Widening gap between growth and unemployment

“Employment and well placed labour produce in a country general prosperity, content and cheerfulness”. - Daniel Weber

Economic growth since 2012 failed to generate secure, regular and decent incomes for vast majority particularly in unorganized and informal sector. India is facing severe crises of employment and livelihood.

As per official records the growth rate in India between 2012-2016 July was impressive. However, due to untimely and ill thought policies of demonetisation and completely morphed GST by BJP –Prime Minister led to crises in the economy. With fluctuating growth rates between 2015-2018 August failed to create more jobs and increases in productivity in certain major sectors failing to spur a commensurate rise in incomes. Besides, demonetisation policy has thrown nearly 225 million people in rural- agricultural and informal sectors out of gears, which would take at least minimum three years for them to recover from the onslaught of shares of working capital on time provided monsoon is active.

Studies on GDP - employment
A study group from Azim Prem Ji University “Centre for Sustainable Employment” came out with some interesting facts. As per the study divergence between growth and employment had increased over period. If one takes the period 1970-1980, when GDP growth was as low at 3-4 per cent, employment growth was about 2 per cent. Surprisingly, after 2013, the ratio of GDP growth to employment growth is less than 0.1 per cent, particularly among educated youth.

This implies that a 10 per cent increase in GDP results in less than 1 per cent increase in employment. Employment actually declined by 7 million between 2013-2016. It is likely that, the absolute decline continues in the following years. It is expected that unemployment may rise to more than 5 per cent after 2016. In geographical terms, northern states of India are the most severely affected. Similarly, in demographic terms young people with higher education qualification levels suffered even if employment rate is as high as 16 per cent.

While incomes are rising in few sectors, the worrying fact is that rural wage growth collapsed after 2014 and has not risen since then. Besides, even in the organised manufacturing sector, the number of jobs has grown, there has also been an increase in the share of contract work offering low wages and less job security. Also, the disquieting factor is the divergence of productivity and wages in the organised manufacturing sector. By 2015, labour productivity is six times higher than it was 30 year ago. However, managerial and supervisory personnel salaries have tripled during the same period, while low skilled and semi-skilled workers wages have grown nearly 1.5 times.

Another dimension of employment situation is that female participation in the (paid) workforce is still very low. At the same time there are wide differences among states in terms of women’s employment. While in Uttar Pradesh, only 20 women are in paid employment for every 100 men, the figure in Tamilnadu is 50 and as high as 70 in Mizoram and Nagaland. From the above, one can easily discern that there prevails not only gender inequality in caste ridden Hindi belt but also with regard to earnings. In fact, the caste gap is actually larger than the gender gap. It is ironical that Dalits and Adivasis are employed more in low-paid occupations, particular in BIMARU states. They earn hardly 50-55 percent of upper caste worker’s earnings.

According to Union labour and employment Ministry Wing on Employment Survey in 2012 the number of unemployed in the country was around 1.71 crore. By 2016 this figure reached 2.33 crores, almost doubled in Five years. At the same time in 2014 percentage of unemployment among youth was 3.8 percent, it has gone up to 5 percent by 2016.

All these low-paid workers are hard hit during 2016-17 due to demonetisation denying livelihood no relief measures are taken by either Central Government or Northern States.

The Ministry of Statistics and Programme implementations should have developed times series data on employment particular rural-informal sector. The reason why this is needed is, technology is fast changing. For example India has industries like textiles, Jute, Paper and Sugar. Now, they are not so labour-intensive in many of the South East Asian nations.

Here we need employment data, tie up with GDP and sectoral growth particular rural-informal and small-scale sectors. It is pity that Business news papers focus on corporate sector indicating that corporate investment picking up and India is shining. But a real factor is that these news papers never concentrate on non-corporate sector which provide larger employment opportunities to low and semi-skilled workforce both male and female.

The Government of India ill- conceived and poorly implemented demonetization on rural sectors is disastrous and has virtually broken the back bone of informal sector. The informal sector accounts for 20 percent of GDP and 80 percent of employment. The rural India is home to two- thirds of India’s population. It is high time, India need to develop formal and informal employment data of rural-India.

Conclusion
The World Bank in 2018 released report on “South Asian Growth and Employment Situation” the report especially mentioned India’s employment situation which reveals that, to maintain employment rate India needed to add 80 lakh jobs every year in future. As per World Hunger Index, India’s position at 97 in 2016 has versioned in 2018 at 108 out of 119 countries taken for review, even in most of the states in India employment generation both in Government Sector and Private organized sector is not as expected. Almost 40 percent of Government Job vacancies are not filled because of unproductive expenditure on popular measures.

Even in private sector, job creation is disappointing. According to ASSCOHAM, as Indian economy growth has slowed and due to government policies, campus selections have declined to 45 per cent between 2014-16. By encouraging manufacturing sectors, which have spread effects, Japan, South Korea and China could increase job creation rapidly between 2009-2014. Unfortunately, India’s manufacturing sector growth is slow and still in infancy stage. There is urgent need for fresh thinking without any ideology pre-commitment. In a democratic welfare state, every Indian should be ensured to lead a secure dignified life in a just and sustainable way.

- Prof A V V S K Rao & Dr M Ramulu
The authors are Prof. in Economics, Jawaharlal Nehru Institute of Advanced Studies. Hyderabad & formerly Head, Department of Economics and Asst Prof, Dept of Economics, University College of Arts and Social Sciences, Osmania University, respectively