India is dealing with a serious crisis of employment despite achieving higher than global average rates of GDP growth consistently for many years. The crisis has many dimensions, some of which are low real wage growth, a proliferation of insecure jobs, high rates of unemployment among the educated youth, and low and falling labour force participation rates, particularly among women. Some of these problems are not unique to India. For example, jobless growth, stagnant real wages, and rising insecurity are global phenomena.
In India, in addition to rising unemployment among the higher educated, less educated workers have also seen job losses and reduced work opportunities since 2016. Five million men left the workforce between 2016 and 2018. Although no direct causal relationship can be established based only on these trends, the beginning of the decline in jobs coincided with demonetisation in November 2016.
These are findings by the recently released ‘State of Working India 2019’ which examines employment trends since 2016. Together with ‘State of Working India, 2018’, which analysed the long-run trends in the Indian labour market, the reports reveal a crisis-hit, precarious employment situation.
Over the past two decades, rising aspirations and education levels among the youth have coincided with declining public employment and weak creation of decent jobs in the formal private sector. In the last two years, the shocks of demonetisation and the introduction of the Goods and Services Tax have also affected employment in the informal sector.
What is the way forward? First, we need to understand the nature of the crisis clearly, and second, we need to address it simultaneously on many fronts. Both these are doable given our current resources and institutional capacities. We need to move beyond the recent controversy over the release of official employment data. It merely indicates that there is now a fully established politics of unemployment in India.
The ‘State of Working India, 2019’ report analysed trends in the Indian labour market, but most of it, is concerned with policy ideas for employment generation. A running theme in the report is the importance of public goods and public action. For example, addressing the crisis of the quality of public goods in our towns through an urban employment guarantee scheme.
India has been a leader in this respect thanks to the Mahatma Gandhi National Rural Employment Guarantee Act, the MGNREGA. An urban employment guarantee scheme will provide employment within city or town limits to all those who ask for it and thereby provide services to all residents, build our civic infrastructure, and restore the urban commons.
The programme can provide 100 days of guaranteed work at Rs 500 a day for a variety of works and 150 contiguous days of training-and-apprenticeship at a stipend of Rs 13,000 per month for educated youth. Such a programme will cost between 1.7 per cent to 2.7 per cent of GDP and will create work for 30-50 million people.
This is a huge spend by any standard but it can result in spin off benefits like raising productivity, stimulating the economy via increased demand, arresting or reversing the effects of climate change, and empowering urban local bodies. Continuing the theme of public action, it is time for India to stop underinvesting in basic social services. Indians spend much more out-of-pocket on healthcare and education than citizens of other comparable countries.
A bold public commitment to a universal basic services programme will have the dual effect of supplying quality services while creating good jobs. A key condition for this is an investment in improved and increased public provision of healthcare, education, housing, security, transport, and utilities.
This includes filling existing vacancies in the system, expansion of capacity, as well as regularising various forms of contract and ‘volunteer’ workers (such as ASHA and anganwadi workers). A well-executed UBS would go a long way in restoring public goods to their rightful place in society, creating millions of good jobs in the process.
Employment-oriented public policy is vital at the macroeconomic level as well. India’s experience with industrial and trade policy (licensing, reservations, permits, subsidies, tariffs, and so on) during the planning years was mixed at best. Recent decades have seen hostility to such policy measures across the globe, barring a few such as tax breaks or the creation of special economic zones.
On the other hand, we know that strategic trade and industrial policy have played a key role in all the successful examples of industrialisation across the world. Even researchers at the International Monetary Fund, an organisation that has been a leading advocate of dismantling the pre-liberalisation era policy structures, have recently written about the importance of industrial policy. The new challenges of the fourth industrial revolution can only be met by a new industrial policy for the 21st century.
Finally, no public action on the ground or at the policy level will succeed if Central, State or local governments are starved of resources. We need to believe in the governments’ ability to deliver public goods and services, and we need to hold them accountable. Indeed, there are many successful examples of public action in healthcare, education, nutrition, industrial promotion and other areas.
These deserve greater recognition. But calls for greater government spending are often met with concerns over the fiscal deficits and public debt. While some of the concerns are legitimate, history and empirical analysis show that many of the fears are either unfounded or overblown. Focusing on the fiscal deficit to the detriment of employment generation and public goods creation is dangerous.
There are major misconceptions about India’s fiscal policy, government debt and fiscal sustainability that are belied by India’s own experience since the 1980s, and there is ample space for fiscal expansion. Such expansion can pay for itself if it invests in building capacities, raising productivity, and improving the quality of life.
India is at a crucial juncture in its economic development where timely public investment and public policy can reap huge rewards. At the same time, being in denial about the current realities and missing this window of opportunity can have large negative consequences in social and economic terms.
Amit-Basole is a faculty member at Azim Premji University, Bangalore and lead author of the State of Working India report.
अमित बसोले, राजेंद्रन नारायणन
From Prabhat Khabar
साल 2019 के आम चुनाव में रोजगार का अभाव सबसे मुख्य मुद्दा बनता नजर आ रहा है. पिछले कुछ महीनों से बेरोजगारी की समस्या और इससे संबंधित आंकड़े लगातार आ रहे हैं. केंद्र सरकार ने 2015 के बाद बेरोजगारी दर के आंकड़े जारी नहीं किये हैं.
साल 2017 में स्थापित आवधिक श्रम बल सर्वेक्षण की रिपोर्ट तैयार होने के बावजूद इसे प्रकाशित नहीं किया गया. बिजनेस स्टैंडर्ड में इस रिपोर्ट के कुछ आंकड़ों के आने पर पता चला कि 2017-18 में बेरोजगारी दर बढ़कर 45 साल में सबसे अधिक 6.1 प्रतिशत हो गयी है. शहरों में यह और अधिक 7.8 हो चुकी है. उच्च शिक्षितों में यह दर बढ़कर 20 प्रतिशत हो गयी है. हर पांच शिक्षित युवा में एक बेरोजगार है. भारत के लिए यह बहुत चिंताजनक विषय है. कम आय वाले असंगठित और अनियमित रोजगार की समस्या तो है ही.
