Making India’s Labour Markets Inclusive

Abstract

Growth is a necessary but not sufficient condition for poverty reduction. Reforming our education, employability and employment ecosystem is key to making progress. This article makes the case that India’s next wave of poverty reduction will come from accelerating India’s four labour market transitions; farm to non-farm, rural to urban, unorganised to organised and subsistence self-employment to decent wage employment. Not everybody agrees; people believe that urbanisation is a curse, farms provide a happy and contended existence, entrepreneurship is a solution to unemployment and the unorganised sector is a highly flexible response to India’s governance deficit. We disagree.

We believe that the biggest lesson of India’s economic reforms is that growth is a necessary but not sufficient condition for poverty reduction. Poverty reduction needs access. Most Indians are unable to escape their financial, geographic or social opening balance (the Ovarian lottery) because our non-inclusive labour markets and human capital ecosystem do not provide access.

Policy must accelerate these four labour market transitions because these are journeys to a better life for most Indians. Access is India’s unfinished agenda and the 3E focus (employment, employability and education) may be the most sustainable vehicles for creating access.

Unfortunately, the global financial crisis is shifting the reform debate back to the dated fundamentalism around the private versus public sector. Reforms are about making our labour markets, economy and country more inclusive. They are about creating equality of opportunity and not equality of outcomes. They are about helping people escape their losing tickets in the Ovarian lottery.