrastructure seem a dead investment.

Build baby, build; for the legions are coming !

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Invest in Vocational Training

Education is key to development – it would be hard to dispute this simplistic truism. But what education ? Primary ? Secondary ? Institutions of high learning ? What ?

This post argues for vocational training being the single biggest priority. There is no doubt that universal primary education has to be a basic human right, and a basic human responsibility. But I would place vocational training a shade above even that. For vocational training ensures people have jobs. Ensures that they have a little more wealth. And when they have that they would themselves ensure that their children receive the best primary education they can find, and afford.

Both China and India do a lot in the field of vocational training. Training people to be machine operators, welders, plumbers, carpenters, nurses, technicians – there are scores and scores of professions where , with a little training, people, who are otherwise unemployable, can find a job. These don’t need a very high basic education for it to be effective. And they offer quick rewards – it does not take an enormous amount of time to acquire these skills and get a job. And even if jobs are not plentiful readily, these skills lend themselves to entrepreneurship.

Start National Institutes of Vocational Training. Give them an aura of respectability. Start dozens of them in every city, in every state, in every country. Governments, in partnership with industry, must invest heavily in them (better to invest in this than to pay the dole). Make it virtually free for those being trained. Make employers, or employees, pay off some portion of the costs after they have found the job.

Make these institutes a place where people can come back to multiple times in their career. If they get laid off, they come back and acquire a different skill, perhaps. If at that point in time, there are plentiful jobs for hair dressers, but not so much for boiler operators, well – whoever wants to train to be a hairdresser can easily do so (incidentally, the most promising profession in China should surely be the hairdresser; every Chinese is obsessed with his or her hair and there are only 5 hairdressers every 10 mtrs in China ! And surely it has to be the most depressing profession in India; Rajalakshmi wouldn’t be caught dead having her hair cut !!)

I also suggest that when somebody is laid off, the employer is required to fund that person’s reentry into the technical school as part of the compensation. And the employee needs to constantly re skill into the professions that are in demand. To my mind, it’s a tragedy that most of us, when we pass out of University and take up work, stop re skilling ourselves.

So IITs, IIMs, Harvard, Jiaotong, are all very good. But they should come slightly lower down in the pecking order. The technical schools should occupy the pride of place. Mao Zedong said, in a completely different context, “Let a hundred flowers bloom”. I suggest, “Let a million technical schools bloom”.

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Governments - Incentivise employment

Every government in the world says one of its biggest priorities is to create jobs. And yet, very often, they do precisely the opposite. Governments, and policy makers, do not normally get it as to how to create jobs. A shining exception is China – no government in the world comes even remotely close to China when it comes to job creation.

How should governments stimulate job creation. By helping in all of the areas covered in this series – by favouring the manufacturing industry, by not adding burdens on to labour cost, by not putting insurmountable barriers to labour flexibility, by creating the right skilled work force, by investing in infrastructure, etc etc. But governments can directly aid employment too. Here’s (again of doubtful practicality) some prescriptions.

Firstly reduce incentives based on investment and increase incentives based on employment. Remove capital subsidies, investment subsidies, and shift to employment subsidies. Base tax holidays on employment, not investment.

Secondly, enable free movement of labour to areas where manufacturing is concentrated (instead of trying to bring manufacturing to where development has not taken place). Provide cheap housing options in such manufacturing clusters. This has been the key to China’s success. Manufacturing was stimulated in the coastal provinces (especially Guangdong), Because that was the ideal location for plants. Labour moved in from all the interior provinces (especially the hugely populated Sichuan). Shenzhen, a non descript fishing village 20 years go, is now a mega city. And for heaven’s sake jail the clowns who propagate the sons of the soil theory.

Thirdly make state and local governments accountable for number of jobs that are created in their state. Give them quotas for employment generation. Today, the progressive states woo investment. They should woo employment. Again, this is taken from China’s strategy. China woos both, but there are specific job creation quotas for officials and they get promoted based on how well they achieve this.

Fourthly make the salary bill tax deductible by two times the salary, for all wages paid to workers of below X dollars. Thus there is a tax incentive to employ lower wage workers, which is where unemployment hits the most. Fund this out of the reduction in the dole (unemployment benefit, social security, or by whatever name its called) that such a move would surely result in.

Fifthly, the government, as the largest single consumer in any country can use its huge buying power very effectively. Other things being equal, favour suppliers who have contributed to job creation. Make % increase in number of people employed as a criteria in vendor selection.