एक तरफ जहां बेरोजगारी और असुरक्षित, असंगठित रोजगार की समस्या तीव्र रूप ले रही है, वहीं दूसरी तरफ शहरों में सार्वजनिक सेवाओं का सख्त अभाव दिखता है और पर्यावरण की स्थिति भी बिगड़ती जा रही है. क्या इन समस्याओं का एक साथ कोई हल निकल सकता है? शहरी रोजगार गारंटी योजना के जरिये यह मुमकिन है.
करीब एक दशक पहले पूरे देश में मनरेगा लागू करने के बाद भारत ने, सीमित रूप में ही सही, रोजगार की गारंटी का सिद्धांत स्वीकार कर लिया.
पिछले कुछ सालों में मनरेगा में बजट की कमी और तीव्र केंद्रीकरण के चलते मजदूरों को लगातार लंबित भुगतान और कम मजदूरी जैसी परेशानियों को झेलना पड़ा है. फिर भी, मनरेगा ने गरीबों की आय बढ़ाने, गावों में लोकतांत्रिक ढांचे को मजबूत करने, लैंगिक व जाति-आधारित गैरबराबरी घटाने, पर्यावरण सुधारने तथा कुआं-तालाब जैसे सामूहिक संसाधनों को सुदृढ़ करने में सफलता पायी है. साथ ही, ग्रामसभा को सक्षम करके अति गरीब नागरिकों की लोकतांत्रिक ढांचे में उम्मीद जगाने में मनरेगा का बड़ा योगदान हो सकता है.
शहरी रोजगार गारंटी योजना कुछ हद तक मनरेगा से प्रेरित हो सकती है, लेकिन इसे शहर के अनुकूल एक अलग रूप लेना होगा. एक ऐसी ही योजना के बारे में अजीम प्रेमजी विश्वविद्यालय स्थित सेंटर फॉर सस्टेनेबल एम्प्लॉयमेंट ने प्रकाशित की है. सुझाव यह है कि शुरुआत में यह योजना दस लाख से कम आबादी वाले छोटे शहरों में लागू की जा सकती है.
भारत में तकरीबन 4,000 ऐसे छोटे शहर हैं. कई प्रकार के कार्य इस योजना के अंतर्गत किये जा सकते हैं. जैसे, साधारण लोक-निर्माण कार्य यानी सड़क, फूटपाथ, पुल अदि का निर्माण और मरम्मत, शहरी पर्यावरण सुधार यानी नदी, तालाब, जंगल, बंजर जमीन और अन्य सार्वजनिक जगहों का कायाकल्प, देखभाल, सफाई, वृक्षारोपण, पार्क और अन्य हरित जगहों का निर्माण, शहरी कृषि और ऐसे कई अन्य काम इस योजना में सुझाये गये हैं.
गावों के मुकाबले शहरों में भिन्न-भिन्न हुनर वाले और उच्च शिक्षा प्राप्त लोग अधिक होते हैं, इसलिए योजना में इसका ख्याल रखा गया है. इसके अंतर्गत दिहाड़ी मजदूरों से लेकर मिस्त्री, इलेक्ट्रिशियन, प्लंबर, पेंटर, कारपेंटर और अन्य कई कुशल कारीगरों के लिए काम का प्रावधान है. शहर का कोई भी नागरिक साल में सौ दिन का काम पा सकता है, जिसके लिए 500 रुपये रोज की दर सुझायी गयी है. इसे हर साल महंगाई के हिसाब से बढ़ाया जायेगा.
उच्च शिक्षित बेरोजगार युवा सार्वजनिक अस्पताल, विद्यालय, दफ्तर आदि में अप्रेंटिस (हेल्पर या इंटर्नशिप) का काम पा सकते हैं. साथ ही पर्यावरण और सार्वजनिक सेवाओं की स्थिति का सर्वेक्षण करना, इससे संबंधित लिखा-पढ़ी का काम और अन्य निगरानी तथा प्रशासनिक कामों में भी उनकी भागीदारी हो सकती है. हर बेरोजगार उच्च शिक्षित युवा को साल में करीब पांच महीने यह काम मिल सकता है.
इन कामों के लिए प्रति माह 13,000 वेतन मिलेगा. इस तरह शहरी बेरोजगार युवाओं को काम का अनुभव मिलेगा, कौशल बढ़ाने का मौका मिलेगा, योजना में भागीदारी का सर्टिफिकेट भी मिलेगा, जिसके आधार पर निजी क्षेत्र में नौकरी मिलने में भी आसानी हो सकती है.
छोटे शहरों में नगर पंचायतें और नगर पालिका आदि आर्थिक व अन्य संसाधनों के अभाव का सामना करती रहती हैं. इस योजना के जरिये इन संस्थाओं में भी जान फूंकी जा सकती है. शहरी रोजगार गारंटी के तहत जो लोग काम करेंगे, वे नगर पालिका के नियमित स्टाफ की जगह नहीं ले सकते और न ही रिक्त स्थान भर सकते हैं, लेकिन उनके काम में मदद जरूर कर सकते हैं. प्रस्तावित योजना लगभग तीन से पांच करोड़ लोगों को लाभ पहुंचा सकती है. इस योजना में कुल खर्च सकल घरेलू उत्पाद का 1.7 से 2.7 प्रतिशत तक होगा, ऐसा अनुमान है.
