Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

[op-ed snap] Demographic dividend, growth and jobs

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Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Demographic dividend, human capital, etc.

Mains level: Importance of Demographic Dividend for India, how to build India’s human capital, etc.


News

India has one of the youngest populations in an aging world

  1. By 2020, the median age in India will be just 28, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan
  2. Importance: Demographics can change the pace and pattern of economic growth

What is demographic dividend?

  1. Demographic dividend refers to the growth in an economy that is the resultant effect of a change in the age structure of a country’s population
  2. The change in age structure is typically brought on by a decline in fertility and mortality rates

Demographic dividend can increase economic growth through six channels

  1. The first channel is through the swelling of the labour force, as more people reach working age
  2. The second channel is the increased fiscal space created by the demographic dividend to divert resources from spending on children to investing in physical and human infrastructure
  3. The third channel is the rise in women’s workforce that naturally accompanies a decline in fertility, and which can be a new source of growth
  4. The fourth is the increase in savings rate, as the working age also happens to be the prime period for saving
  5. The fifth channel is an additional boost to savings that occurs as the incentive to save for longer periods of retirement increases with greater longevity
  6. The sixth channel is a massive shift towards a middle-class society that is already in the making

But demographic dividend can also transform into a curse

  1. The growth benefit of a demographic dividend is not automatic
  2. A lot depends on whether the bulge in working population can be trained, and enough jobs created to employ the 10 million more people who will join the labour force every year
  3. There is mounting concern that future growth could turn out to be jobless due to de-industrialization, de-globalization, and the fourth industrial revolution and technological progress
  4. While digital technologies may enable the creation of new products and more productive jobs, they may also substitute existing jobs
  5. India may not be able to take advantage of these opportunities, due to a low human capital base and lack of skills

State-wise opportunity

  1. Whether the demographic dividend promotes growth or transforms into a curse depends on how prepared the states that should benefit from a young population are
  2. Bihar, Uttar Pradesh and other lagging states will experience a much bigger bulge in working population than more developed states like Tamil Nadu
  3. Unfortunately, the less-developed states are also the least prepared to take advantage of the demographic change they will undergo

India’s human capital is not enough

  1. India’s human capital base may not be adequate for the future or in a position to benefit from the demographic dividend
  2. India is home to the world’s largest concentration of illiterate people in the world
  3. It has made gains in human development, but challenges remain
    (human capital: the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country)

What should be done?: Building human capital

  1. Investing more and more efficiently in people will enable India to tap into its demographic divided, and prepare the country for the future
  2. There is a powerful link between these investments and economic growth, stability and security
  3. Investing in people through healthcare, quality education, jobs and skills helps build human capital,
  4. which is key to supporting economic growth, ending extreme poverty, and creating more inclusive societies
  5. New technology could be exploited to accelerate the pace of building human capital, including massive open online courses and virtual classrooms
  6. Policymakers should have a greater incentive to redouble their efforts to promote human capital so that it can contribute to economic growth and job creation

The way forward

  1. No country can achieve its potential and meet the challenges of the 21st century without the full participation of working population
  2. High-quality education is one of the strongest ways for countries to reduce poverty, achieve gender equality, and create more jobs
  3. Building human capital translates into higher rates of economic growth and job creation
  4. Demographic dividend without investments in human capital will be a wasted development opportunity,
  5. and it will further widen economic and social gaps, instead of narrowing them
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