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The growing jobs challenge

The growing jobs challenge
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First Published: Tue, Nov 23 2010. 09 54 PM IST

Photo: Hindustan Times
Photo: Hindustan Times
Updated: Tue, Nov 23 2010. 09 54 PM IST
The Labour Bureau recently released its first report on employment in the country. Till now, job estimates have usually been available in the employment-unemployment surveys of the National Sample Survey Organisation (NSSO). The most recent of these is the 64th round (2007-08), preliminary results of which were reported in this column on 20 July. The 64th round estimates were disappointing, with annual employment growth during 2004-05 and 2007-08 at 0.8 million per year—a fraction of the total annual increase in the labour force of around eight million. The government, on the other hand, has projected nine million jobs annually in the 11th Plan. The preliminary estimates from NSSO confirmed the apprehension that the present spell of growth may be jobless, and, therefore, a setback to the inclusive growth agenda.
The new report is largely silent about its methodologies, which precludes any comparison with the NSSO surveys. However, the bureau must be commended for bringing out the report in a short time, which makes it useful to look at recent trends, unlike the NSSO reports that are available with a lag of two-three years. The survey gives the first estimates of employment and unemployment trends in 2009-10.
Photo: Hindustan Times
While some of the broad trends are similar to what NSSO reported, there are two estimates that merit attention. The first is the usual status unemployment rate at 9.4%. Although this is close to NSSO’s daily status unemployment rates, it is almost four times the organization’s usual status (yearly reference period) rates. In absolute terms, the bureau report suggests that the total number of unemployed people is almost 40 million, compared with 11 million reported by NSSO.
How seriously should one take these estimates? In general, capturing employment status through such surveys is quite complicated. This is more so in the case of developing countries with large agrarian economies. The problem is two fold. First, what is measured in such surveys using a long-term reference period is open unemployment. In this, a person is defined as unemployed not only if he is jobless, but also if he is seeking work. In agrarian societies, even though individuals may not be adding to the production process (that is, their marginal productivity is zero), they may not report themselves as unemployed. Second, they may also not report themselves as jobless in societies where being unemployed is associated with some kind of social stigma. This is precisely why farmers or cultivators report the lowest unemployment rates. These twin issues also mean that open jobless rates by usual status are generally low. Ever since the employment-unemployment surveys were started in 1972-73, that rate has remained in the range of 2-3%.
However, the Labour Bureau estimates may not be completely untrue, because of two factors. First, 2009-10 was a drought year. Although this did not lead to a sharp reduction in agricultural production, some sections of the population are likely to have joined the rank of the unemployed. Second, the 2008-09 slowdown could also have affected employment availability in the non-farm sectors, particularly in construction. There is some evidence of this from the quarterly surveys initiated after the slowdown to track employment trends. These suggest that the total number of jobs created in manufacturing and services has been only one million in the last two years. This number is also in line with the jobless growth estimates coming from NSSO surveys. But if these trends are true, they confirm the spectre of jobless growth shown by NSSO’s 64th round. At the same time, they should also ring alarm bells for a government which considers productive employment creation as the cornerstone of inclusive growth. If not, the demographic dividend may turn out to be the population curse.
Along with this negative story, the report also suggests that there are some positive changes in the workforce structure. Agricultural employment, it says, may be only 45%—not 55% as NSSO estimated. If this is true, it implies that employment trends may finally be responding to the changes in the sectoral contribution of agriculture to the gross domestic product, which has been declining much faster than its employment share. Such likelihood is not entirely ruled out. One, this could be a response to falling real incomes as a result of drought and inflation, pushing people to seek jobs in non-farm sectors. Two, it could be a response to the cumulative growth of non-farm sectors in the last five years, pulling labour from the farm sector. If the second reason is operative, it is worth celebrating as the signal of a trend break in the sectoral share of employment. But if the first is operative, then this is only temporary, and implies a worsening of livelihood in rural areas.
These issues signal the need for some serious thinking on the part of the government. That is crucial for a successful labour transition in a fast growing population with nine million annual additions in the labour force. Jobless growth could also spell disaster for the larger ambition of achieving double-digit growth. Whatever the interpretation, the recent estimates of employment and unemployment do suggest that the government may have a serious challenge on its hands, one that needs to be addressed immediately.
Himanshu is an assistant professor at Jawaharlal Nehru University and a visiting fellow at Centre de Sciences Humaines, New Delhi
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First Published: Tue, Nov 23 2010. 09 54 PM IST