On 1 July, the government released its first report to the people on employment. Based on the National Sample Survey Organisation (NSSO) employment-unemployment surveys (EUS), the report credited the government for having achieved a high rate of jobs growth—at around 2% per annum—and projected that the growth of employment in the next five years would be close to 2.5% per annum.
An annual government report on employment is a welcome step, given the importance of employment creation. Unfortunately, the government’s expectations are off the mark compared with what the EUS data shows, which suggests that there is a serious problem of employment creation during the first United Progressive Alliance (UPA) administration’s tenure.
NSSO recently released its latest report on employment and unemployment for 2007-08 (64th round). This is part of the annual round of NSSO surveys, besides the quinquennial rounds that are generally used to track employment trends. However, the survey round for 2007-08 is fully comparable with the round of 2004-05—the last quinquennial survey on employment and unemployment—in all respects, with a marginally higher sample size. The 2007-08 survey gives the first picture of the government’s performance on employment creation.
The results are surprising. Between 2005 and 2008, the first three years of UPA-I, the total additional jobs generated in the economy by the usual status measure was only 2.4 million or 0.8 million per year. The total number of workers increased from 457.9 million in 2004-05 to 460.2 million in 2007-08, a growth rate of 0.17% per year, compared with 2.85% per year in 1999-00 and 2004-05. This, in fact, is the lowest rate of jobs growth in the last three decades for which data is available. In contrast, the annual job creation between 1999-2000 and 2004-05 was 12 million.
However, the trend was not the same in rural and urban areas. While employment increased by 4.4 million in urban areas between 2005 and 2008, it actually fell by two million in rural areas. This is also confirmed by the daily status measure of employment, which shows that person-days of employment in rural areas declined from 93.8 billion in 2005 to 92.9 billion in 2008. This decline would have been far greater had it not been for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Person-days of employment created by public works (including MGNREGS) increased from 221 million in 2004-05 to 939 million in 2007-08.
The employment creation trend is also different for men and women. While employment for men increased by 5.2 million per year, it declined by 4.4 million per year for women. Though a large part of the slow employment momentum is attributable to the decline in jobs growth for women, the growth rate of employment for men was not enough to compensate for this.
What happened after 2007-08? The issue is important because of the widespread job losses as a result of the global financial crisis and the subsequent slowdown. NSSO survey reports are not available, but the ministry of labour did conduct surveys of selected sectors. These show that employment declined by half a million between October and December 2008. Though it recovered subsequently, the total job creation in these sectors between December 2008 and December 2009 was only 1.3 million.
Compared with this, the government’s recent report projects a total workforce of 506 million by 2009-10. That would imply additional employment creation of around 46 million in the last two years. It also mentions that 63.5 million people in the working age are expected to join the workforce during 2010-15 and the economy is expected to absorb most of them, given the buoyancy in the economic growth. That is an annual rate of job creation of 13 million per year.
The report projects that a growth rate of 9-10% would be sufficient to absorb the additional labour force, and the economic advisory council of the Prime Minister has shown similar optimism. Given the employment trend in major sectors, this is no more than wishful thinking by the government. Not only has the 9-10% growth rate failed to create sufficient jobs, it would have been worse but for the buoyant agricultural sector and the much-maligned MGNREGS.
But the issue is more serious than employment numbers. Given the fact that the years between 2004-05 and 2007-08 were the best in terms of gross domestic product growth, the lack of job generation in the first three years of UPA-I is a serious question mark on its commitment to inclusive growth. In some ways, the decline in jobs growth for women is not so much of a problem, given the negative relationship between women’s employment and income growth. But the slow growth of employment for men and in rural areas is certainly a concern.
Even more serious is the low employment generated by the sectors that drove the economic growth— services and manufacturing. So much so that there is almost no change in the share of agriculture in total employment between 2005 and 2008, indicating no non-farm employment diversification. But it also implies that differences in per worker productivity between agricultural and non-agricultural sectors increased substantially in the first three years of the UPA government.
Himanshu is an assistant professor at Jawaharlal Nehru University and a visiting fellow at Centre de Sciences Humaines, New Delhi.
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