पारदर्शिता और जवाबदेही को ध्यान में रखते हुए सूचना अधिकार कानून की धारा-4 का पालन होगा. हर वार्ड में, साल में कम-से-कम चार बार सामाजिक अंकेक्षण और जन-सुनवाई के जरिये लोगों द्वारा प्रशासन और विधायकों पर निगरानी रखने का प्रस्ताव है. इसमें शिकायत निवारण के कानून को लागू करने का प्रस्ताव भी है, जिससे आम आदमी का मनोबल बढ़ेगा और उसकी लोकतांत्रिक भागीदारी में उन्नति होगी.
राजनीति में आज जब ‘न्यूनतम आय’ का सवाल गरमाया हुआ है, यही मौका है कि रोजगार गारंटी के जरिये आय की गारंटी की बात हो और रोजगार गारंटी का सिद्धांत शहरों में भी लागू किया जाये.
Mathew Idiculla, Rajendran Narayanan, Amit Basole
From The Hindu
India is in the midst of a massive jobs crisis. The unemployment rate has reached a 45-year high (6.1%) in 2017-18 as per leaked data from the Periodic Labour Force Survey (PLFS) report of the National Sample Survey Office (NSSO). According to the PLFS report, the unemployment problem is especially aggravated in India’s cities and towns. Aside from unemployment, low wages and precarity continue to be widespread. In urban India the majority of the population continues to work in the informal sector. Hence, India cannot ignore the crisis of urban employment.
Reviving India’s towns
Both State and Central governments tend to treat towns as “engines of growth” for the economy rather than spaces where thousands toil to make a living. Programmes such as the Swarna Jayanti Shahari Rozgar Yojana (1997) that included an urban wage employment component have made way for those focussed on skilling and entrepreneurship.
India’s small and medium towns are particularly ignored in the State’s urban imagination. As per Census 2011, India has 4,041 cities and towns with an urban local body (ULB) in the form of a Municipal Corporation, Municipal Council or Nagar Panchayat. However, national-level urban programmes such as the Smart Cities Mission and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) only benefit a fraction of them. Most ULBs are struggling to carry out basic functions because of a lack of financial and human capacity. Further, with untrammelled urbanisation, they are facing more challenges due to the degradation of urban ecological commons.
Hence, we need new ways to promote the sustainable development of India’s small and medium towns. In the context of the present employment crises, it is worthwhile considering to introduce an employment guarantee programme in urban areas. Along with addressing the concerns of underemployment and unemployment, such a programme can bring in much-needed public investment in towns to improve the quality of urban infrastructure and services, restoring urban commons, skilling urban youth and increasing the capacity of ULBs.
The idea of an urban employment programme is gaining traction in political and policy debates. According to multiple reports, it could be a key agenda of a possible Common Minimum Programme of the Opposition parties for the 2019 general election. In Madhya Pradesh, the new State government has launched the “Yuva Swabhiman Yojana” which provides employment for both skilled and unskilled workers among urban youth.
What shape an urban employment guarantee programme should take can be widely debated. We have offered one proposition in the policy brief “Strengthening Towns through Sustainable Employment” (https://bit.ly/2utJlL0), which was published recently by the Centre for Sustainable Employment, Azim Premji University. Such a programme would give urban residents a statutory right to work and thereby ensure the right to life guaranteed under Article 21 of the Constitution. To make it truly demand-driven, we have proposed that the ULB receives funds from the Centre and the State at the beginning of each financial year so that funds are available locally. Wages would be disbursed in a decentralised manner at the local ULB.
Given the State’s relative neglect of small and medium towns and to avoid migration to big cities, such a programme can cover all ULBs with a population less than 1 million. Since it is an urban programme, it should have a wider scope than the the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA); this would provide employment for a variety of works for people with a range of skills and education levels. We emphasise that it would not come at the expense of MGNREGA but rather the two would go hand-in-hand.
Urban informal workers with limited formal education would benefit from this programme. They can undertake standard public works such as building and maintenance of roads, footpaths and bridges for a guaranteed 100 days in a year, at ₹500 a day. We have also proposed a new set of “green jobs” which include the creation, restoration/rejuvenation, and maintenance of urban commons such as green spaces and parks, forested or woody areas, degraded or waste land, and water bodies. Further, a set of jobs that will cater to the “care deficit” in towns by providing child-care as well as care for the elderly and the disabled to the urban working class have been included.
Skilling and apprenticeship
Another novel aspect is the creation of a skilling and apprenticeship programme for unemployed youth with higher education who can sign up for a contiguous period of 150 days (five months), at ₹13,000 a month for five months to assist with administrative functions in municipal offices, government schools, or public health centres, and for the monitoring, measurement, or evaluation of environmental parameters.
While the first category of work is aimed at providing additional employment opportunities and raising incomes for those in low-wage informal work, the second category is to provide educated youth experience and skills that they can build-on further. We estimate that such a programme will cost between 1.7-2.7% of GDP per year depending on design, and can provide work opportunities to around 30-50 million workers. In light of the 74th Amendment, this programme should be administered by the ULB in a participatory manner by involving ward committees.
Our proposal provides strong transparency and accountability structures — proactive disclosure of information based on Section 4 of the RTI Act, proactive measures through mandatory periodic social audits, public hearing and reactive measures through a “Right to Timely Grievance Redressal” for workers.
An urban employment guarantee programme not only improves incomes of workers but also has multiplier effects on the economy. It will boost local demand in small towns, improve public infrastructure and services, spur entrepreneurship, build skills of workers and create a shared sense of public goods. Hence, the time is ripe for an employment guarantee programme in urban India.
