Jobless Growth

Jobless growth is a situation in which an economy's output or income rises without a commensurate increase in employment opportunities. It does not necessarily mean that no jobs are created; rather, employment grows slowly relative to GDP, reflected in low or declining employment elasticity.

How it arises

Jobless growth results from the interaction of technology, sectoral composition and labour-market conditions.

• Growth may be concentrated in capital-intensive sectors, where additional output requires relatively few workers.
• Automation and productivity improvements can raise output without a proportionate increase in labour demand.
• A shift towards skill-intensive modern services may exclude workers lacking appropriate education or training.
• Employment can lag even when jobs increase if the labour force grows faster than employment.
• Constraints affecting labour-intensive firms, including limited credit, infrastructure and market access, can restrict large-scale job creation.

Measurement and interpretation

Employment elasticity measures the percentage change in employment associated with a one per cent change in output. A low positive elasticity indicates that output is growing much faster than employment, while a negative value means employment is contracting despite output growth.

• The concept should be assessed alongside unemployment, labour-force participation, real wages and the quality of work.
• Productivity growth is not inherently undesirable; the concern arises when its gains do not generate adequate employment, incomes or wider demand.

Developmental implications and response

Persistent jobless growth weakens inclusive growth because households mainly access the benefits of development through productive and remunerative work.

• It may increase unemployment, underemployment, informality and income inequality, especially among young and less-skilled workers.
• Policy should encourage labour-intensive manufacturing and services, viable MSMEs, and employment-generating infrastructure.
• Education, skilling, apprenticeships and improved labour-market information can reduce mismatches between workers and available jobs.
• Social protection and support for worker mobility can cushion adjustment while productive employment expands.

How UPSC asks this