Debunking the myth of job creation , Pg7

Key Highlights:

• On July 1, 2025, the government approved the Employment Linked Incentive (ELI) Scheme with an outlay of ₹99,446 crore to support employment generation.
• The scheme aims to provide fiscal incentives to employers, particularly in the manufacturing sector, for creating new employment opportunities.
• The scheme prioritizes firms registered with the Employee’s Provident Fund Organisation, potentially marginalizing the informal sector.
• Concerns exist that the scheme may exacerbate capital-labor asymmetries and wage gaps, disadvantaging low-skilled and informal workers.

Detailed Insights:

• The ELI Scheme reflects an employer-centric approach, overlooking the mismatch between employability and employment opportunities, as highlighted by the Economic Survey 2024-25.
• Only 8.25% of graduates are employed in roles matching their qualifications, with over 53% underemployed in semi-skilled or elementary occupations, indicating a severe skill mismatch.
• The scheme's focus on the formal sector may reinforce inequality by channeling public resources towards relatively well-off enterprises, leaving behind low-wage, unregistered workers.
• There are concerns that the scheme could normalize disguised unemployment, where people appear employed but do not contribute to output, leading to low productivity and stagnant wages.
• The emphasis on manufacturing may marginalize workers in agriculture and services, especially women, rural youth, and informal workers, due to declining employment elasticity in manufacturing.
• Investment in skilling and education reforms, along with a focus on long-term sustained employment opportunities, is suggested as an alternative approach.

Key Concepts Involved:

• Employment Elasticity: Measures the responsiveness of employment to a change in economic output or growth.
• Capital-Labor Asymmetries: Unequal power dynamics between employers (capital) and workers (labor) in the labor market.
• Disguised Unemployment: A situation where individuals appear employed but contribute little to overall production.