Governments can do a lot directly to incentivise employment. They have to believe passionately in it. That they will do if they know that they can remain in power (win election in democratic states ; get the favour of the leader in communist ones). Both the electorate and the leader might want to consider moving this to the top in the criteria for deciding whom they wish to back.

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Labour flexibility is fundamental to job creation

In China, when you are employed, you get a fixed term contract. Usually 2 years or 3 years. Even if you are a manager. Even if you are a very senior manager. There is no “endless” employment agreement. And this is ostensibly a communist state. It is not a complete coincidence that in the last 20 years, China has created jobs in the manufacturing sector for some 200 million people.

This blogger might prattle on like an Ayn Rand and is unapolegetically a capitalist. Yet, in his heart, he is a bleeding socialist. Witness the almost pathological aversion to layoffs, as posted here, here and here. BUT ……

One of the biggest myths behind unions and governments “protecting” jobs is that they protect jobs. They don’t. What they actually do is cosset the privileged few and make vulnerable the underprivileged many. The employer simply does not take on “permanent” workers and instead takes on temps, or contractors or part timers or whatever. These get no security of employment, they are often exploited, and there’s often nobody to stand up for them. Or else the employer starts to favour capital over labour as ironically the flexibility he has with stupid machines, is way above the flexibility he has with intelligent people. Any which way, it’s the worker who loses.

We are not talking about those employers who abuse or exploit their workers here. There the law must be stringent and must make no compromises. It’s the flexibility to scale up and down, which is the point of contention.

Take the case of the humble house maid or ayi, or whatever she is called in the developing world. This is one of the most unregulated of labour markets. They are often abused or exploited ( some would argue that they are the subject of exploitation by the maid, but that’s another story !). But such a thriving market exists only because there is freedom of entry and exit. Imagine a situation where once you employed a maid, you could never sack her without a hefty compensation, and only after a lengthy consultative and court process. There isn’t a single housewife on earth who’ll employ a maid under those conditions. A thriving labour market that exists today will come to a standstill. Are maids sacked at a whim ? – sure. Unfairly – certainly ? But at least there is a possibility of getting a job and earning some money.

So here’s another impractical idea. Allow much more freedom to let people go . Legislate a small, but not wild compensation (say 3 months wages). The state then pays another 3 months wages (the dole which many countries already have). Provide a disincentive to companies who get rid of people, without replacing them elsewhere in the country - like a monetary penalty of another 3 months wages, which goes to fund the dole. The state funds retraining of such people, if required ( covered in a post to follow). Create an environment for jobs to flourish, as I have been arguing all week. By doing this, people may get sacked more often. But they are unlikely to be long without a job.

The Indian IT industry employs hundreds of thousands of people. IT companies take great pride in boasting about how many people they have added. Part of the reason is that they are not worried about having to let people go – they have the opposite problem of getting people to stay. Very few employees are really worried about getting the boot; for they know that they can get another job. All this, even though the legal environment is the same restrictive environment where there are draconian permanency rights.

Now wouldn’t it be wonderful when all employers are worried about retaining their people, rather than how they are going to sack them ?

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Labour pricing - don't score an own goal

One of the most amazing consequences of the recession over the last two years is that, for the first time, employees are willing to accept pay cuts, or even zero pay for periods of time, in order to retain their jobs. Labour has realised (the unpleasant truth) that just like any other factor of production, there is an equilibrium price. Go above it and business will be killed. Its much better to have low pay than no pay. High pay and constant increases are not an automatic entitlement.

This post is primarily for the developed economies where cost of labour is high. Because this has been accepted as a given, manufacturing has inexorably moved to the east, notably China. So the developed world has accepted, without challenge, that their costs will be high and therefore they can do nothing about jobs going away. Such a defeatist attitude is unbecoming of the great innovative cultures they are. Any cost, even labour cost, can , and should, be controlled to keep manufacturing jobs from going away. But how ? Here’s an unpalatable prescription.

Lets take a typical situation – the cost of a worker in a factory is say $ 25,000 per annum. The equivalent cost in a developing country is $ 2,500. Now that’s a huge gap – 90%. While there is no magic bullet, we can chip away at the difference.

Firstly, a significant portion of the cost in developed countries is the social costs that are imposed by the government. Generous pension rules. Unbelievable medical rights (for god's sake, artificial breast implants should not be an entitlement in any medical scheme). The US system of employer paying the medical insurance is a horrible way to drive labour costs up and ensure that manufacturing jobs keep going to China. Retain very basic social costs and remove everything else. Costs are down by 10%.

