Focus on humans rather than robots

The Prime Minister of India wants every note given to cabinet for approval to have a paragraph stating what implication the proposal will have for job creation, said Ms. Sitharaman, Minister of Commerce and Industry, in a media interview. This is very good news. Because without faster and more widespread creation livelihoods and jobs for its huge youth population, the country will be faced with large social and political problems, signs of which are already visible in many parts of the country. So far, though, the Indian economy has grown well in terms of GDP, it has been a laggard in terms of job creation. It generates only two-thirds as many jobs with every unit of growth than the global average. Therefore, increasing GDP will not be enough: the pattern of growth of the economy must be changed to create more jobs. Policy-makers’ mind-sets will have to be changed.

A headline measure of the growth of the economy must be the numbers of jobs and livelihoods it generates, not merely the GDP. India’s manufacturing sector, which can create more jobs, comprises only 16 per cent of India’s GDP, whereas China’s is 35 per cent. The goal of the government’s manufacturing policy has been stated as an increase in manufacturing to 25 per cent of GDP. The 12^th Plan had pointed out that the goal of manufacturing policy should be the numbers of jobs that will be generated, not manufacturing GDP. Because investments in several, large, capital-intensive plants can increase manufacturing’s share of GDP without increasing employment much. Thus, the problem of ‘job-less’ high growth will continue. Unfortunately, the goal of the manufacturing policy continues to be touted as 25 per cent of GDP, even by the honorable minister in the interview cited. Goals and measurements focus strategies. Therefore, job creation must be the principal goal and progress should be measured towards it. 

Rapid advances in digital, computational and communication technologies are displacing human labour and even human minds in manufacturing, service, and knowledge industries. Therefore, along with the need to embrace ‘Industry 4.0’ technologies to remain competitive, policy-makers around the world are even more concerned about the ‘future of work’ and jobs. Another reason to focus on jobs and livelihoods rather than the size of sectors, is that technologies have changed the shapes of enterprises and entire industries—such as banking, retail, travel and manufacturing. Production engineering and maintenance services, which were hitherto integral to ‘manufacturing’ enterprises, are now provided to them by external ‘service’ enterprises. Therefore, it is harder to measure what is manufacturing and what is not, and it should not matter so long as the enterprise generates more jobs.

Automation, by definition, will displace human effort. By deploying more technology, enterprises will become more ‘productive’, measured as output per unit of employment. Jobs within the enterprise will reduce. Therefore, more jobs and livelihoods must be created outside these highly productive enterprises to fulfill society’s needs for more widespread employment. Automobile assemblers, like Maruti, argue that for every person they employ in their increasingly automated factories, a dozen jobs are generated elsewhere. Similarly, companies like Uber and Airbnb, who employ very few people themselves, stimulate many livelihoods for people in tiny enterprises and in ‘self-employed’ jobs. Using less capital and less technology, and more human effort than large enterprises, small enterprises have always been more ‘productive’ generators of jobs in every country. Advances in technology and changing shapes of enterprises are likely to make them even more necessary for job creation than large enterprises. Therefore, to accelerate job creation, policy-makers should focus much more on enablers of small enterprises and their requirements for ‘ease-of-doing-business’ than on demands of large investors.

Some economists are concerned that India’s ‘informal’ sector, which is over 90% of India’s economy, is too large. They advocate more rapid ‘formalisation’ of enterprises. Their ideas about good form are derived from the past, and conform with the form of presently large enterprises. A mindset that large size is good and small is bad will curb the growth of jobs and livelihoods in the future. Small, even village-based, manufacturing and service enterprises connected into larger networks can be very competitive. Rather than promoting large factories, policy-makers should focus more on energising small enterprises and on strengthening clusters and networks. They must pause and consider what new form ‘formalisation’ should take rather than implementing policies to fit informal enterprises into old models of formalisation. Indeed, this is the challenge for policy-makers with the emergence of new, networked models of businesses and enterprises, in which the units are tinier—as with Airbnb and with Uber’s self-employed, single person enterprises.

Uncertainty worries investors and employers. It worries employees too. Employers want flexibility to adjust the sizes of their workforces to stay afloat amidst uncertainty. Employees need an assurance of security to take care of their families with changes in their employment. Employers must be innovative and adopt new technologies to be competitive. Employees should be assisted to learn new skills to remain employable. Employers demand reforms to labor markets to give them greater freedom to fire workers. Unions want labour market reforms to strengthen social protection. Social security, provided by the state or employers, is required to maintain the social contract between providers of capital and providers of human inputs.  

Robots and computers, according to technology forecasters, will soon be able to do everything human beings can. What then will human beings do in this technological paradise? And how will they earn to pay for all the goods, services, and even entertainment, that technology will produce for them? Machines can improve the supply: but how will demand be increased? Better livelihoods with adequate incomes for human beings along with good social security are already big challenges for India’s leaders, even before ‘Industry 4.0’. They should stay more focused on developing strategies for livelihoods and social security than on an Industry 4.0 technology strategy.

(The writer is a former member of the Planning Commission)