Indian Institute of Finance, Delhi, NCR Gr. Noida (www.iif.edu), has developed a Model on Theory of Employment, Wealth, and Efficient Labour Market through National Labour Exchange by four senior economists of the institute i.e. Professors J. D. Agarwal, Manju Agarwal, Aman Agarwal and Yamini Agarwal. Governments all over the world and international agencies like the United Nations, IMF, World Bank, ADB, and ILO etc. are seriously concerned about generating employment and reducing the prevailing unemployment and poverty between 2015 and 2017. For most governments as well as international agencies, generating employment is one of the most pressing and serious issues. It is also observed that there is a mismatch between the demand and supply of appropriate labour due to asymmetric information, i.e. jobs available but not in the knowledge of Labour and suitable labour available but not in the knowledge of employers.

Keeping in view this and other dimensions, IIF instituted a study to develop a “Theory of Employment, wealth and Efficient Labour Market through National Labour Exchange” published in Finance India September 2017 Vol 31 No 3. The study suggested setting up of a national Labour Exchange to achieve full employment, generating wealth and an efficient labour market. The authors of the research have proposed setting up of a National Labour Exchange along the lines of National Stock Exchange, Bombay Stock Exchange and Commodity Exchanges worldwide in order to promote efficiency in the Labor market, full employment and generating wealth and for positive contributions to GDP. The authors also consider that Labor is a valuable resource and a wealth of a nation, having potential to generate more wealth. In the study the authors questioned the concept of wages or price of labor as in classical Economics, but supports Ricardo’s theory of value and laissez faire through an efficient labor market. The authors of the study also questioned Keynesian theory outlining Government Intervention to generate Employment through Monetary Policy changes and Fiscal Policy.

The Keynesian theory does not take into consideration the normal economic and business conditions in the economy. The study also critically evaluates various theories on Labour. The proposed Model of creating an efficient Labor Market through National Labor Exchange, according to the study completed at IIF, will facilitate an automatic way for Full Employment, generating wealth for the Nation, Firm and Labour, Reducing Poverty, easy access to information about the availability of Labour (man hours) and jobs. It would also help save employment costs in a market driven economic system with asymmetric information. National Labour Exchange as proposed, in the study, would also help rating certificates, diplomas, degrees, skill development and experiences of labour based on scores and would facilitate transparency in the efficient labour markets where man hours and services can be traded like stocks, bonds and commodities. It would automatically adjust the return to labour based on value addition  and economic and business conditions avoiding the problems of laying off. Efficient Labour Market would facilitate perfect or nearly perfect mobility of labour and full employment and maximizing wealth through National Labour Exchange which would need digitalization of labour records.

Labour is the most important resource that utilizes natural or capital resources in the most productive manner to create and generate wealth for nations, companies, organizations and for themselves state the authors of the study. Despite the technological revolution and advancements in artificial intelligence, labor continues to be supreme and guides the functioning of all economic events and economic systems. Labor in itself is the wealth of a nation. But it is not effectively utilized. Labor suffers from lack of employment opportunities, poverty, poor wage, income variations, immobility and many other problems. In developed economies, wages constitute about 70 % to 80 % of the pre-tax income and post-transfer payments with at least one working member in each household. However in developing and emerging economies this share is less than 50% for example it is 40-50% in Argentina, 40% in Peru and 30% in Vietnam. Self Employment is the main source of income in most of the developing and emerging economies for lack of employment opportunities, information, corruption, lack of transparency, and accountability in recruitments and lack of skills and adequate training. Despite the importance of labor in the world economy, the labor market is far from perfect for lack of necessary information available.

The proposed model provides a General Theory of Employment, Wealth and Efficient labour market through setting up of a National Labour Exchange. National Labour Exchange can be a vehicle of facilitating information for available jobs i.e. employment opportunities at given return to labour and availability of labour offering the services for a return based on their value addition. The proposed model will fill the existing gap of asymmetrical information.

The proposed National Labour Exchange as suggested in the study, according to authors, would induce competition, both among employers and labour to maximize productivity, maximizing wealth, GDP and social welfare. Labour, instead of being idle or underemployed, would prefer to pick up a job with lower return. It would provide transparency and accountability of the employer, employable and employed and would avoid exploitation of labour. Efficiency in the labour market would help foreign investors to know about the skill, experiences, qualifications and desired return of labour in a country. This in turn will remove any fears regarding the availability of labour in a given industry.

The payment to labour should be based on return to labour on the basis of value addition, rather than as wages as is being currently done. Payment of wages is exploitative on one or the other ground. Labour is resource (wealth) as much as land or capital and deserves return to labour. In the study it is stated that the wages paid to labour should be replaced by “Return to Labour” based on value addition.

Return to Labour would be automatically directly linked to productivity. It would give dignity and enhance or reduce return. According to the authors of the study, setting up of National Labour Exchange, would create one national market for labor exchange, uniting the country and its countrymen to one common working platform removing the discrimination of regional imbalances, labor immobility and information asymmetries that create distortions in the demand or supply of labor. It would encourage labour at all levels to acquire certificates, degrees, skill and focus on maximizing productivity so as to ensure a composite score to be high to get better return on jobs and choice of firms.

The proposed Model of creating Efficient Labour Market through National Labour Exchange will facilitate an automatic way for Full Employment, generating wealth for the nation, firms and Labour, easy access to information about the availability of Labour (man hours) and jobs using Artificial Intelligence, Machine Learning and Data Sciences. It would also help save employment costs in a Market Driven Economic System with Asymmetric Information. National Labour Exchange as proposed would also help Rating Certificates, Diplomas, Degrees, skill development and experiences based on Scores and would facilitate transparency in the Efficient Labour Markets. It would automatically adjust the return to labour based on value addition and economic and business conditions avoiding the problems of laying off. Efficient Labour Market would facilitate perfect or nearly perfect mobility of labour through the National Labour Exchange. The Government of Delhi and the Government of Uttar Pradesh, apart from various National Governments have called for the work to introduce the same in their National Economies to benefit the people at large.

The work on “Building Human Capital to embrace world of AI, Data and Machine Learning as tools for Growth using Automated NLXs (National Labour Exchanges)” presented at the 19th International Symposium on Management Engineering (ISME) and the 20th International Conference on Intelligent Information Hiding and Multimedia Signal Processing (IIHMSP) from October 3-6th, 2024 in Matsue, Shimane, Japan where the Conference Host was Prof. Dr. Junzo Watada (Professor Emeritus of Managing Sciences, Waseda University, Japan; Conference Chair was Prof. Dr. Yoshiyuki Yabuuchi, Professor of Data Science,  Shimonoseki City University, Japan and the Chair Session was Prof. Dr. Gopal Tadepalli (Professor of Computer Science, Anna University, INDIA) apart from over 100 colleagues from the academic fraternity from around the world. The work focused on how the use of AI, Machine Learning and Data Science can help bridge the gaps existing for over centuries in meeting the full labour employment using market mechanism of NLXs recognizing the importance of Human Capital and Growth objectives of National Economies.

Aman Agarwal is Professor of Finance,
Director (Rektor) & Dean (International Relations),
Indian Institute of Finance, Delhi and G-Noida, and Yamini Agarwal is Professor of Finance & Economics and Director, BVIMR (Deemed-to-be-University), Delhi and Pune