Employees must work longer hours. No 6 week holiday entitlement. Work five and a half days a week; maybe even six days. Work eight and half hours a day. Another 15% reduction.

Governments must provide an incentive for lower level manufacturing jobs in the form of tax concessions (argued in the previous post). Abolish investment related subsidies (the amount of pork in the US is unbelievable). Channel that money to tax breaks for the low end manufacturing jobs. Another 10% reduction.

Allow inflation to chip away another 10%. Wage inflation in developing countries will always be higher than wage inflation in developed countries. Aspirations rise everywhere – even in the poor world. And contrary to economic theory it will not be nullified by exchange rate movements. Keep wage inflation in developed countries to 0%. In 5 years, you’ve made up another 15%.

The employee should take charge of his destiny and guarantee a 5% productivity higher than in the low cost developing world. By working smarter; not necessarily harder. Write it into the employee contract. Another 5% is chipped away. Give up some “luxury perks” like swank canteen, gym, etc. 5% more goes. And finally exempt them from paying the union subscription. Another 5% gone.

That still leaves a 25 % differential. But that is safe. No company will ship jobs to another country for a mere 25% savings in labour costs. The additional costs of shipping, supervision, risk, etc will outweigh such a differential.

Does this all look like a horrible killjoy proposal ? Capitalist pig being anti labour ? A sweatshop ? For sure it would seem like that to the entrenched employee with a “safe” job. But stand on the outside. Ask the unemployed single mother struggling to find work – any work. Ask the person who’s on the street having been evicted from his house. Ask the guy who’s applied to 436 jobs and got deafening silence, not even the courtesy of a reject letter. You’ll get a very different perspective.

Is this politically saleable ? Absolutely not. But try introducing this with an undertaking that anybody who opts for this is guaranteed a job for the next 10 years. Purely optional. Only in new plants being set up afresh. Whoever wants to take this up can take it up, purely voluntarily.

Try this in El Centro, CA, the town with the highest unemployment in the US. Somehow, I think you’ll find enough people signing up to fill 5 factories.

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Manufacturing is key

Manufacturing sector is the key to creating jobs. Not agriculture. Not services.

Agriculture employs a lot of people , especially in developing countries, but cannot create more jobs. Land is finite. Agricultural development will be primarily in improving productivity and output ; not in expansion of jobs. In this sector, policy must focus on efficiency; not on job creation.

The services sector is sexy, but not a massive creator of jobs. For all the growth of the Indian IT industry, the number of direct jobs it has created is probably 1 million. Add the indirect employment and you probably can get 5 million. That is a drop in the ocean of the employment challenge in India. So from a policy perspective, this sector needs to be left free, facilitated to grow, and encouraged, but with limited policy intervention.

The sector that can really boost jobs on scale is manufacturing. This is where policy initiatives must be most active.

What sort of policy initiatives ? Some thoughts, equally applicable to developing as well as developed countries.

Make it easy to open a manufacturing unit. In developing countries it is the problem of land acquisition. In the developed countries, it is the problem of myriad of planning permissions, approvals, fighting green lobbyists, obstructionists, etc etc. (Try setting up a power plant in California). Countries must legislate clearly facilitating easy setting up of plants – a fast track clearing process that must be mandated. In today’s atmosphere of joblessness, the political selling of such legislation is feasible.

Provide a clear incentive based on number of jobs created (not on the size of the investment). This will attract those operations that create more jobs, as opposed to capital intensive sectors. I suggest that, especially for developed countries, this is the most desirable track. For example provide an income tax holiday to employees (thereby lowering the cost of labour) and not to the company.

Develop great infrastructure. Manufacturing units needs perfect infrastructure – power, water, transportation, etc. It’s the job of governments to facilitate building such an infrastructure. This is particularly true of developing countries like India and those in Africa. It’s a fallacy that these are mind bogglingly expensive. Allow private participation and capital will come.

Add to this the other boosters namely labour flexibility, labour pricing and training (all to be covered in separate posts) and you can stimulate the manufacturing sector, even in developed countries.

It’s a myth that all manufacturing will move to the low labour cost countries like China. Firstly, labour cost is only a component of total manufacturing cost and often not the largest component. Secondly China is not the lowest wage country – India for example has lower labour costs; it’s a combination of infrastructure, labour flexibility, productivity, speed, etc that makes China’s manufacturing many times India’s.

But labour cost is an issue. Manufacturing will move to places where the total cost of production is cheapest. Can anything be done about labour cost ? I believe yes. In tomorrow’s post.

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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.

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