Without jobs, India's demographic dividend will be a disaster: Alakh N Sharma Jobs in India grew by just 2.2% between 2010 and 2012. Economist Alakh N Sharma, director of the Institute of Human Development and principal author of India Labour and Employment Report 2014, spoke with Rema Nagarajan about why unemployment is rising, the people it hits hardest, manufacturing as a remedy â€” and how competitiveness goes beyond wages: How serious is India's unemployment? Unemployment among the educated is very high. As people get more educated, unemployment's only growing. It's highest among women graduates at about 60%. After 10 years, 40% of all girls will be matriculates â€” but India has the lowest female employment rate along with Pakistan and Middle Eastern countries. One-third of our unemployed are graduates and above. If we don't create enough jobs for them, we won't be talking about a demographic dividend â€” it will be a demographic disaster. Why aren't enough jobs being created? There's overemphasis on services and neglect of the manufacturing sector. The service sector provides only 26% employment but contributes 58% of GDP. We need to increase the share of manufacturing in GDP. It's currently 16% â€” compared to South East Asian countries like China, Korea and Indonesia, where the share is 40%-50% of GDP. For the first time, agriculture's share in employment is going down in India. But those moving out of agriculture are migrating to low productivity employment. Ideally, they should move into the manufacturing sector. That's what happened in most countries. But the manufacturing sector in India is just not robust enough to absorb them. How has growth impacted employment? Employment growth was just 0.5% per annum from 2004-05 to 2011-12, the period that saw the highest growth of GDP by 8.5% per annum. But for the first time in 2011-12, we're seeing growth in the organised employment sector. There's also been a rise in wages, even rural casual wages. However, the proportion of informal employment in the organised sector actually increased from 41% in 1999-2000 to 58% in 2011-12. So, there's deterioration in the quality of employment created. What is the effect of rising informal employment? About 92% of India's 470 million workers are informal workers. Informal employment is insecure, poorly paid and has no social security. There's also a difference between wages of regular workers and informal or contract workers. The latter constitute one-third of workers in the manufacturing sector. In China, they've done away with the wage difference, mandating equal pay for equal work. We should do the same â€” the difference in wages is one of the main reasons for widespread labour unrest. But can India afford to increase wages? India seems to believe in being competitive in the international market by keeping wages low â€” that is totally wrong. In China, wages are up to two and a half times those in India. Yet, China is more competitive than India in the international market. How do they do that? Wage cost is a small share of the total cost of production. Wages as a proportion of the total cost of organised manufacturing is falling, from 47% in 1981-82 to 25% in 2011-12. How you organise production, infrastructural arrangements and technological innovation are factors that give you a competitive edge â€” we don't become competitive by saving on labour costs and impoverishing workers. Without jobs, India's demographic dividend will be a disaster: Alakh N Sharma - The Times of India ******************************************* This clearly indicates how lopsided our growth is and that it is time to organise production, infrastructural arrangements and technological innovation. However, the question remains how? Any ideas?