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Home / Opinion / Columns /  The many layers of our unemployment problem

Last month witnessed protests in several parts of north India by students who had appeared for the Non-Technical Popular Categories exam conducted by the Railway Recruitment Board. This was to fill up 35,000 posts for which 12.5 million candidates had applied. While the RRB’s decision to set up a committee to examine the issue may have pacified students for the time being, it is unlikely to offer any solution for the bigger problem of employment and earnings in the Indian economy.

As an employer, the Railways is our second largest after the defence ministry. But its problem is not with the recruitment process but the huge number of applicants for low-skill jobs. How big is 12.5 million? It is almost 10% of all those aged 20-25 in the country. So every tenth person in this age group was an applicant for the lowest category of employment in the Railways.

None of this is unknown and multiple data sources, including the government’s own estimates from Periodic Labour Force Surveys (PLFS), have shown the enormity of our employment crisis. Even by the PLFS, the 18-25 age group’s unemployment rate at 24.5% for 2019-20 is not only extremely high, it’s among the highest in the world if small and conflict-ridden countries are excluded. With a labour force participation rate of around 40%, it also means that every tenth young person in the country is unemployed by the official definition. While this may appear too high, even this is a gross underestimate of joblessness in the country. A significant majority of those who were on the streets protesting against the RRB are unlikely to be captured as unemployed by our official statistics. Most would be counted as students rather than as unemployed. A small minority of them would actually be working for private establishments but looking for a better job with security of tenure, better wages and social protection, which informal jobs lack. By the PLFS estimates, two-thirds of regular salaried workers in 2019-20 did not have a written job contract and most had no social security.

Underestimation of unemployment is as much a statistical issue as it is an economic reality. Despite improvements in standards of living and rising per capita income, a third of our population is poor by official estimates. For these households that must feed themselves, being jobless is a luxury they can hardly afford. By default, they tend to accept work at whatever wages are available. The social stigma attached to being unemployed also means that many would prefer the disguise of employment in agriculture and other enterprises even though they might not be contributing to production. For many others, being stuck in informal work arrangements at exploitative wages may be their only option. Even with the best of definitions and survey mechanisms, it is difficult to get a true estimate of unemployment, given the complexity and multitude of work arrangements that exist. But an effort at getting a better understanding of the problem by strengthening our statistical system should be a priority for the government.

Unfortunately, while this government has shown little regard for official data, the denial of unemployment as a major challenge for the economy is no longer a statistical issue. It has already become a public issue in almost all states that are in the midst of electoral battles to elect governments. Several political parties in the fray, including the Bharatiya Janata Party, have promised unemployment allowances to woo the electorate.

Recognition of the severity of India’s employment crisis is only the beginning for us to resolve the problem, which is arguably the economy’s biggest. Ideas like an unemployment allowance or an urban employment guarantee are unlikely to solve the problem in its entirety. Even as a temporary reprieve from the crisis, these are insufficient. However, the politicization of India’s job scarcity should lead to a discussion on long-term solutions.

The country requires a policy push not just for creating additional employment, but also to ensure that the jobs so created provide decent wages, security of tenure and social protection. Given that the incentive structure built into the current policy regime favours capital- intensive growth at the cost of labour utilization, a structural solution to the employment problem would require a close re-examination of the prevalent structure of production.

At a time our economy is struggling with low demand and a crisis of income in the rural economy, reviving rural demand through public expenditure is not just a necessity for economic revival, it is also the best way to increase the employment content of growth.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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