Tuesday, June 6, 2023

Breaking the Cycle of Unemployment with Direct Selling

Every month, a million Indians become age-eligible to join the workforce, but the growth in jobs has not kept pace with the rising number of aspirants.

The last quarterly survey by the Labour Bureau showed that India has never created so few jobs since the survey started in 2009, as in 2015 — Only 1.35 lakh jobs compared to more than nine lakh in 2011 and 4.19 lakh in 2013 in eight labour-intensive industries.

The result— unemployment has been on the rise, despite India supposedly being one of the brighter spots in a slowing global economy. India’s unemployment rate grew from 6.8 per cent in 2001 to 9.6 per cent in 2011, according to Census 2011 data.

President Pranab Mukherjee recently stated, “The Indian economy today needs to generate 115 million non-farm jobs over the next decade to gainfully employ its workforce and reap its demographic dividend.”

In 1996-97 19.5 million government job were available. Today that number is 17 million. Not only are fewer jobs available than before, those that are created are precarious, and badly paid because of the informalisation of the economy.

“Employment creation will be one of our greatest challenges for the next decade,” said Jayant Sinha, minister of state for finance in a recent article in India Today about rising unemployment.

A McKinsey Report titled The world at work: Jobs, pay, and skills for 3.5 billion people predicts that by 2020 most of the additions to the global labor force will occur in India and the “young” developing economies of Africa and South Asia.

In the next two decades, the world is likely to have too many workers without the skills to land full-time employment. In both developing and advanced economies, policy makers will need to find ways not only to produce high-skilled workers but also to create more jobs for those who aren’t as highly educated. Solutions include moving up the value chain in developing economies (food processing creates more employment than growing export crops, for example) and finding opportunities for workers without a college education to participate in fast-growing fields—such as health care and home-based personal services.

In light of the current situation, how can we create these many jobs? The one possible solution to this grave problem is promoting entrepreneurship. Entrepreneurs hold the key to the growth of a nation’s economic development and growth.

The direct selling industry provides a potential solution by promoting entrepreneurship and self-empowerment. Robert Kiyosaki, author of the best-selling personal finance book of all time, Rich Dad Poor Dad, has a lot to say about the value of the direct selling industry. In his book The Business of The 21st Century, he writes that direct selling is the “business model of the future. Why? Because the world is finally starting to awaken to the reality that the Industrial Age is over.” He says that direct selling “gives millions of people throughout the world the opportunity to take control of their lives and their financial futures.”

American economist, New York Times best-selling author, and social entrepreneur Paul Zane Pilzer says – ‘Ten million new millionaires will be created by 2016, and you can become one of them–especially if you are in direct selling, technology or home-based business.’

Direct selling offers the unemployed the opportunity to earn an income and allows the underemployed to supplement part-time employment. Direct selling also provides personal development such as improved self-esteem, interpersonal skills and career development in terms of business, entrepreneurial skills and selling experience. At the heart of direct selling is the ability to offer people the chance to feel empowered, to take control of their lives and to add value to society. This fuels entrepreneurship, self-employment, and micro enterprises. Research shows that such ventures strengthen a country’s economy.

According to a report by KPMG and FICCI published earlier this year, the direct selling industry in India has the potential to grow almost nine times to touch Rs 64,500 crore by 2025 and is likely to provide self-employment to around 1.45 million people. The report said the direct selling industry has been recording double digit growth of over 16 per cent over the past four years.

The direct selling industry is putting a dent in the unemployment cycle for numerous professionals. In fact, direct selling companies are some of the only organizations that offer significant, substantial training to the people who need it most—those who are currently unemployed—for little to no cost.

Companies in the direct selling industry provide invaluable training skills. Not only do people learn financial principles, which they can use to build their business, the training they receive helps them with their personal growth that is also transferable to other careers they may have in the future.

While direct selling is a relatively new industry in India at less than 20 years, it has provided a livelihood to over 4 million Indian households and has generated approximately Rs.7500 crores in revenue. Taxes to the exchequer on account of direct selling industry are in excess of Rs 600 crores.

Despite its many benefits and popularity in India (India is No.21 in global direct selling markets) there has been a lack of clarity on the legislation governing this thriving industry. The lack of guidelines and legislation leads to genuine direct selling companies being bracketed with pyramid schemes that disguise themselves as direct selling companies. This negatively impacts the entire industry.

Many countries like Hong Kong, Malaysia, Singapore and the Philippines, have specific and strict direct selling and MLM legislation and the industry is a big contributor to the economies of these countries.

Last year an Inter-Ministerial Committee was set up under the aegis of Ministry of Consumer Affairs to understand and formulate the requisite legislation governing the Direct Selling Industry. Among other things, the committee is considering the enactment of legislation to regulate Direct selling/Multi-Level Marketing companies; formulate guidelines for such companies, and promote and to some extent adopt international best practices to protect consumers.

We hope that with time and with the above measures, direct selling sector in the country will only flourish and add on to the economic growth of the country.

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