Joblessness on the rise in India

After many years of refusing to recognise there is a jobs crisis in India, the government of India, faced with relentless data to the contrary, has now resorted to misinformation.

About

• As compared to the 8% per annum GDP growth in the period 200414, and 7.5 million new non-farm jobs created each year from 2005 to 2012 (NSO’s employment-unemployment survey), the number of new nonfarm jobs generated between 2013-2019 was only 2.9 million, when at least 5 million were joining the labor force annually (NSO’s Periodic Labour Force Survey (PLFS)).
• NSO itself states clearly that the two surveys provide comparable data; the claim that those two surveys are not comparable is not correct.

K-Shaped Recovery

• A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people.
• A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.
• This type of recovery is called K-shaped because the path of different parts of the economy when charted together may diverge, resembling the two arms of the Roman letter "K".

Unpaid family labor

• It is said that between 2017-18 and 2019-20, the worker participation rate (WPR) and labor force participation rate (LFPR) is rising, showing improvement in the labor market.
• But the point is how these rates are rising when the economy is slowing down sharply from 2017 to 2020.
• The reality is that this rise in WPR and LFPR is misleading.
• It was caused mostly by increasing unpaid family labor within self-employed households, mostly by women.
• Manufacturing employment increased between 2017-18 and 2019-20 by 1.8 million is technically correct (based on PLFS) but this data ignores that between 2011-12 and 2017-18, manufacturing employment fell in absolute terms by 3 million, so recovery is hardly any consolation.
• Another argument offered is that GDP in FY22 “could not have returned to pre-COVID FY20 level without workers returning to work and MSMEs recovering too”.
• This fails to recognize that organized economic activity could recover without a corresponding increase in unorganized activities, thus canceling each other out, and still leaving the jobless without work, or even less work.
• A fall in urban unemployment after July 2020 to January-March 2021 has now been reversed, with the urban unemployment rate rising in April-June 2021 back to the mid-2020 level, and labor force participation falling again. This is a K-shaped recovery.
• There is no evidence that MSMEs, which provide most of the non-farm employment, have recovered to pre-COVID levels.

Farm employment

• Recovery of urban employment till March 2021 clearly ignores that urban employment barely captures a third of total employment.
• Besides, agriculture output may have performed well during COVID, and free rations may have alleviated acute distress.
• This completely ignores that between 2019 and 2020, the absolute number of workers in agriculture increased from 200 million to 232 million, depressing rural wages — a reversal of the absolute fall in farm employment of 37 million between 2005-2012, when non-farm jobs were growing 7.5 million annually, real wages were rising, and a number of poor falling.
• Rising farm employment is a reversal of the structural change underway until 2014.
• Another argument is that organized formal employment is rising because new registration in the employee provident fund rose in the last two years.
• One limitation of EPFO-based payroll data is the absence of data on unique existing contributors.
• Employees join, leave and then rejoin leading to large and continuous revisions in EPF enrolment.

Way Forward

• Promoting Labor Intensive Industries: There are a number of labor-intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles, and apparel and garments.
• Special packages, individually designed for each industry are needed to create jobs.
• Decentralization of Industries: Decentralization of Industrial activities is necessary so that people of every region get employment.
• Development of the rural areas will help mitigate the migration of the rural people to the urban areas thus decreasing the pressure on the urban area jobs.
• Drafting National Employment Policy: There is a need for a National Employment Policy (NEP) that would encompass a set of multidimensional interventions covering a whole range of social and economic issues affecting many policy spheres and not just the areas of labor and employment.
• The underlying principles for the National Employment Policy may include:
• Enhancing human capital through skill development.
• Creating a sufficient number of decent quality jobs for all citizens in the formal and informal sectors to absorb those who are available and willing to work.
• Strengthening social cohesion and equity in the labor market.
• Coherence and convergence in various initiatives taken by the government.
• Supporting the private sector to become the major investor in productive enterprises.
• Supporting self-employed persons by strengthening their capabilities to improve their earnings.

Conclusion

There has been a massive increase in joblessness of at least 10 million due to COVID-19, on top of the 30 million already unemployed in 2019. This happened while the CMIE is reporting the employment rate has fallen from nearly 43% in 2016 to 37% in just four years. Government must take adequate steps to address this challenge. If not provided employment, in no time the demographic dividend will turn into a demographic burden.

Exam take away

Prelims take away

• K-Shaped Recovery
• National Employment Policy