Five New Job Creation Schemes

The Union Budget has proposed five schemes with an outlay of ₹2 lakh crore to generate jobs for the youth.

Historical Context and Previous Schemes

• 2016 Apparel Sector Package: The Ministry of Textiles introduced a special package to generate one crore jobs in three years.
  • Government Contribution: The government covered the entire employer’s EPFO contribution of 12% for new employees earning less than ₹15,000 a month for the first three years.
  • Mixed Results: Large-scale units benefited, but small- and medium-scale manufacturers did not see much impact.

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Employment and Skilling Initiatives in the Budget 2024

Introduction of Schemes:

• Focus on Employment-Linked Incentives: Union Finance Minister announced three schemes as part of the Prime Minister’s package, aimed at providing employment-linked incentives.
  • EPFO-Based Schemes: These schemes will be based on enrolment in the Employees’ Provident Fund Organisation (EPFO) and will recognize and support first-time employees as well as their employers.

All five schemes are mentioned below

• First Scheme:
  • One-Month Wage Benefit: Newly employed workers in all formal sectors will receive one month’s wage.
    • Direct Benefit Transfer: This will be provided in three installments, up to ₹15,000, for first-time employees registered in the EPFO.
    • Eligibility: Employees with a salary up to ₹1 lakh per month are eligible.
• Second Scheme:
  • Incentives for Manufacturing Employment: This scheme aims to incentivize additional employment in the manufacturing sector.
    • Focus on First-Time Employees: Linked to the EPFO contribution of first-time employees for the first four years.
    • Expected Benefit: Aims to help 30 lakh youth and their employers.
• Third Scheme:
  • Support for All Sectors: The government will cover additional employment in all sectors.
    • Employer Reimbursement: Employers will receive up to ₹3,000 per month for two years towards their EPFO contribution for each additional employee.
• Fourth Scheme:
  • Youth Skilling Initiative: The goal is to skill 20 lakh youth over five years.
    • Upgrade Training Institutes: 1,000 Industrial Training Institutes will be upgraded in a hub-and-spoke model with a focus on outcomes.
• Fifth Scheme:
  • Internship Opportunities: One crore youth will get 12-month internships in 500 top companies over the next five years.
    • Government Support: An internship allowance of ₹5,000 per month and a one-time assistance of ₹6,000 will be provided.

Benefits of the Proposed Employment and Skilling Schemes

• Direct Financial Support for Employees

  • Wage Subsidy: New employees in the formal sector will receive a one-month salary (up to ₹15,000) in three instalments, providing immediate financial relief.
  • Internship Allowance: One crore youth will receive a monthly stipend of ₹5,000 during their 12-month internship, encouraging skill development and practical experience.

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• Incentives for Employers

  • Employment-Linked Incentives: The government will provide incentives to employers for creating new jobs, especially in the manufacturing sector. This includes reimbursement of EPFO contributions for new and additional employees.
  • Skilled Workforce: Upgraded Industrial Training Institutes will produce a skilled workforce, benefiting employers seeking qualified talent.

• Job Creation and Skill Development

  • Job Opportunities: The schemes aim to generate millions of jobs, addressing the pressing issue of unemployment.
  • Skill Enhancement: A focus on skilling through internships and ITI upgrades will equip youth with the necessary skills for employability.

• Overall Economic Growth

• • Increased Consumption: Direct financial support to employees will boost consumption, stimulating economic activity.
  • Manufacturing Growth: Incentives for the manufacturing sector can lead to increased production and exports.
  • Productivity Improvement: A skilled workforce will enhance productivity and competitiveness of Indian industries.

Challenges of the Proposed Employment Schemes

• Focus on Formal Sector and Large Enterprises
  • Exclusion of Informal Sector: The emphasis on EPFO-registered employees means that these schemes mainly benefit the formal sector, neglecting the vast informal workforce.
  • Large Enterprise Bias: These initiatives appear to favor large enterprises, as seen with the apparel sector package. 
    • Small and medium enterprises, which employ a significant portion of the workforce, may not gain as much.
• Short-Term Nature and Implementation Issues
  • Limited Duration: The schemes are time-bound and may not ensure long-term employment security. 
    • A more sustainable approach is needed to foster job creation across various sectors.
  • Implementation Challenges: Past government programs have faced issues such as delays in fund disbursement, bureaucratic hurdles, and inadequate monitoring.
• Skill Gap and Job Mismatch
  • Skill Inadequacy: There is a risk that the skills taught may not match market demands, leading to a gap between training and job requirements.
  • Job Creation: The effectiveness of skill development programs depends on the availability of suitable jobs. 
    • Without a strong job creation strategy, skilled individuals may still face unemployment.
• Potential for Misuse and Inefficiency
  • Ease of Doing Business Focus: The schemes mainly benefit corporations by lowering labor costs, rather than directly addressing unemployment.
  • Lack of Targeted Approach: The absence of a specific focus on vulnerable groups, such as women, youth, and marginalized communities, raises concerns about the effectiveness of these schemes in reaching those most in need.

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