Jobless Growth? The Evidence Is Now Pointing In The Opposite Direction

Jobless Growth? The Evidence Is Now Pointing In The Opposite Direction

by Yash Mishra - Apr 29, 2019 04:22 PM +05:30 IST
Jobless Growth? The Evidence Is Now Pointing In The Opposite DirectionWorkers at a garments factory. (Getty Images)
  • India’s real problem is not the job market but the low levels of the gross enrolment ratio.

    Let’s see where the truth lies.

In the ongoing general elections to the Lok Sabha, opposition parties appear focused on building a narrative around “jobless growth” or “high levels of unemployment across sectors”. The government has refused to acknowledge this and termed it as false propaganda.

While there is a lack of reliable macro data on employment, many startups tend to have a good understanding of the reality as their very nature requires them to keep their ears to the ground. So, now let's see where the truth lies. To be able to paint things in black-and-white, two logical approaches will be used: first, as the country's gross enrolment ratio remains below 30 per cent, the job scenario in two segments of the population — one with college degrees and the other comprising the rest of the workforce — will be examined.

The second approach is that in the absence of comprehensive data, the anecdotal evidence available in the public domain will be utilised, especially strong anecdotal evidence that reflects the reality of employment in labour-intensive sectors.

Let's start with a segment of the population that has never attended college. One sector with an acute shortage of candidates to fill available vacancies is trucking. More than 25 per cent of the eight million trucks in the country are lying idle because of the non-availability of drivers.

One has to ask how there can be acute unemployment in rural or semi-urban areas when there are no takers for more than two million jobs which pay no less than Rs 18,000 a month? In fact, things are getting harder for truck owners as they expect vacancy levels to increase to 40 per cent in the near future despite substantial wage inflation. (Read the details here, here)

The situation was very different in early 1980s when there were 13 truck drivers for every 10 trucks which evolved to parity in the late 1990s. Now there are not even seven truck drivers available for every 10 trucks.

Sticking to this category of labour-force participants without a college degree, we can check anecdotal evidence from another highly labour-intensive sector: textiles, the second biggest employer in this country after agriculture. One story, headlined, “Tirupur comes to Tripura to mitigate labour shortage” last year, told us that the biggest textile hub in the country was being crippled by a labour shortage, but the most important takeaway here was the decline in labour supply from the relatively poor areas of the eastern states of Bihar, Odisha and West Bengal which have hitherto been the largest supplier of labour to the sector.

In fact, most of the textile manufacturing hubs in the country, especially in South India and Punjab, have been reporting a shortage of workers for quite some time now. Turning our attention to the construction industry — the fourth most labour-intensive sector — it has been at the receiving end of the government's shocks — demonetisation and the Real Estate Regulation Act — for some time now and witnessed substantial wage inflation over the period of last four years.

The average daily wages of a construction worker employed in the home-building and road-building sectors increased by more than 30 per cent from about Rs 350 per day to Rs 500 over a period of four years in many parts of the country. It doesn't take a genius economist to understand that wage inflation and high unemployment cannot go hand-in-hand.

The focus of this analysis is non-farm employment but let's spend a minute to take stock of the situation of direct employment in the agriculture sector. The scarcity of labour in Punjab's agriculture is well documented but what is more emphatic is the spread of this shortage to other agrarian regions, especially in western Uttar Pradesh.

Last year, The Times of India reported that labour crunch had forced farmers in Bijnor to opt for community farming. The trend of a decrease in labour participation in the agriculture sector is actually being witnessed throughout India as farmers complain about non-availability of farm labour.

But this is a trend in the right direction as eventually no more than 15 per cent of India's workforce should be directly employed in agriculture — which is roughly the sector’s share in gross domestic product (GDP). One wonders why a section of the media registered shock over the loss of jobs in the farm sector.

A recent National Sample Survey Office (NSSO) study revealed the “loss of two crore jobs” in the agriculture sector in a six-year period from 2012 to 2018. The irony of such language is that when the Indian economy expands and modernises, this 'job loss' in agriculture has to rather accelerate in the subsequent period. Media’s hysterical reaction to such headlines can at best provide a dose of entertainment.

All the sectors discussed in this analysis — logistics, textiles, construction and agriculture — are highly labour-intensive and provide the bulk of the employment to labour force participants who lack a college degree. Clearly, there are no signs of distress in the labour market for this segment, not even remotely.

Regarding people with college degrees who are looking for jobs, a segment which makes less than a quarter of the labour-force in India, a very good parameter that serves as a leading indicator is buoyancy in campus placements. The appropriate way to gauge this buoyancy is to check for wage inflation in the so-called tier-1 campuses and an increase in job offers in the rest.

The presence of both those indicators implies a very strong job market and, conversely, the absence of both indicates a weak job market — something that was witnessed in 2009, and widely reckoned globally as the worst year to graduate in recent history. A simple data scan will show that India has witnessed a substantial level of wage inflation in tier-1 campuses and an increase in job offers in the rest of the colleges in the last two consecutive years.

Moreover, one important trend that is emerging is a step-up in hiring by multinational companies (MNCs) and more than one hundred thousand college graduates have been hired by them from campuses across the country. This trend is interesting because there is a notion — which sometimes is an exaggeration — that the vast majority of Indian engineering graduates are not employable.

The fact that many of these so-called, non-employable graduates are being hired by MNCs and trained for good quality design and research-oriented jobs is also a strong indicator of the quality of the jobs being created in the economy.

The one, not-so-original point that needs to be made is about the big, but mostly correct, claims of job creation over the last three to five years by non-NDA (National Democratic Alliance) state governments, especially in Karnataka, West Bengal and Kerala. Going by their logic, it's really amusing to know that these aforementioned three states are an oasis of economic growth and investor interest in an otherwise gloomy and stagnant economic scenario in the rest of the country.

India's real problem is not the job market but the low levels of the gross enrolment ratio. There are no concrete plans to take this ratio to 40 per cent over the next five to seven years and then shore it up to at least 60 per cent in the subsequent five- to seven-year period.

In the political arena, the performance of the Congress party continues to be disappointing. It has played a very important role in shaping the Indian economy through its “pro-people” policies, but now seems obsessed with a tool called deception to bring about a rapid turnaround in its political fortunes.

There are at least a dozen real issues — ranging from the high real interest rate regime which is hampering consumption and aggravating household debt to the sharp rise in fees in educational institutes of national importance, which might nip the growing entrepreneurship scene in bud — that the Congress party can raise to embarrass the Bharatiya Janata Party, but the party seems to find little confidence in real issues that stare the nation in the face.

(The author is Founder, VoxWeb, a mobile-only social media platform)

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