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Is robust hiring in the offing?

By Devangshu Datta
April 26, 2016 09:06 IST
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Big workforce expansion is expected in manufacturing, mining, construction and services

A policy focus on generating employment offers many payoffs.

Apart from winning votes, high employment is associated with good tax revenues and lower crime. Employment data are also useful for investors, as it can be correlated to future revenue and profits.

Unfortunately, India has little reliable or timely data.

That may be one reason why policy has not worked well.

There are several other reasons why India’s workforce is persistently underemployed.

A weak educational system churns out unemployable youngsters.

Extremely complex and rigid labour laws encourage rampant unionism and make it hard to hire and fire in flexible fashion.

Poor infrastructure and red tape make it hard to set up businesses, get goods to market and so on.

As of now, 12 million Indians join the workforce every year.

This creates a need to generate 1,000,000 new employment opportunities every month.

Only one nation -- China -- has met targets on that scale consistently and it took an entirely different path with an emphasis on manufacturing and exports.

Most nations release timely employment data.

The US for example, releases monthly payroll data, as do most European nations.

Indian data are more scattered and less timely.

In many cases, such as the National Sample Survey Organisation ’s reasonably comprehensive surveys, Indian data can be five years old.

One can only hope data will improve in speed and reliability with wider use of Aadhaar, Permanent Account Number, etc.

The last NSSO survey was released in 2011.

The next one is due in June 2016.

A trend of labour shifting out of agriculture during 2005-10 was reflected in the 2011 survey.

Some 25 million agricultural workers (classified as ‘self-employed’) shifted to formal jobs between 2005 and 2010.

Employment intensity, measured as the number of persons generating every Rs 100,000 of real gross domestic product, declined during 2005-10 to 1.05 persons/lakh, from 1.7 persons/lakh during 1999-2004.

Lower intensity means fewer jobs are generated by GDP growth.

After 2011, we are groping for data.

As of April, a very small percentage, about 30 million persons were formally employed in either public or private sector jobs out of a total workforce of about 525 million.

Only two per cent of that force is considered highly skilled.

The workforce was around 470 million in 2011 when the last NSSO survey was released and it should have grown by 55 million since.

Over 330 million were based in rural areas in 2010.

The massive urban migration and urbanisation of the past five years must have led to some change in that rural/ urban split but we don’t know what for sure.

Formal hires in manufacturing actually declined between 2005-10. This doesn’t mean employment generation in manufacturing fell.

Manufacturing grew strongly through this period.

But employers circumvented complex labour laws by hiring ‘casual labour’ and that trend continues.

Construction, which generates high employment, has been in the doldrums since 2013.

Low generic growth and consumption will have impacted jobs in retail and the financial sector.

But corporate compensation for employees rose in 2015-16, a year when many other costs came down.

Higher compensation suggests some degree of tightness, at least in terms of skilled labour.

That impression is backed by the Manpower Employer Outlook Survey, which says hiring has been strong for the past few quarters.

These are quarterly estimates from ManpowerGroup, an American MNC focussed on workforces.

The Indian survey asks 5,203 employers, “How do you anticipate total employment at your location to change in the three months to end of June 2016, compared to the current quarter?”

The responses suggest robust hiring.

Employer confidence is reckoned to be very strong.

Broadly 38 per cent of survey recipients expect to hire in this quarter.

In fact, India’s hiring patterns and employer confidence are projected to be the strongest of the 42 countries surveyed by Manpower, although 39 nations will see expansion.

The April- June survey suggest Indian hiring will be south-focussed.

The pace of hiring will decline slightly in north and west and remain around the same in the east.

The big expansions will be in manufacturing, mining and construction and services.

Transportation, utilities, wholesale and retail trade will contribute the least.

Those trends should translate into improved financials sometime in the future for beaten-down manufacturing and construction firms.

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Devangshu Datta
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