Amit Basole and Rajendran Narayanan work at Azim Premji University, Bangalore. Mathew Idiculla is a consultant with the Centre for Sustainable Employment
The question of jobs and employment has been one of the most dominant economic issues of 2018. It is likely to be a central issue in the 2019 elections as well. In our recently released report, State of Working India (SWI) 2018, we have highlighted a concerning rise in the rate of unemployment in the country. In developing countries like India, unemployment is generally low because the majority of the labour force cannot afford to be unemployed, instead they take up any casual work that they can find or they employ themselves (self-employed) in some small business or other. But over the past few years, India’s unemployment rate has been steadily rising from around 3 per cent in 2011 to 5 per cent in 2015 to 7 percent in late 2018. This is unprecedented.
The nature of India’s labour force is changing rapidly. Young people are acquiring more education and entering the labour force with graduate degrees. Graduates and post-graduates now constitute 15 per cent of India’s labour force. In 2004 this number was only 6 per cent. It will continue to rise. These youngsters are not satisfied with just any type of work of a casual or self-employed nature. They want regular salaried work that pays at least the minimum central government salary. But the Indian economy is not generating such jobs in adequate amounts. As of the latest available government data from 2015, regular salaried workers account for only 17 per cent of the workforce. 82 per cent of male and 92 per cent of female workers earn Rs. 10,000 a month or less. Since graduates aspire to better jobs, they are three times more likely to be unemployed compared to the overall average. The widespread protests all over the country demanding more reservations in the public sector are a symptom of this problem.
The economic factors behind this lack of job creation are well known. The sectors that have shown rapid GDP growth, such as IT-BPO, real estate, or financial services, are not those that create a lot of jobs. Sectors that can create a lot of good jobs, such as manufacturing, have experienced extensive mechanisation and a rapid rise in insecure employment (contract work, trainees, etc). With agriculture in crisis, this is also not an attractive option for youth in rural areas. Low-wage service work and construction jobs are the only ones to be easily found.
To deal with this problem we need good, up-to-date information. But instead, 2018 saw a lot of confusion on job creation numbers due to lack of official data on employment. Three years have now passed without clarity on how many jobs have been created on net, i.e. accounting for job creation as well as job destruction in all the sectors of the economy. This is because the government has not released data for 2016-2017 and 2017-2018. Instead many claims of job creation have been made on the basis of enrollments in provident fund and pension schemes, as well as MUDRA loans, and other government schemes. But since these schemes cover only a small fraction of the total labour force, they do not paint a complete picture. Household surveys are essential for such a picture.
Currently, the Mumbai-based Centre for Monitoring the Indian Economy is the only available survey data source since 2016. RTIs filed by us reveal that official survey data for 2017-2018 is available and will be released soon. One hopes that this will be in time for a debate over the government’s performance before the elections.
To sum up, unemployment among the educated youth, low wages among those who do have work, and lack of timely data are major problems we need to address urgently.
In SWI 2018, we have suggested that a “National Employment Policy” is needed. I end with a few ideas for such a policy.
1. A Universal Basic Services (UBS) programme that expands public investment in education, health, housing, public transport and safety. This will create good jobs in addition to addressing the shortfall in the provisioning of public goods.
2. A National Urban Employment Guarantee Programme that offers work opportunities particularly in the small towns and peri-urban areas. Such a programme will necessarily differ in details from NREGA, but will be in the same spirit. Workers employed in this programme can contribute to the creation of public infrastructure such as roads, sanitation, urban greening and rejuvenation of the rapidly degrading urban environment.
3. Fiscal policy (at central, state, local levels) is central to employment generation and welfare. We need to reorient fiscal policy towards employment rather than international credit-ratings, and stop making the fiscal deficit a policy target.
4. A new data architecture based on household and business surveys, time-use surveys, and administrative sources (such as EPFO and GST databases).
(Amit Basole is Associate Professor of Economics and Head, Centre for Sustainable Employment at Azim Premji University)
Published in Prabhat Khabar.
It seems that nearly every day, our media carries stories of concern about the employment situation in India. The stories include accounts of a desire for jobs that is not being met, the vast over-subscription of government jobs, the falling labor force participation of women, the diminishing opportunities for decent employment in rural India, or massive migration to cities in search of remunerative employment. Other stories focus on the quality of employment being created, often precarious and without dignity. A recent poll by the Bill and Melinda Gates Foundation and Ipsos finds that unemployment is the number one cause of worry both of youth and adults in the country, and this concern is higher than in any other county polled.
At the same time, India is one of the fastest growing countries in the world. Growth has led to impressive gains in poverty reduction. It also has a vibrant democratic society as well as a large pool of capable and young people, who are increasingly healthier and more educated. It is better placed than other countries around the world in trying to generate meaningful and sustainable employment for these reasons. The concern over job creation is also widely shared by all political parties. But for a whole host of reasons, the link between GDP growth and the creation of more and better employment has become much weaker. Both the quantity of jobs and quality of jobs are at issue.
Taking a longer view, historically, the path to a more developed economy has involved the movement of workers from agriculture to non-farm occupations (a la Simon Kuznets) and from informal activities to formal ones (a la Arthur Lewis). For our policy-makers, the main concern continues to be how to support and accelerate the transformation of India from an economy dominated by self-employment and small-scale enterprises to a modern, vibrant one. This concern is further exacerbated in an era when there is increasing automation and less space potentially than there was in decades gone by to create employment through export orientation. There is nothing ‘natural’ about this process. It requires a clear vision and a judicious mix of industrial and trade policies that implement it, for example, by tying import substitution to export promotion, and protection from foreign competition alongside fostering of domestic competition. It also requires changes in the political economy with land reforms, a favourable international climate in the form of export markets and geo-political stability.
In a new report, the State of Working India, we take stock of both the long-run process of structural change as well as more recent developments in quantity and quality of employment, using primarily official government sources. While there are many nuances, some basic facts appear unequivocal.
