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A Digital Public Platform Could Boost Labour Market Efficiency
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Context
The Indian labour market faces a paradox of labour shortages despite a surplus workforce. This is compounded by skill gaps and search frictions that prevent efficient matching between employers and job seekers. The rapid spread of digital public infrastructure offers a potential solution to enhance labour market efficiency.
Labour Market Paradox
- Skill Gaps: Many graduates lack the skills demanded by employers, contributing to the paradox of labour shortages in a surplus economy.
- Search Frictions: Search costs, risks, and imperfect information hinder the seamless matching of employers and job seekers, as highlighted by economists like Peter A. Diamond, Dale T. Mortensen, and Christopher A. Pissarides.
- Informal Networks: Informal job searches through social networks help reduce search costs but are limited in scope and efficiency.
Role of Digital Public Infrastructure (DPI)
- Reducing Transaction Costs: Digital platforms like the United Payments Interface and Open Network for Digital Commerce have reduced transaction costs in various sectors. A similar platform for the labour market could enhance job matching efficiency.
- Connecting Employers and Job Seekers: A digital platform could facilitate connections between employers and potential workers, addressing search frictions and improving labour market dynamics.
- Boosting Wages and Productivity: By improving information flow and matching efficiency, a digital platform could help workers find better-paying jobs, thereby boosting wages and productivity.
Steps to Enhance Labour Market Efficiency
- Developing a Digital Platform: Building a digital public platform to connect employers with job seekers, similar to successful models in other sectors.
- Integrating Welfare Schemes: Incorporating key welfare schemes into the platform to support job seekers and enhance their bargaining power.
- Addressing Skill Gaps: Focusing on skill development initiatives to align the workforce with industry demands, complementing the digital platform's job matching efforts.
UPSC Mains Questions
Q. Discuss the potential impact of a digital public platform on labour market efficiency in India. How can such a platform address the paradox of labour shortages in a labour surplus economy?
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