Employment & Skill Development

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Definition and Importance

Human capital, as defined by the OECD, refers to the stock of knowledge, skills, and attributes that make individuals productive. Investment in education, healthcare, and skills significantly impacts economic growth.

Contributes to National Income

Skilled and healthy individuals ensure a steady supply of labor, leading to increased economic activity and a higher real national income. For example, countries with higher levels of human capital typically exhibit sustained GDP growth due to productive labor.

Boosts Productivity and Innovation

Human capital enhances labor productivity and fosters innovation. It also enables societies to adapt to technological advancements, ensuring long-term economic competitiveness.

Income and Economic Growth Cycle

Human capital and economic growth share a reciprocal relationship. Higher levels of human capital spur income growth, while higher income allows for increased investments in education and health.

Challenges Impacting Human Capital Formation in India

1. Poverty
NITI Aayog reports that 14.96% of Indians face multidimensional poverty, limiting their access to education and healthcare.

2. Healthcare Spending
India’s healthcare expenditure is among the lowest in BRICS nations, leading to inadequate facilities and professionals.

3. Literacy Disparities
India faces gender and regional disparities in literacy. Male literacy is 84.7% compared to 77% for females. States like Kerala (92.2% literacy) outperform Bihar (61.8%), indicating regional imbalances.

4. Employability Concerns
Only 50.3% of graduates in India are employable, according to the India Skills Report 2023, reflecting skill gaps in the workforce.

5. Infrastructural Deficits
Insufficient schools, training centers, and health facilities hinder human capital development, especially in rural areas.

Government Initiatives

Programs like Ayushman Bharat Yojana, Skill India Mission, and the National Education Policy (NEP) 2020 aim to address these challenges by focusing on healthcare, skill development, and educational reforms. By tackling these issues, India seeks to strengthen its human capital and accelerate economic growth.

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Understanding Casualization of the Workforce

The term “casualization of the workforce” refers to a trend where employers increasingly hire workers on a temporary or contractual basis instead of providing permanent employment with associated social benefits, such as job security and employee benefits. In India, this phenomenon has been on the rise, with the proportion of casual labor in urban areas increasing from 13.4% in 2019-20 to 14.1% in 2020-21 .

Disadvantages of Casualization in India

1. Job Insecurity: Casual workers face significant job insecurity, as they can be hired and fired at the employer’s discretion. This instability makes it challenging for them to make long-term life plans, such as purchasing a home or starting a family.
2. Lack of Employment Benefits: Unlike permanent employees, casual workers often do not receive essential benefits such as health insurance, retirement plans, or paid leave. This lack of support can hinder their access to healthcare and financial security .
3. Lower Wages: Casual laborers typically earn lower wages compared to their permanent counterparts for similar work. This wage disparity can make it difficult for them to support themselves and their families .
4. Reduced Motivation: The combination of lower wages, lack of benefits, and unstable work schedules can lead to decreased motivation and productivity among casual workers .
5. Weak Bargaining Power: Casualization diminishes workers’ bargaining power, as they are often not part of a collective bargaining unit. This situation makes it harder for them to negotiate better wages or working conditions .
6. Impact on Women: Women are disproportionately represented in casual jobs, which often exposes them to exploitative conditions, lower wages, and fewer benefits .
7. Lack of Skill Development: The temporary nature of casual jobs discourages workers from investing in skill development, limiting their future employment opportunities .

While casualization can offer flexibility for both workers and employers, it is crucial for India to foster an ecosystem that encourages formalization in the labor market. This would provide better access to finance, infrastructure, and legal protections for workers.