First, even as GDP growth rates have risen, the relationship between growth and employment generation has become weaker over time. GDP growth has accelerated to 7 per cent, but employment growth has slowed to 1 per cent or even less. On the one hand, this could be a welcome development in so far as it reflects productivity growth. But it is also a problem in so far as the demographics suggest the need for larger employment growth to accommodate those entering the labor force. In addition to the new entrants, jobs are also needed for who want to leave agriculture. Recall that just under half of the workforce is still in this sector which produces less than 20 per cent of the national income.
Second, historically, under-employment and low wages, and not open unemployment, have been the key issues. But a new feature of the economy is a high rate of open unemployment, which is now over 5 per cent overall, and a much higher 16 per cent for youth and the higher educated as of 2015. The increase in unemployment is clearly visible all across India, but is particularly severe in the northern states. If one is optimistic, this may represent a temporary skill mismatch, as more educated and aspirational youth are willing to wait for a job rather than accept a less desirable one. On the other hand, given concerns about the quality of education, this may not be a temporary phenomenon and might require intervention.
Third, around 100 million workers are either employed in very poor quality jobs or are out of the labour force because of the unavailability of work. These are ‘surplus workers’ available to be pulled into the economy if jobs can be created. Another estimate of the surplus workforce, that can be more productively employed elsewhere, is the percentage of those employed in unorganised petty services such as retail, domestic work, and so on. As of 2016, this is estimated to be 78 million.
Fourth, despite a steady rise in wages, the levels are still low. Between 2010 and 2015, real wages grew at 2 per cent per annum for organised manufacturing, 4 per cent for unorganised manufacturing, 5 per cent for unorganised services, and 7 per cent for agriculture (for the last, growth has collapsed since 2015). Since 2000, real wages have grown at around 3-4 per cent in most sectors, with the exception of agriculture. Despite this, nationally, 67 per cent of households reported monthly earnings of only up to Rs. 10,000 in 2015. In comparison, the minimum salary recommended by the Seventh Central Pay Commission (CPC) is Rs. 18,000 per month. This suggests that a large majority of Indians are not being paid what may be termed a living wage, and it explains the intense hunger for government jobs.
Fifth, the Indian economy remains heavily gender and caste segregated. Women workers earn anywhere between 30 and 80 per cent of male workers’ earnings depending on the occupation and industry in which they work. Women are severely under-represented among senior officers, legislators and managers as well as in well-paying industries such as Finance. SC as well as ST groups are over-represented in low-paying occupations and severely under-represented in the high-paying occupations, a clear indication of the enduring power of caste-based segregation in India.
What is to be done? India will continue to transform and face the challenges of a world with fewer ‘standard’ options such as export-oriented industrialization (given a much larger number of more productive competitors). It is important, then, to have a clear national employment policy, one that can build on the progress achieved thus far, but that also takes the issue head on. Expansion of employment guarantee, certification of skills acquired on-the-job, a universal basic services programme, innovative industrial policies, and learning from the experiences of the states, can all be part of this effort. And of course, a willingness to use the public purse for these actions is necessary. But this is not enough. Such a policy will need to integrate crucial considerations of social equity and ecological sustainability into its structure. For our country, in the 21st century, Lewis and Kuznets, the theoreticians of structural change, have to meet the ideas of Ambedkar and Gandhi.
(Amit Basole and Arjun Jayadev teach Economics at Azim Premji University.)
Amidst the clamour of commentary around the Union Budget yesterday and today, one issue is conspicuous by its absence: jobs.
Of the big three issues I had flagged in my pre-budget analysis, viz. rural distress, jobs, and stimulating private investment, the first has found a prominent place and the third somewhat less so, but the second issue has been given short shrift. Even MGNREGA finds itself with a stagnant budget in nominal terms (constant at INR 55,000 crores), which will mean a decrease in real spending. This is contrary to expectations in many quarters that this budget would see a big push on job creation.
Before we look at what little the budget does offer on jobs, let us look at the big announcements; an increase in the minimum support price for all crops to 150% of the costs of production and a new national health insurance program.
The revised MSP was a long-expected announcement and, politically speaking, this is the right time to make it. However, there is no clear budgetary allocation for it. Is it to come from the additional INR 7000 crore allocated to agriculture? If so, is this increase enough? Further, what does “cost of production” mean?
Will the government take into consideration paid out costs plus family labour (called A2 + FL) or the above plus imputed rent of land and capital owned (called C2)? Until several such details become clear it is impossible to tell whether this can actually improve farm incomes and, thereby, stimulate the rural economy. Add to this the well-known fact that MSPs rarely function as effective price floors (as they are supposed to) because of very poor implementation, forcing farmers regularly sell for less than MSP. All said though, an announcement is better than no announcement. Since this is a big election year, this is the opportunity to press the government on delivering the promise in a proper manner.
Now let us come to the second big announcement, a National Health Protection Scheme, with up to INR 5 lakh annual coverage for 10 crore families. This has been hailed as a big move and it is. The question is, who stands to benefit from it? The FM mentioned that it would create “lakhs of jobs, particularly for women.” But in the absence of details it is not clear how this will happen.
The newspaper accounts of the scheme do not mention the jobs angle much. Rather, there are mentions of this huge government-funded programme (some say the largest such in the world) being a boost for the insurance and healthcare sector. Assuming that the NITI Aayog wants to design this scheme to benefit the poor, maximally, it would be useful to keep a few things centre-stage so that the scheme does not become a giveaway from the government to the insurance and pharmaceutical companies, and hospitals.
First, either improve public delivery of healthcare or find a way to keep prices of drugs, treatment etc. tightly under control. Given the current inflation in healthcare costs and declining medical ethics and standards, this programme runs the risk of funneling a huge amount of public money to private hands while delivering poor quality healthcare to the poor.
