Numbers don’t lie: There is a real job crisis

Santosh Mehrotra

Jajati Parida

We are repeatedly told by government economists that there is no jobs crisis. Surjit Bhalla, till recently part of the PM’s Economic Advisory Council, noted not to worry about slow growth of jobs, based on his employment estimates (‘Gender equality & government jobs’, FE, January 5; goo.gl/pL4CMA).

People work, but don’t have enough work to survive (let alone save for old age) on one source of livelihood, so they have at least one ‘principal’ means of livelihood, and one or more additional ‘subsidiary’ employment. Hence, Indian labour force surveys give us estimates of both principal and subsidiary status employment. Together, they constitute what is called the usual principal and subsidiary status employment (UPSS). A foremost problem in Bhalla’s calculations is reliance only on principal status employment, and the omission of subsidiary status, in his calculation of employment, labour force and unemployment figures. His estimates understate the size of India’s labour force and are generally misleading.

Estimates based on both principal and subsidiary status suggest the following (see the accompanying table). The overall labour force (LF) is not growing at 12 million per annum. Never in India’s history (except 1999-2000 to 2004-05 due to a baby boom in the early 1980s) has the LF grown by 12 million. So what appears to Bhalla like a discovery, most labour economists in India should have known for at least seven years.

Instead, it had grown by 2.1 million per annum during 2004-05 and 2011-12, and about 2.4 million per annum during post 2011-12 periods. The sharp supposed ‘fall’ in jobs that Bhalla finds post-2004 is actually on account of a sharp increase in school enrolment (which he recognises).

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The volume of open unemployment was almost constant at around 10 million until 2011-12, but (what Bhalla is innocent of is that) it increased to 16.5 million by 2015-16. Increased open unemployment post the 2011-12 periods suggests that those in education prior to 2011-12 would start searching for non-agricultural jobs—but did not find them.

Worse still, it shows up in a sharp increase in unemployment rate (UR) of the educated (based on our estimates of Annual Survey, Labour Bureau). The UR rose over 2011-12 to 2016 from 0.6% to 2.4% for those with middle education; 1.3% to 3.2% for class 10 pass; 2% to 4.4% for class 12 pass; 4.1% to 8.4% for graduates; and 5.3% to 8.5% for post-graduates. Even more worrying, for those with technical education, UR rose for graduates from 6.9% to 11%, post-graduates from 5.7% to 7.7%, and for vocationally trained from 4.9% to 7.9%. The more educated you are, the more likely you will be unemployed.

Bhalla has argued that “during those seven UPA years (2004-05 to 2011-12), only 10 million jobs were provided, or just 1.4 million per annum.” Earlier, Bhalla claimed (‘Politics and fake GDP analysis’, FE, December 1, 2018; https://goo.gl/rQPZhm) that “…the lowering of GDP growth for 2004-05 to 2011-12 was entirely expected. Primarily because of the surprise (sic) low employment growth between 2004-05 and 2011-12.” For 2004-05 to 2011-12, he erroneously claims that NSSO data “reveal” a total job gain of “only 9 million.”

Bhalla seems to believe all kinds of jobs, including in agriculture, are ‘jobs’ to be valued. For an economy at India’s stage of development, an increase of workers in agriculture (that took place over 1999-2004) is a structural retrogression—in a direction opposite to the desired one. Between 2004-05 and 2011-12, the number of workers in agriculture fell sharply, which is good—for the first time in India’s economic history. Until then, the absolute numbers working in agriculture had increased (even though the share of employment in farming was falling, slowly). Similarly, youth (aged 15-29 years) employed in agriculture fell from 86.8 million to 60.9 million (or at the rate of 3 million per annum) between 2004-05 and 2011-12. However, after 2012, youth in agriculture actually increased to 84.8 million till 2015-16 and even more since then (as CMIE data would attest). Bhalla is clearly innocent of such nuances. Job growth is lower in recent years than over 2004 to 2014.

Let us now deal with Bhalla’s claim that only 1.4 million jobs were provided during 2004-05 to 2011-12 (or just <10 million total). Yes, that is true only if you deduct from total job growth in all sectors, those leaving agriculture (less agri-workers is a good thing for the workers, agriculture and economy as a whole). What really matters for India at our stage of development is the growth in non-agricultural jobs. During that period, 51.2 million non-agri jobs were created, or 7.3 million per annum.

By contrast, post-2012, only 1.2 million per annum (or 4.8 million total) non-agricultural jobs were created until 2015-16, and then 1.75 million (3.5 million total) are likely to have been created (all other things remaining the same) till 2017-18.

What is most worrying is that manufacturing jobs actually fell in absolute terms, from 58.9 million in 2011-12 to 48.3 million in 2015-16, a whopping 10.6 million over a mere four-year period. This is consistent with the slowing growth in the Index of Industrial Production (IIP, which consists of manufacturing, mining, electricity). IIP had risen from 100 in 2004-5 to 172 by 2013-14 (in the 2004-05 series), and from a base of 100 in 2011-12 in the later series to 107 in 2013-14, but only rose to 125.3 in 2017-18. Slower industrial production recently is also suggested by other indicators (slower credit offtake, lower plant load factor). Declining manufacturing jobs is indicative of stalled transformation of the Indian economy.

What is tragic is the growing number of educated youths (age 15-29 years) who are “Not in Employment, Education and Training (NEET)”. This number (which was 70 million in 2004-05; see table) increased by 2 million per annum during 2004-05 and 2011-12, but was growing by about 5 million per annum from 2011-12 to 2015-16, and if that later trend continued (as there is evidence it has) we estimate it would have increased to 115.6 million in 2017-18.

These NEET and unemployed youths together constitute the potential labour force, which can be utilised to realise the demographic dividend in India.

Bhalla’s claim that “a large part of the so-called jobs crisis is because of demand for government jobs, not jobs per se” is, therefore, without foundation. There is a real crisis. Also, the NEETs have grown by a massive 20 million in just four years (2011-12 to 2015-16). Plus, there is the 10 million actual increase in the LF. In other words, just over four years, India should have created at least 7.5 million new non-agricultural jobs each year (which India had managed to create over 2004-05 to 2011-12); it actually created only 2.2 million. This is not counting the new non-agricultural jobs needed for agricultural workers wanting to leave agriculture; this number fell as construction growth fell sharply in the last few years.

(Mehrotra is professor of Economics, Centre for Labour, JNU, Delhi. Parida is assistant professor, Central University of Punjab, Bathinda.)