Different groups of the non-employed have vastly
different likelihood of transitioning into employment. For example, people who
want jobs have 13-14.5% probability of employment, while retired or disabled
individuals have less than 2% probability of becoming employed. The unemployed
are also a heterogeneous group. The short-term unemployed are twice as likely
to enter the workforce as the long-term unemployed, who in turn are twice as
likely as people who are out of the labour force but want a job.
(MARIANNA KUDLYAK, "Measuring Labor
Utilization: The Non-Employment Index", FRBSF Economic Letter, March 27,
2017)
Before 2019 general election, Opposition Parties vehemently
attacked Narendra Modi led NDA-2 Govt for failing to provide jobs as Modi
himself promised it during 2014 election campaigns. Modi in a Political rally
in UP on 23, