Some Random Thoughts on Employment

Despite the much touted population dividend (which increases the number of youth who can contribute to productive employment) and massive investment in rural employment programmes, the number of persons in the labour force (those working or seeking work) actually declined from 470.1 million in 2004-05 to 469.9 million people in 2009-10. The number of actual workers during these five years when the Indian economy was growing rapidly increased just by a million whereas during this period, the number of persons in the age group 15-59 increased by about 50 million.

Both the Tenth and the Eleventh Five-Year Plans had targeted to add 50 million jobs in a five-year period. In other words, the Plans have completely failed, as there has not been any significant increase in employment opportunities, whereas the number of non-workers in the age group 15-59 soared. Unemployment rate on current daily status has increased from 6.0 per cent in 1993-94 to 7.3 percent in 1999-2000 and to 8.4 per cent in 2009-10.

There has been a significant decline in employment in rural India, particularly for women and this despite the scheme being run under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA). The decline in the number of female workers is a matter of concern as it increases their dependency on men and thus strengthens patriarchal norms. More importantly, wages for female casual work have slightly gone up from Rs 35 to Rs 46 per day at 2004-05 prices during 2004-09, whereas for rural men this increase was from Rs 55 to Rs 67. Thus, women still get only two-thirds of the wages that men earn in casual work.

The argument that more young people are now attending educational institutions cannot explain why there are still 40 million unemployed people in the country (according to the current daily status figures of NSSO 66th round), who should have got the jobs if the economy was creating them. The incidence or instances of those who are willing to work and available for the labour market but unable to find the work or employment is higher among the young (below 30 years) when compared to their seniors (over 30 years of age).

Even the manufacturing sector has not done well, as during 2004-09, the share of workers in this sector, both in urban and rural areas, declined from 24.6 and 8.1 per cent to 23 and 7.2 per cent, respectively. The only sector that has shown buoyancy is the construction sector, primarily due to the boom in real estate development that is happening at a rapid pace in India. Construction is also the main activity in MGNREGA, although mere earthwork does not create durable assets.

Conditions of work and promotion of livelihoods are important for raising the incomes of youth workers. Let us hope that the recently constituted National Council for Skill development under the Chairmanship of the Prime Minister makes skill development a major national priority especially for the youth. At the same time, appropriate macro policies are important for generating employment.

In other words, one has to examine whether macro policies in India are pro-employment and pro-poor in the post reform period. For instance, financial sector liberalisation led to a decline in credit to agriculture sector, to small and marginal farmers, and to weaker sections in the post-reform period. The micro-credit movement is not a substitute for the agricultural credit by the banks, who seem reluctant to operate in rural areas.

Although the share in agriculture of rural workers has declined, two-thirds of them are still dependent on agriculture and the allied sectors, which contribute only 14 per cent to the GDP, thus increasing the gap between rural and urban standards of living. Agriculture continues to be a sector ridden with surplus labour and low productivity. The index number of crop production (with triennium ending 1981-82 taken as 100) rose to 148.4 in 1990-91 and 175.7 in 1996-97, but since then has either fallen or remained stagnant at this level, and ended up at 179.9 in 2009-10 (Various Economic Surveys, GOI). The compound annual growth rate during 1996-2010 comes to only 0.2 per cent, clearly indicating that production has been stagnating in the last 13 years.

Along with creation of new jobs government should also aim at improving the quality of employment in the unorganised sector in which nearly 92 per cent of the workforce is engaged

The non-farm sector in India has immense potential to generate new jobs with relatively low direct investments. However, its expansion depends upon a number of factors, which are influenced by government policies – directly or indirectly. Un-fortunately, de-regulation introduced after 1991 has not touched the rural or the small informal sector, and has largely been confined to the modern manufacturing sector.

For instance, marketing of agricultural products is hampered by various regulations passed under the Essential Commodities Act and the Mandi Acts. The controls and restrictions, imposed under these laws, are disincentives to production and distribution of essential commodities. Such controls should be re-examined so as to reduce the influence of various inspectors and their discretionary activities.

Similarly gathering of forest products, which is regulated under rules framed under the Indian Forest Act, involves a very large number of rural people, especially tribals, but low returns to them are directly attributed to policy distortions arising out of state monopolies, which means only the agencies designated by the state have the right to market, process, and store NTFPs. Monopolies reduce the number of legal buyers, chokes the free flow of goods, delay payment to the gatherers, and reduce gatherers’ collection and incomes. Moreover, government culture does not encourage efficient business. It is suggested that for marketing NTFPs Government should not have a monopoly, nor create such a monopoly for traders and mills. The solution is to de-nationalise NTFPs gradually, so as to encourage healthy competition, at the same time provide a minimum support price to forest gatherers just as it is done for farmers. Encouraging setting up of processing units within the tribal areas is also recommended.

Poor progress in the energy-transport infrastructure has always been a major constraint on any effort to achieve a significant acceleration on the growth of the non-farm rural sector. Since these are non-tradable services, the necessary expansion in supply must come from increased domestic production. The quality of these services in terms of both price and reliability are as important as availability.

Along with creation of new jobs government should also aim at improving the quality of employment in the unorganised sector in which nearly 92 per cent of the workforce is engaged. Workers engaged in the unorganised sector do not have the benefit of several laws such as the Minimum Wages Act or the Factories Act. They are also not covered by statutory welfare measures such as maternity benefits, provident fund, gratuity, etc., all of which were put in place after intense struggles by the Indian working class in the pre-as well as post-Independence period. Many self-employed persons such as vendors, rag pickers, and petty traders make their services available from the early hours of the morning to late at night, despite all types of inhospitable working conditions, including hostility from police and municipal authorities.

The non-farm sector has the potential to generate jobs. However, this is linked to existing government policies

The typical urban landscape in India, in almost all the 100,000-plus cities/towns, is characterised by the presence of slums in some form or other. This is due to the fact that the quality of work and livelihoods in the city is mostly ruled by the uncertainties of the informal economy and rigid unworkable government controls. The strain it puts on the income of the worker translates itself into an inability to invest in housing. This ultimately manifests itself in the rise of slums, which become cost-effective for a worker in an uncertain work situation.

So large populations become more and more resigned to living in abysmal conditions, often without access to a regular supply of water as well, and the urban landscape gets more and more divided. Creating more uncertain and unskilled employment in the cities without any improvement in living conditions may further aggravate the inhuman conditions in which the urban poor live.

It should be recognised that many small entrepreneurs in the country are facing genuine problems – poor quality infrastructure; inadequate access to institutional credit; delayed payments by large industries; procedural delays in getting government clearances; harassment by inspecting officers; rigid labour laws, technological ob-solescence; non-availability of skilled manpower; lack of marketing facilities and difficulty in competing with well-established foreign and national brand names.

These would require not only policy changes but an efficient and responsive administration. Though supply side intervention in the form of rural electrification, roads, credit and communication systems is vital for the growth of the non-farm sector, institutional framework within which government support is delivered – plethora of official organisations and agencies, many charged with overlapping functions, with poor coordination between themselves – needs to be set right too.

Finally, government should re-examine the focus on self-employment in programmes such as IRDP, SGSY, SJSRY, etc. The capacity of the poorest sections of society to absorb credit and to start enterprises is very limited. This is partly to do with their lack of business skills, illiteracy, their inability to take risks and their lack of motivation for business. It would be much better to upgrade their skills and make them employable in the newly emerging industries and trades. The poor would prefer to be wage employed on a regular basis at a decent salary due to improved skills, rather than face the risk of operating in an uncertain market plus the ignominies of humiliation from the insensitive police and municipal officials.