The latest International Labour Organization (ILO) report on global employment trends underlines the central role of women workers in explaining the changes in the Indian labour market. The average labour force participation rate (LPR) in South Asia has fallen because a large number of Indian women have left their jobs in the past few years. Labour participation has, in fact, contributed negatively to value-added per capita growth in South Asia during 2007-11.
The withdrawal of women from the workforce is also the key to one of the great paradoxes of the modern Indian economy: the steep decline in job creation during the phase when the economy grew the fastest. The latest official estimates of employment provided by the National Sample Survey (NSS) in 2011 showed that net job additions in India plunged from 59.5 million in 1999-2004 to 1.25 million in 2004-09. At first glance, the NSS numbers seemed to suggest that the acceleration in economic growth during the second half of the last decade had failed to create enough jobs, which sparked a debate over the economy’s capacity to generate employment. But the phenomenon of “jobless growth”, as it came to be described, was at odds with the phenomenon of rising real wages, reported by the same survey.
Subsequent research by scholars, who have looked into the survey results more closely, indicate that the apparent fall in job numbers has less to do with the lack of jobs and more to do with the lack of workers, or more specifically, the lack of women workers. The period 2004-09 did not witness a rise in unemployment; rather it saw a decline in LPR (the sum of employment and unemployment rates), which means the proportion of people looking for jobs declined. A recent Economic and Political Weekly article by Jayan Jose Thomas, economist at the Indian Institute of Technology (IIT) Delhi, shows that the major reason for this decline was an improvement in the rural economy, which led many women to quit agricultural work.
Of the 59.5 million jobs created during the first half of the previous decade, nearly a third was in agriculture, at a time when the sector was in distress and agricultural growth was near-zero. Most of the new farm jobs in that period went to “self-employed females”. The majority of such workers were “unpaid”, which means they worked mostly for their relatives or husbands, without compensation. The rise in such low-quality jobs was a reflection of rural stagnation. As the rural economy improved in the second half of the decade and wages shot up, especially for males, women quit distress jobs. The fact that these women could afford not to work even in the drought year of 2009 suggests a rapid reversal of rural fortunes in the last decade. Thus, despite an increase in 22.3 million jobs in the non-agricultural sector, the overall increase in employment in 2004-09 appears poor because of the withdrawal of 21.1 million agricultural workers. The spread of education is also partly responsible for the declining LPR: most young males and nearly a third of women missing from the workforce chose to study rather than work, according to estimates by K.P. Kannan, former professor at the Thiruvananthapuram-based Centre for Development Studies.
The combination of rural resurgence and improvement in educational attainments created an illusion of jobless growth in India. To be sure, this does not mean that there are no employment challenges. The NSS data suggests a significant contraction in manufacturing in 2004-09, particularly in the small-scale, export-oriented firms, which affected women workers disproportionately. To add to this, the persistent and structural problem of low female LPR shows little sign of improvement, reducing India’s ability to benefit from the demographic quotient. Also, most new jobs in the past few years were in the construction sector, which is now slowing down.
India needs structural fixes such as labour reforms and steps to bridge the country’s infrastructure and skills deficits but it also needs to return to a higher growth trajectory to be able to offer quality jobs to a rising and impatient populace. The two key factors behind the rural resurgence that is reshaping India’s labour market are the direct results of faster growth: the construction boom which pushed up wages, and the rise in government revenue which led to rapid increases in procurement prices.
Empirical evidence does not support the idea that economic growth in India can be, or has been, jobless. Nor can we aspire to have more or better jobs in a slowing economy.