Second, make job creation in the healthcare sector an integral part of the scheme by expanding public healthcare coverage. In fact, the public expansion option has two advantages, it keeps costs under control, the government will only be paying itself, not third parties, and it creates jobs. Of course, this will need more than the INR 1473 crore allocated to this program.
Jobs and employment are directly addressed only in a small and uninspiring section under MSMEs and Employment. There are no big ideas here commensurate with the magnitude of the challenge or with this government prior commitment to the issue. The government is proposing to pay 12% of EPF costs for new employees for up to three years, to create incentives for firms to hire new workers. This extends the scope of the previous policy.
There are also some policies specifically to create incentives for women to participate in the workforce, such as maternity leave and creches. While most of these are welcome measures, they stop far short of what needs to be done on the jobs front. Sadly, the FM also cites the same flawed study cited by the PM in a recent interview, that 70 lakh formal jobs will be created in the current year. The problems with this have been widely discussed in the media already.
The second pro-jobs measure mentioned in the budget is the reduced tax rate (from 30% to 25%) for firms with turnovers of INR 250 crores and less. This is again a disappointingly supply-side view of job creation. Lowering taxes to create jobs will only work if some other key conditions are satisfied. Most importantly, firms need to see strong demand in the economy, particularly in the vast rural sector.
On the whole, there is a large missed opportunity here to go big on the employment front by proposing a range of direct public employment measures, a potential expansion of MGNREGA to more occupations, payment of wage subsidies for jobs where the minimum wage is far below a living wage, and so on. All of these have long been on the policy wish-list.
One last comment on the third front I had highlighted in my pre-budget analysis, viz. private investment. The Economic Survey chapter on Savings and Investment ends by saying “`animal spirits’ need to be conjured back.” This refers to John Maynard Keynes’ famous characterisation of the behaviour of the owners of capital to be moved to action on the basis of mood swings of optimism and pessimism rather than calculations of risks and rewards. The measures suggested are, addressing the problem of stressed assets on bank and firm balance sheets, lowering taxes, easing the costs of doing business, etc. The budget more-or-less confirms to this approach. And no doubt, these measures are important.
But the list leaves out the obvious driver of “animal spirits” in the Keynesian tradition, viz. aggregate demand. The thinking is almost purely supply-side, whether discussing an incentivising investment by big business or by small and medium industries. Time and again we have seen, and even industry leaders have said, that a revival of demand in the economy, an increase in spending across the income distribution, is a strong determinant of private investment.
In sum, while the budget seems to deliver strongly on “ease of doing business”, on the “ease of living” front, much remains unclear. Pressure should be kept up in this election year to hold the government accountable for the proper implementation of the revised MSP formula and the new health insurance scheme.
It is safe to say that the issue of job creation was among the top economic issues of 2017, along with demonetisation and GST. And as a long-term issue, its importance definitely exceeds the other two, which though severe are likely to be short-term shocks. Further, riding on the youth vote in 2014, the Narendra Modi government has consistently made jobs its central plank, ensuring that the issue always remains in the news.
The year began with the question of whether demonetisation had negatively affected job growth, especially in the informal sector. Unfortunately, like most questions about demonetisation and its impact on the informal economy, this one too suffers from lack of data to answer it. The government has doggedly refused to address the question directly by failing to conduct the necessary surveys at a national level. But anecdotal evidence, as well as survey evidence from a few sectors, does indicate that the severe contraction in economic activity caused by demonetisation did eliminate informal jobs on a large-scale.
The long-run question is, however, what it has always been. Can the Indian economy generate employment in the required numbers to provide gainful, meaningful work to the millions of youth who enter the labour market each year?
On this, 2017 will be known more as a year of confusion and backpedaling on promises mixed with some welcome developments on the data front.
A principal source of confusion has been the term “jobless growth.” Only last week two ex-policymakers argued that “India’s jobless growth is a myth.” Citing Labour Bureau survey data, the authors pointed out that India’s problem is not lack of jobs, but rather lack of “regular, productive, and well-paid jobs.” But this has always been the understanding among all observers of the Indian economy.
As I have also consistently pointed out in this column, jobless growth was never about the absence of jobs, it was about the failure of the formal sector to generate decent jobs, forcing the vast majority to work in the informal sector. The question is, why has growth mostly created “bad” jobs. And how can it create more “good” jobs? So it is rather late in the game to be resorting to such denial techniques and using clickbait headlines to boot.
Another source of confusion has been the lack of data. The most frequently used NSSO data has been available only every five years. India did not have a large-scale, high-frequency employment data collection system till 2010. The Labour Bureau experimented with annual surveys from 2010 to 2015, but these were not used much by academics or policy-makers for quality as well as availability reasons, and have now been discontinued.
Due to lack of reliable, high-frequency employment data, much poorly informed back and forth has been carried out in the op-ed pages. In mid-2017, a task-force was set up under then NITI Aayog Chairperson, Arvind Panagariya to prepare a report on how to improve the country’s employment statistics system. Admitting that the debate “has been taking place in the absence of accurate data or analysis”, the report made recommendations to collect “more reliable, timely and relevant labour market data”.
In this respect, a welcome development is that in 2017, the NSSO has started doing a Periodic Labour Force Survey (PLFS). This is an unprecedented (for India) continuous survey that will be conducted quarterly for urban areas and annually for rural and urban areas. So while 2017 passed with lack of adequate data to gauge what was happening to jobs, hopefully, 2018 will be different, creating the stage for an informed debate leading to the 2019 general election.
