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At a time when India Inc is finding it difficult to find skilled labour, research done by RBI officials suggests that for the total economy, labour quality on an average increased by 0.7 per cent per annum from 1980-81 to 2021-22.
“There is a general increase in education levels for all workers, especially those employed in capital-intensive manufacturing and services sectors. The labour quality index shows higher growth in capital-intensive manufacturing and service sectors, while construction and agriculture sectors exhibit lower growth attributed to the prevalence of low-skilled workers,” the paper authored by Sreerupa Sengupta and Vineet Kumar Srivastava stated in their paper titled ‘Measuring the Contribution of Labour Composition in Gross Value Added in India – The Human Capital Approach’ published in the latest RBI Bulletin.
However, the quality has dipped between 2000-2022 compared to the previous two decades. While the labour quality grew by 0.72 per cent every year between 1980-81 to 1999-2000, the growth was at 0.60 per cent between 2000-01 and 2021-22.
Fastest growth
At the disaggregated industry level, the improvement in labour quality was the fastest in capital-intensive manufacturing sectors such as chemicals, machinery, and transport equipment. Among the services sector, subsectors like health, social work and telecommunication recorded the fastest growth in the labour quality index. Subsectors like business, education and financial services, however recorded slower growth in the quality index as these sectors already have a very high share of skilled workers
“The growth accounting exercise in KLEMS (Capital (K), Labour (L), Energy (E), Material (M) and Services (S) database framework shows that employment contributed around 25 per cent to output growth, with labour quality contributing an additional five per cent to output growth on average during 1980-81 to 2021-22. Thus, the labour input (combined employment and quality) accounted for 30 per cent of overall output growth during 1980-81 to 2021-22,” the paper said.
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