Too Many Workers, or Too Few: India’s colossal employment challenge

By Alex Travelli and Hari Kumar

NEW YORK: As India overtakes China to become the world’s most populous nation, solving its economic mismatch is perhaps its most crucial task. Success could mean a more middle-income future that fulfills the country’s world-shaking promise. Failure could leave swaths of India mired in pervasive poverty for decades to come. The fate of the planet’s biggest generation of workers hangs in the balance. India’s young and expanding population, with more students leaving school every year to start careers, is the envy of countries that face an aging citizenry and a shrinking workforce. Its economic growth of about 6% a year is also a global bright spot.

But that growth is not producing enough jobs. And the jobs that businesses do have to offer are often out of alignment with the skills and aspirations of India’s potential employees.

This has implications for the entire world. India must get more out of its workforce if its economy, now the fifth-largest and knitted more deeply into the global exchange of goods and services each year, is to stoke growth elsewhere, as China does.

Inside India, the long-term consequences of failing to match its young with adequate employment could be grave. The unmet desires of these workers, more educated and more indebted than ever, have become a volatile force. Across the state of Bihar, of which Patna is the capital, young men set fire to trains last summer, furious at a plan that could eliminate jobs in the armed forces.

A quieter risk is an immense waste of human potential. India’s anticipated “demographic dividend,” as its population continues its steady but manageable growth, could instead bring a huge cohort forced to settle for unfulfilling and unproductive work, when they do not drop out of employment completely.

At the same time, managers struggle with enormous personnel problems. Finding people willing to uproot themselves for the factory jobs most crucial to long-term economic growth can be difficult. Training them can be expensive, and keeping them can be nearly impossible.

If India were to follow a traditional path to development, it would need a more robust manufacturing sector, economists say. But as bosses try to bypass their labor issues by opting for automation, India is tipping toward “premature de-industrialisation,” with manufacturing jobs vanishing before they have worked their usual poverty-alleviating magic.

“We either have to go in for full automation, where we have to reduce our manpower drastically, or look at doing business with fewer people,” said Jayakumar Ramdass, the joint managing director of Mahendra Pumps, another booming industrial concern in Coimbatore.

In Bihar, India’s youngest, poorest and fastest-growing state, with more than 120 million people, a feudal social structure and low rate of urbanization pose old chicken-or-egg riddles that ask what keeps a poor place poor.

Here entrepreneurship looks like another name for self-employment, and self-employment a euphemism for unemployment. More than half of India’s workforce is technically self-employed. That work is often piecemeal: Picture a railway station where 10 rickshaw drivers wait for passengers but there are only enough fares for two or three.

So, in India, many young people aim not for the stars, but for stability. In Bihar, that means a government job, no matter how lowly. Even an under-registrar position in the Prohibition office, for instance, is a coveted prize.

But the competition is fierce. Roughly half a million young people took the annual preliminary test for the Bihar Public Services Commission in February, for a total of 281 jobs. For every batch of 2,000 hopefuls, 1,999 will walk away with nothing.

The odds are nearly as bad on the national level. From 2014 to 2022, Indians filed more than 220 million job applications with the central government. Of those, just 720,000 — less than a third of 1% — were successful, a government minister told Parliament.

Still, every year, Patna, the capital of Bihar, draws in thousands of students from the densely populated countryside, each spending years scribbling notes on calculus, geology and everything else they might face on state examinations. The valley around Coimbatore, in the southern state of Tamil Nadu, is a model of what India wants for itself in the decades ahead. The state’s fertility rate is much lower than Bihar’s. Coimbatore’s business community is diverse, with about 100,000 small- to medium-sized companies, specializing in casting, machining and irrigation equipment.

What these businesses don’t have is a steady supply of reliable labor. Ramesh, the managing director at Alphacraft, the auto parts manufacturer, is optimistic about almost every aspect of his business. Orders are going up and shipping costs are being streamlined, and he sees growth prospects on three continents. His only problem: a workforce he cannot count on “because they are all coming from distant parts of the country.”

Ramesh is the only manufacturer of Aston Martin parts in Asia. The training he invests in the migrant workers becomes an expensive proposition, when 80% of them “float,” he says — they often leave for major festivals, at unpredictable intervals, never to return. That keeps his HR department scrambling.

Ramesh is proud to provide a good living to the men who stay loyal to his company, far more than what a government job in Bihar would pay. Still, he and other owners and managers in Coimbatore are investing heavily in automation. For now, they need their migrant workers, but once they can afford more investment, they hope to need fewer of them.

Without more industry in places like Bihar, and a greater supply of capable, willing factory workers in places like Coimbatore, the great opportunity represented by India’s demographic moment in the sun remains under a shadow.