Employment growth is as important an indicator of an economy’s health as is the growth in its gross domestic product (GDP). This is because the pace of job creation tells us how inclusive a country’s economic growth is. While India’s official statistical agencies publish data on incomes (or GDP) at an annual and even quarterly basis, data on employment in the country based on large sample surveys was, until recently, available only at an interval of five years.
In this context, the latest employment and unemployment survey conducted by the National Sample Survey Office in 2011-12, just two years after the completion of its previous round in 2009-10, is a welcome step.
The discussions in the press following the release of the results of this survey have focused on the hugely fluctuating trends in overall employment growth.
Overall employment increased impressively, by 59.4 million between 1999-2000 and 2004-05. But the next five years, 2004-05 to 2009-10, have been widely described as a period of jobless growth, as the net employment generated fell sharply to 4.7 million only. The 2011-12 survey showed some recovery in employment growth, with 10 million new jobs being generated in the two years since 2009-10.
However, an analysis based solely on the aggregate trends in overall employment growth can be misleading, especially for a developing country like India, which has seen structural shifts in the labour market because of changes in demography, educational attainments, and economic expansion.
To begin with, overall employment refers to the sum of employment in agriculture and the non-agricultural sectors. It is expected that with economic development, employment in agriculture will decline, both in relative terms as well as in absolute numbers.
Surprisingly, however, agricultural employment in India increased by 17.4 million between 1999-2000 and 2004-05, which accounted for 30% of the overall generation of employment in the country during this period. Closer examination reveals that a large part of this increase was due to females (14 million) whose entry into agricultural labour as self-employed workers was possibly a last-ditch effort to escape impoverishment, given the evidence for rural distress during that period (1999-2000 to 2004-05).
At the same time, female agricultural employment declined in India between 2004-05 and 2009-10. Partly, this seemed to be a reduction of the distress employment created during the previous five-year period. A modest improvement in agricultural growth and the creation of employment by public works programmes, after the middle of the last decade possibly led to these changes.
Thus the sharp slowdown in overall employment growth in India during the second half of the 2000s was due to an absolute decline in agricultural employment (by 20.4 million) and a modest increase in non-agricultural employment (by 25. 1 million). In a continuation of these trends, agricultural employment declined by another 12.9 million between 2009-10 and 2011-12.
The generation of non-agricultural employment in India was at the rate of 8.4 million a year between 1999-2000 and 2004-05, which slowed down to five million a year between 2004-05 and 2009-10, but rose again to 11.5 million a year between 2009-10 and 2011-12. In fact, the rate of generation of non-agricultural employment in the country improved from 5.9 million a year between 1993-94 and 2004-05 to 6.9 million a year between 2004-05 and 2011-12.
Clearly, there is little justification for terming the employment growth in India since the mid-2000s as jobless. Still, there are reasons to be worried about the pace and nature of job creation.
First, of the net increase of 48 million new non-agricultural jobs in India between 2004-05 and 2011-12, 24 million or half of the total increase was on account of jobs in construction, which were largely in rural areas and likely to be of poor quality. On the other hand, the manufacturing sector generated just five million new jobs during this period.
Secondly, employment generation in the country is lagging the growth in labour supply. The absence of quality jobs has meant that women, especially the urban educated, are discouraged from entering the labour market, choosing instead to attend to domestic duties in their own households. In 2011-12, the urban female labour participation rate was only 22.2% compared to a labour participation rate of 81% among urban males (in the 15-59 age groups).
The gap between labour supply and labour demand is likely to widen in India in the coming years. Given the demographic transition the country is going through, India’s working-age (15 to 59 years) population is set to increase from 757 million in 2010 to 972 million in 2030. To absorb the new entrants to the labour force, job creation must be faster. The quality of jobs will have to increase too given the considerable expansion in the numbers of educated workers that will occur over the next few years.
Jayan Jose Thomas is on the faculty of the Indian Institute of Technology, Delhi, and is currently working on a fellowship from the Indian Council of Social Science Research.