Missing jobs

Print edition : October 07, 2011

AT A DIAMOND polishing unit in the Visakhapatnam Export Processing Zone. Total female employment has fallen in recent years. - C.V. SUBRAHMANYAM

To make employment creation a central goal of economic policy, the first requirement is collection of data at frequent intervals.

IN preparing the approach paper to the Twelfth Five Year Plan, the Planning Commission engaged all interested persons in the country in a wide, web-based consultative exercise and also involved a varied group of stakeholders. The resulting document clearly indicates some awareness of the complex problems likely to be faced by the economy in the coming period. But it falls short of expectations because it does not provide a cohesive strategy to deal with these problems and indeed does not seem to have a framework that would enable such a strategy.

Obviously, it is impossible to consider all the different aspects of an approach to a Plan in this short space. So let us consider only one of the central issues in the economy today: employment generation. This was never one of the success stories of the macroeconomic strategy of the reform period. Since the early 1990s, employment (especially in what could be called minimally desirable jobs) has not kept pace with rapidly expanding aggregate incomes.

The latest large survey data from the National Sample Survey Organisation (NSSO) suggest that the problem has intensified in recent years. Between 2004-05 and 2009-10, for all persons above 15 years of age, employment of all kinds (including self-employment, part-time work, home-based work, and so on) in terms of the principal activity increased at an annual compound rate of 0.82 per cent, compared with 2.7 per cent in the previous period.

Total female employment actually fell, mostly because of a massive decline in self-employment. The general decline in self-employment also calls into question the future viability of petty self-employment in low-grade manufacturing. Insofar as regular employment of women has increased, in both urban and rural areas, it has been dominated by domestic service, which can hardly be seen as a desirable expansion of productive activity reflecting economic boom.

This is a huge concern because creation of good quality jobs is the most important mechanism in making aggregate economic growth inclusive as desired, for example, by the Eleventh Plan. The approach to the Twelfth Plan accepts this point as well: For growth to be inclusive it must create adequate livelihood opportunities and add to quality employment commensurate with the expectations of a growing labour force (page 9).

One reason for employment growing more slowly in the most recent period is actually the increasing involvement of young men and women in the higher stages of education. While this is good news, it also means that there will be more and more young people entering the labour market with higher qualifications, expecting to find employment that is commensurate with their education.

This likelihood too has not escaped the notice of the Planning Commission. It notes: Much larger numbers of educated youth will be joining the labour force in increasing numbers during the Twelfth Plan and in the years beyond. The clear implication of this is that the pace of job/livelihood creation must be greatly accelerated (page 10).

Teaching shops

However, the problem extends far beyond simply increasing the aggregate rate of job creation. Much of the increased enrolment in education has been in private institutions: the approach paper notes that private higher education currently accounts for about four-fifths of enrolment in professional higher education and one-third overall. Most of these especially the professional courses are associated with high user fees. Families across the country now put most of their hopes in educating their young as a means of social and economic advancement. Where access to good public educational institutions is limited (which is increasingly the case), such families educate their young at enormous cost, often selling their assets and going into debt in order to pay the high fees.

Yet it is abundantly clear already that the large bulk of such private institutions do not live up to their promise in terms of ensuring employment or even employability. Examples are rife of graduates with engineering, management and other degrees applying for jobs as salespersons or even as railway signal men because they are unable to find jobs that will use the skills they are supposed to have acquired.

The reason for this state of affairs is that the system itself is simply not generating sufficient number of the kinds of jobs that are demanded by those with such degrees. But the poor quality of education in many institutions (both public and private) is also a big part of the problem.

That is why it is surprising that the Planning Commission thinks that encouraging more private initiatives in higher education will solve the problem and that the current not-for-profit prescription in education needs to be examined. It is already only too evident as the proliferation of teaching shops masquerading as higher education institutes suggests that this is a sector with very strong information asymmetries, where consumers are often not able to sort out quality or can do so only after spending long years and often significant resources in the effort.

In this context, it is chilling to read the argument that free entry will, in the end, automatically weed out the poor quality institutions (page 13). First of all, how long will it take to reach the end? And in between, how many lakhs of students and their families will have plunged into debt and wasted years of their lives? What will the ensuing frustration and resentment mean for social stability and potential unrest?

No employment strategy

More generally, the approach paper does not really seem to have an employment strategy at all. That may be why it does not have a chapter on employment, and the macroeconomic discussion barely allows this soft consideration to intrude into its macho obsession with gross domestic product (GDP) growth rates. Indeed, despite all evidence to the contrary, the underlying assumption seems to be that output growth in itself will generate the required employment.

Thus, there is a brave declaration that the rate of job creation in manufacturing should increase to provide 100 million additional jobs by 2025 (page 110). This is startling given that economic growth in the 15 years up to 2010 generated not even a small fraction of that number. What makes the projection particularly brave is that manufacturing employment actually declined in the period 2005-06 to 2009-10 even though manufacturing output grew at an annual compound rate of more than 8 per cent over that period.

If manufacturing is to provide even part of the additional employment that is projected, there must be special focus on medium, small and micro enterprises. The approach paper does note the different elements that are required for this: access to capital and credit; technology and productivity; marketing and production inputs; and creation of industrial clusters to provide infrastructure. All of these will require specific policy interventions, which also take note of the specific requirements of women engaged in such activity.

But obviously, if employment is indeed to become a central goal of economic policy, a more proactive role is required in general. The first and most obvious requirement is that employment data should actually be collected at more frequent intervals. It is extraordinary that reliable employment data are generated only once in every five years through large surveys of the NSSO and through the Census (once in 10 years), and then made available only after a very substantial time lag. Compare this to the release of quarterly data on GDP, compiling which is surely much more complex to estimate and requires many more assumptions to be made.

If gender-disaggregated data on employment are not collected and analysed regularly, it becomes impossible to monitor actual trends or the effects of policies and processes on employment. Only when such data are available can they even become a basis for popular mobilisation. More regular (at least annual) data must be the basic minimum requirement for a government that is serious about employment creation, and must be an essential demand from the citizenry.

But shifting to an employment-oriented macroeconomic strategy can have many other, more creative aspects. One aspect that is often missed is the possibility of using social policy and social expenditure to generate more employment, which not only improves the quality of life of people but also has very strong multiplier effects. Increased public spending on health, sanitation, education and other essential public services should be associated with the provision of regular and good quality jobs in these sectors, rather than exploitation of underpaid para-professionals who increasingly carry the burden of service delivery.

This is not only a welfare measure it can in fact be part of a systematic growth strategy, as the experiences of South-East Asian countries as well as Nordic countries make amply clear. This is particularly important in India at the current juncture because of its demographic bulge and the increasing numbers of educated youth in search of productive employment. We urgently need to redesign our growth strategy with this viable alternative in focus.

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