The government’s backpedalling on the jobs issue in 2017 has taken two forms. The first, after several weeks of bad press in mid-2017, BJP President Amit Shah issued a statement that it was not possible to provide formal sector jobs to everyone in a country of 125 crore people so self-employment was the answer. This was a clear admission of failure because it implied that the government did not think its policies were going to create formal jobs in the private sector in adequate numbers. Second, in order to make its performance in job creation seem better, the government proposed redefining what counts as a “formal” job. If we count all workers who are enrolled in some pension or provident fund scheme as “formal” then the picture looks better. While this may be understandable as a jobs accounting exercise, it hardly solves the actual problem of disguised unemployment plaguing millions.
We need to get serious about three distinct issues with regard to the Indian labour market. First, the continued problem of bad, low-paying jobs and disguised unemployment, which is most of our labourforce. Second, the relatively new and fast-growing problem of open unemployment among the educated youth. As a proportion of the total labourforce, this is a small number, but it is a high visibility issue as seen in the large rallies taken out all across India for reservations in government jobs. Third, the question of a low and falling labour force participation rate. Compared to other developing countries, India has a much lower ratio of those employed or seeking work in the population aged 15 and above (53% compared to Indonesia’s 66% or China’s 69% and the world average of 62%). This is usually explained by withdrawal of women from the labour force due to prosperity or education. But it needs to be investigated further because “discouraged workers”, those who have given up looking for work, may be a part of the story as well.
The final and potentially welcome development for this year is that the government is expected to announce a new National Employment Policy in the 2018 Union Budget. One hopes that such a policy will be adequately funded, and even more importantly will signal that the government places the interests of Indian workers before those of international investors or the global market.
Over the past few months, the question of job creation, or lack thereof, in the formal sector of the economy has steadily been in the news. Clearly, the Modi government is feeling the pressure to do something, or at least to be seen to be doing something, about it. The first response to the accusation that the Indian government has failed on the job creation front was in the form of Amit Shah’s statement that it was not jobs that were promised, but livelihoods. So the government would encourage self-employment. Never mind that self-employment has always been the fallback option for those not able to secure jobs. Half of the Indian workforce is self-employed.
The revelation that 10 million workers left out of the Employee Provident Fund Organization (EFPO) because of employers defaulting on their responsibilities have been registered during the EFPO amnesty program this year.
Since this response was unlikely to cut much ice, a second response has emerged over the last few weeks. This is to argue that in fact, India has a much larger formal workforce than previously estimated. 15-25 per cent instead of the usually quoted figure of 7-10 per cent. This is asserted on the basis of the revelation that 10 million workers left out of the Employee Provident Fund Organization (EFPO) because of employers defaulting on their responsibilities have been registered during the EFPO amnesty program this year. The program (running from January 1st to June 30th) gave firms the opportunity to register workers that were off the books so far and pay their PF dues for a nominal fine of INR 1 per year.
The sudden 26 per cent increase in the size of the workforce that qualifies for PF is being billed as an increase in formal sector employment. Following up on this, a few days ago, the NITI Aayog task force, led by Chairman Arvind Panagariya and charged with reviewing the state of employment data, recommended that formal employment is redefined more “pragmatically” to include workers that are covered under PF, insurance, or pension schemes.
Of course, if receiving the “formal” label means these workers can now fight for better working conditions and more benefits, this would be welcome!
Now, bringing workers who qualify for PF, insurance, or pension schemes into the system so that they actually get the benefits they are supposed to and making sure companies are actually paying into the system, is, of course, a good idea. But using this as a way to underplay the jobs crisis is simply playing a numbers game.
Redefining informal workers as formal will look good on paper but does not change anything on the ground. In fact, it may even make things worse if the “formal” label ends up taking all such jobs off the radar for improvement in working conditions. This is because even jobs in which workers qualify for various benefits are often precarious, hazardous, or otherwise prone to malpractices (such as stealing of PF). Even contract workers can be on PF schemes. Of course, if receiving the “formal” label means these workers can now fight for better working conditions and more benefits, this would be welcome!
But the cynical use of data does not stop there. An article from a few days ago in the Financial Express is a master class in how media can be used for manipulation even in the staid world of economic statistics. The headline reads “Job Creation Boost: Pradhan Mantri Awas Yojana Urban birthed 1.7 crore jobs.” The highlighted summary goes: “Two years after its launch, the Prime Minister Awas Yojna Urban (PMAY-U) may be off to a slow start, but the scheme has already employed close to 1.7 crore people so far, says a study.” This article has been tweeted and retweeted as proof of the success of the Modi government in job creation.
Closer examination reveals that the Express report is based on a study by the National Council for Applied Economic Research (NCAER) published in April 2014. This study uses input-output data from the Central Statistical Organisation and employment data from the National Sample Survey from the year 2009-2010 to show that for every lakh rupees invested in the housing sector, 2.69 new jobs (2.65 informal and 0.4 formal) are created in the economy. So with an estimated investment of Rs 42,160 crore under the Awas Yojana, employment of 1.71 crores should be generated. Thus, we arrive at the 1.7 crore jobs figure.
What we need is a genuine policy response that can increase the number of decent, secure jobs, paying at the minimum the government class IV monthly salary.
So note the data gymnastics here. Firstly, the study is based on data from the UPA-II regime and was published before the present government came to power. Secondly, it is based on indirect input-output analysis, not on any survey of actually created jobs. Thirdly, according to the study, 87 per cent of the jobs created would be informal. Fourthly, it is well known that the construction sector has been a principal source of (informal) jobs in the past few years.
So in sum, a three old study based on seven-year-old data confirms what we know about informal job creation in the construction sector and is not designed to say anything about the current debate on how to create decent, formal jobs. What we need is a genuine policy response that can increase the number of decent, secure jobs, paying at the minimum the government class IV monthly salary. What we are getting instead is a juggling of the numbers and misleading headlines.
First published in The Tribune.
