To fix unemployment, fix the economy first

The core issue highlighted is employment elasticity, which measures the percentage change in employment associated with a 1% change in economic growth (GDP). The author points out that India has been a 'laggard' in this area since the 1991 liberalization, meaning GDP growth has not translated into proportionate job creation—a phenomenon often termed jobless growth. The editorial contrasts this with China's historical success in raising per capita incomes rapidly. The argument is that India, with its significant demographic dividend, requires economic growth with the highest possible employment elasticity. The focus on capital-intensive technology like AI, aimed at increasing productivity (defined as more output with less human input), exacerbates this problem by potentially displacing workers. The UPSC often tests candidates on strategies to achieve inclusive growth, and this article argues that structural reforms prioritizing labor-intensive sectors and skills over mere capital deregulation are essential for India to utilize its youth bulge effectively.

The article critiques the current governance approach that prioritizes ease of doing business—often involving deregulation and weakening labor protections—over ease of living. The author uses the example of China to argue that state intervention is necessary to manage technological transitions. Despite its authoritarian nature, the Chinese government has responded to the socio-economic impacts of AI by enacting policies through its Ministry of Human Resources and Social Security and the State Council to protect workers, including mandating retraining and restricting illegal AI-driven layoffs. The editorial suggests India's recent labor market reforms (the consolidation into four labor codes: the Code on Wages, 2019, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and the Code on Social Security, 2020) focus too heavily on employer flexibility. For UPSC Mains (GS Paper 2), this raises questions about the welfare state and the balance between encouraging investment (capital rights) and protecting workers' livelihoods (labor rights) in the face of disruptive technologies.

The social implication of jobless growth and AI displacement is the potential for significant unrest, particularly among the educated youth. The editorial points out that in China, youth unemployment reached 16.3% recently, with 70% being university graduates. India faces a similar challenge with high rates of educated unemployment, suggesting a mismatch between the education system, the skills demanded by the market, and the actual jobs created. The author emphasizes that fixing the education system is insufficient if the basic structure of the economy does not create meaningful employment. This links directly to the concept of social capital and stability. If a large segment of the youth remains disenfranchised, it can lead to social unrest and political instability. The article advocates for a 'people-first' approach, suggesting that protecting the most vulnerable—workers and small-time entrepreneurs—should be a primary social objective of economic policy, aligning with the Directive Principles of State Policy in the Indian Constitution that mandate the state to secure the right to work and a living wage (Article 41 and Article 43).