Jobless growth: Impact of technology and re-skilling in today’s economy

Dipak Kurmi

(The writer can be reached at dipakkurmiglpltd@gmail.com)

In the 1970s, India witnessed a job expansion of around 3% annually, aligning closely with the economy’s growth rate of 3–3.5% per year. This resulted in an employment elasticity almost touching unity. However, in the last three decades, despite the economy surging at a rate of 5-8% per annum, job creation has only managed to hover around 1% annually. This stark disparity translates into an employment elasticity plummeting from about 0.4 in the 1990s to a mere 0.1 today. Simply put, this phenomenon epitomizes “jobless growth,”  a scenario where employment growth fails to keep pace with GDP expansion, puzzling even seasoned economists.

Economists adept at unravelling the complexities of this apparent contradiction often attribute it to labour obsolescence. Just as technology can swiftly render previous innovations obsolete, labour faces a similar fate. Take, for instance, the turn of the 20th century, when automobiles supplanted horse-drawn carriages. Companies specializing in buggy production found themselves on the brink of closure, save for a niche market nostalgic for a bygone era. Workers skilled in carriage craftsmanship suddenly found themselves redundant, needing to acquire new, more intricate abilities to assemble the modern marvels of automobiles. The transition from horse-drawn carriages to cars not only revolutionised transportation but also underscored the importance of re-skilling. While skilling up is crucial, adapting to new technologies becomes imperative as innovation outpaces traditional practices. As we look ahead, the automotive industry stands on the brink of another seismic shift with the rise of electric vehicles. While this transition has yet to reach its zenith due to cost disparities, the eventual dominance of electric cars will necessitate a workforce equipped with new proficiencies. Until then, the specter of jobless growth looms, even as GDP charts an upward trajectory.

The Indian IT giants, TCS, Infosys, and Wipro, deserve commendation for their proactive approach to averting labour obsolescence within their sector. Through comprehensive pre-employment training programmes, often lasting up to six months, they ensure that new hires are equipped with the necessary skills. However, it’s worth noting that Infosys founder Narayana Murthy openly criticized the need for such extensive training, attributing it to the perceived unemployability of Indian graduates. This issue doesn’t lie with the graduates themselves but rather with the broader education system, which often lacks specificity. Unlike in India, where there’s a gap between academia and industry, countries like Germany boast a robust industry-university partnership. This collaboration allows for tailored education programmes that align closely with the demands of the job market, ensuring graduates are adequately prepared for the workforce.

India’s jobless growth is partly attributed to the stagnation of manufacturing, which accounted for only 13% of the GDP in 2022. The onset of the COVID pandemic prompted a resurgence of interest in agriculture as people sought stability amidst uncertainty. Revitalizing manufacturing holds the key to unlocking substantial employment prospects. While banking activities show signs of resurgence, the evolution towards branchless banking, fueled by phone and internet banking, has contributed to the industry’s GDP share without proportionate job creation. Traditional public sector bank branches, once bustling with around 50 staff members, now embrace technology-driven models with minimal staffing, often comprising just 5 to 10 employees. This shift underscores the changing landscape of modern banking and its impact on employment dynamics.

Even the International Monetary Fund acknowledges the paradoxical phenomenon of jobless growth as a harsh reality. After the 2008 US financial crisis, which surpassed the severity of the Great Depression of the 1930s, the economy began its gradual recovery through stringent cost-cutting measures. Unfortunately, this recovery often came at the expense of labour, with job cuts becoming an inevitable outcome. Companies like Amazon and Google exemplify this trend as they relentlessly streamline operations through automation and online platforms, resulting in layoffs despite their overall growth trajectory.

The emergence of the gig economy adds another layer of complexity to the ongoing debate. While gig workers may not be formally employed by any single organization, their contributions to the economy and GDP are undeniable. In India, cab drivers thrive thanks to platforms like Ola and Uber, while delivery personnel for Swiggy and Zomato navigate city streets, earning their livelihoods. Similarly, artisans such as carpenters, electricians, and plumbers find steady work through app-based service aggregators, transforming the traditional employment landscape. Technology has fundamentally reshaped both the hiring process and workers’ perceptions of independence and flexibility. The mantra of ‘adapt or perish’ rings true as technological advancements redefine labour dynamics. These shifts shed light on the enigma of jobless growth observed in economies worldwide. Consequently, while India’s current unemployment rate of 3.7% may seem modest, the burgeoning gig economy offers a parallel narrative of employment resilience and evolution.

Foxconn’s heavy reliance on robots for manufacturing epitomizes the inevitability of jobless growth as technology and automation supplant manual labor. Moving forward, the key lies in re-skilling rather than clinging to outdated educational paradigms. Education must be both current and forward-thinking to ensure students are equipped with skills relevant to the evolving technological landscape. This imperative is particularly pronounced in engineering education, where staying abreast of the latest advancements is paramount.