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Business News/ Opinion / Online Views/  Lower growth, but far more jobs

Lower growth, but far more jobs

We’ve heard of high growth that doesn’t lead to much employment. But how could lower growth lead to more jobs?

Between 2004-05 and 2009-10, while rural employment went up by 13 million for male workers, it declined by 19.5 million for rural female workers. Photo: Hindustan Times (Hindustan Times)Premium
Between 2004-05 and 2009-10, while rural employment went up by 13 million for male workers, it declined by 19.5 million for rural female workers. Photo: Hindustan Times
(Hindustan Times)

Isn’t it extraordinary that net employment increased by 13.9 million people in the two years between 1 January 2010 and 1 January 2012 while net job growth was a mere 1.1 million between 2004-05 and 2009-10?

It’s all the more astonishing because average economic growth during the earlier period was higher than during 2010-12. We’ve heard of high growth that doesn’t lead to much employment, called jobless growth. But how could lower growth lead to so many more jobs? Yet that is precisely what the latest round of the National Sample Survey (NSS) says.

One explanation is that we had a drought in 2009-10, with agriculture growing by a mere 0.4% that year and that skewed the survey. In 2011-12, on the other hand, agricultural growth was a respectable 3.9%. But the problem with this explanation is that the growth of rural employment between 2010 and 2012, according to the NSS data, has been precisely zero. The entire increase of 13.9 million jobs has come about from urban centres. It has little to do with the state of agriculture. Between 2004-05 and 2009-10, the addition to urban jobs was a much lower 7.6 million.

The increase in urban employment is also seen from the finding that in 2011-12, only 49% of persons employed worked in agriculture, while in 2010 it was 53.2%. What is interesting is that, in spite of the slowdown in the manufacturing sector, the proportion of workers employed in the secondary sector went up from 21.5% in 2010 to 24%. That fits in with the data on the increase in jobs coming solely from urban areas.

The employment story is actually a bit more nuanced. Between 2009-10 and 2011-12, employment for males in rural areas went up by 2.7 million (persons in the workforce classified by “usual status"), but that was offset by a loss of 2.7 million jobs for women in rural areas. Similarly, between 2004-05 and 2009-10, while rural employment went up by 13 million for male workers, it declined by 19.5 million for rural female workers. So the real issue is the decline in employment among women in rural areas. There’s no such problem in the urban areas—although the number of women employed in urban areas went down between 2004-05 and 2009-10, that was more than made up by 2011-12. A number of explanations have been offered for the decline in women’s employment in rural areas, including more girls going in for education and women withdrawing from the workforce because of increased household income.

The Planning Commission also had an explanation for the lack of strong growth in manufacturing jobs between 2004-05 and 2009-10. It said the reason could be the fall in international demand for the products of labour-intensive industries. External demand may also be the explanation for the rebound in manufacturing employment between 2009-10 and 2011-12. Exports grew 20.9% in 2011-12, on top of a growth of 40.5% in 2010-11. On the other hand, export growth had slowed in 2008-09 and then turned negative in 2009-10. Now that export growth has slowed again, will that in turn lead to lower employment growth in manufacturing?

It’s also likely that cultural factors, too, play a part in female employment. Consider, for instance, the labour force participation rate according to the “usual status" for women in Bihar. Their labour participation rate is a mere 57 per 1,000, the lowest in the country, compared with the all-India figure of 225 per 1,000. In rural Bihar, the female participation rate is 58 per 1,000 and in urban Bihar it’s even worse, at 54 per 1,000. Urbanization seems to have had little impact on women working outside the home in Bihar. Other states and Union territories that have very low rates of female labour participation are Delhi (111 per 1,000), Assam (126 per 1,000), Chandigarh (129 per 1,000), Haryana (145 per 1,000) and Uttar Pradesh (163 per 1,000).

So it’s probably a combination of women withdrawing from the workforce and slowdown in exports that lowered the labour force participation rate so drastically between 2004-05 and 2009-10. Conversely, a smaller number of women withdrawing from work and a rise in labour-intensive exports led to higher job growth between 2009-10 and 2011-12.

During the NSS in 2004-05, the labour force participation rate (LFPR) was 43%, which fell to 40% by 2009-10. In the 2011-12 survey, LFPR was 39.5%, lower than the 2009-10 rate by just a smidgen. Note that this implies the economy hasn’t benefited from any demographic dividend.

Another heartening trend is that the “casualization" of employment has been reversed during 2009-10 and 2011-12; 29.9% of workers now are casual labourers, compared with 33.5% in 2009-10. Employees who earn regular wages and salaries now comprise 17.9% of workers, compared with 15.6% in 2009-10. The quality of employment has improved. The fall in casual labour and perhaps the social and employment programmes in the rural areas have led to much higher growth in wages for rural casual labourers. The average daily wage for rural casual labourers “engaged in works other than public works" went up from 93.06 in 2009-10 to 138.62 in 2011-12—an increase of 48.9% in two years. For urban casual labourers engaged in the same activity, the average all-India daily wage went up from 121.83 in 2009-10 to 170.10 in 2011-12—a rise of 39.6%. Real wages have gone up for the lowest paid workers.

In short, the two years 2010-2012 seem to have been very good years for employment, in spite of a deceleration in growth. Note, however, that in 2010-11, gross domestic product growth was a very high 9.3% and it was only in 2011-12 that it slowed to 6.2%. The big question is: will the benign trend continue, in spite of growth slowing dramatically since then?

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Published: 04 Jul 2013, 11:30 PM IST
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