MOSL: ECOSCOPE-Higher employment or better jobs? Evidence of The Lewis Model in India’s labor market
ECOSCOPE: Higher employment or better jobs? Evidence of The Lewis Model in India’s labor market
- Early this year, we released a theme report on India’s labor market, wherein we noted two striking features that make it unique: (1) a fall in labor force participation ratio (LFPR) in the second-most populous and one of the youngest economies in the world, and (2) the robust inverse correlation between employment and real GVA/GDP growth during the post-liberalization period. In this note, we provide evidence of the existence of ‘The Lewis Model’ in India, and link the two most striking features with each other.
- The existence of a relatively large accommodative unorganized sector and related under-employment makes it difficult to achieve the dual objective of higher employment and better jobs. Even in the past, we have achieved only one: either higher growth with deteriorating quality of jobs (between FY00 and FY05) or better jobs with slow growth (between FY05 and FY12). The latter, we believe, is more pertinent than the former for the Indian economy.
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