IN what has been termed as a “routine” and “calming” budget, Finance Minister Arun Jaitley’s team has checked all the appropriate boxes. Increased outlay for popular schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and for public investment in infrastructure, and tax cuts for small businesses and the lower end of the salaried classes, while keeping to the announced path of fiscal consolidation with a deficit target of 3.2 per cent. Overall the budget contains no big surprises (such as inheritance tax, universal basic income etc.). But after the economic turmoil caused by demonetisation, was this a lost opportunity to make some big changes? Or is it a deliberate attempt to go back to business as usual?
While the broad patterns in the budget are fairly routine this also means that there is no vision commensurate with the challenges that the Indian economy is facing. Here I will speak only to one of the biggest challenges, that of generating livelihoods that provide regular, living incomes for everyone. India is going through a well-documented job-creation crisis. The lack of well-paying formal sector jobs forces many into the informal sector. For example, the Labour Ministry’s latest “Employment-Unemployment Survey” (2015) estimates that at the all-India level just over 67 per cent of households earn less than Rs 10,000 per month. Fully 77 per cent of households at the all-India level do not have a regular salaried person working, but instead are either self-employed or are casual workers.
What does the budget do to address this crisis? Broadly by four measures — increased spending on agriculture, increased allocation to MGNREGA, increased public expenditure on capital goods, and decreased taxes on small business, micro small and medium enterprises (MSMEs). Let us take each in turn.
The substantial increase in the MGNREGA budget from Rs 38,000 crore to Rs 48,000 crore will, no doubt, be welcomed in general. The fact to note is that, as per the budget documents, while the budget estimate for 2016-2017 for MGNREGA was Rs 38,000 crore, the revised estimate for the past year (the money actually spent) is Rs 47,499 crore. This is a huge increase over the actual spending for 2015-2016 which was Rs 37,341 crore. Thus the new budget allocation is merely keeping up with the demand for employment in the countryside. In the medium to long term, it is also important to keep in mind that a programme such as MGNREGA is designed as a safety net and a stop-gap measure. Rural policy should be designed to increase farm and non-farm incomes in the private sector in such a way that people no longer need to work in MGNREGA.
In this regard, the most prominent announcement in the budget speech has to do with doubling of farm incomes over the next five years (by 2022) by setting aside Rs 10 lakh crore (roughly 8.3 per cent of GDP) for the agricultural sector. The goal is, of course, laudable, but is there a vision that accompanies it? Achieving this goal requires agricultural incomes to grow by a whopping 12.5 per cent per year over the next five years. The actual rate of growth in agriculture has been far lower (the estimates for 2016-2017 are 4 per cent). While a detailed examination of the budget documents may reveal some mechanism, the Finance Minister’s speech did not give any such indications.
One could argue that growth rates in the agricultural sector could be driven by growth in the secondary and tertiary sectors (a variation on the trickle-down theory). But there are serious constraints on such a process, the principal one being that spending on primary sector output (such as food) does not grow very much beyond a certain point as people get richer. This implies that increasing incomes in the agricultural sector requires us to focus on that sector in a bottom-up strategy. Indeed, lack of broad-based aggregate demand in the Indian economy, a simple consequence of the aforementioned meagre earnings of the vast majority of households, is generally acknowledged to be behind the current slack in private investment, a lack made all the more severe by demonetisation.
Increased expenditure on infrastructure is another selling point of the budget. Like increased spending on MGNREGA this is an uncontroversial move, likely to elicit broad support. It is also welcome that the government has recognised the close synergistic links between public and private investment (as opposed to the “crowding out” logic that sees the two as competitors). If the government is serious about things such as 100 per cent rural electrification that actually ends the current grossly unequal distribution of electricity and other public goods, this is to be welcomed and can potentially be very good for job growth. However, if it entails projects that will serve only the urban, middle classes (such as more highways), bringing displacement to those in the informal sector then the welfare effects are more ambiguous.
Coming to decreased taxes on MSMEs, in general this should be a welcome step as far as making these businesses more competitive goes. However, in the face of weak demand they may still not choose to expand operations and create jobs. The primary constraints on MSMEs are demand and infrastructure (such as electricity), not the tax burden. Given strong demand and sales, the incentives for evading the tax net may also reduce.
A genuine attempt at ending the crisis of jobless growth will have to start from the bottom up, and not rely on trickle-down approach. This means vastly increased public spending on agriculture and on other non-farm economic activities in which the vast majority works. This can take the form of expanded public works programmes or wage-subsidies to the private sector that allow people to work in occupations that they are already trained for rather than on road construction and other putatively “unskilled” work they are not trained to do. Reports from the rural areas indicate that, in addition to farmers, skilled weavers and other workers are taking to MGNREGA work due to distress. This is skill-destroying and should be stopped.
But won’t such fiscal expansion run afoul of fiscal consolidation? Here I end with a question that is not asked often enough: Why are we so obsesssed with the fiscal deficit and international ratings? Paying inordinate attention to ratings is consistent with the insistence on Foreign Direct Investment (FDI) as a path to development. But this need not be the case. India is a large market and a large economy and is capable of financing its own development path. The only other reason for the emphasis on fiscal prudence is the popular yet flawed “crowding out” argument that has been challenged many times in academic literature as well as popular media and that the government also does not believe in, as indicated by the argument that public spending will boost private investment. Thus there are no other good reasons for insisting on such arbirtrary targets such as 3 per cent or 3.2 per cent.
The Finance Minister seems to have played it safe in the current budget while attempting to square the usual circle of increasing spending and decreasing tax rates, while at the same time reducing the fiscal deficit. The casualty, as is often the case, are the bottom 80 per cent of Indians who have yet to see trickle-down economics work for them as it has for the top 20 per cent.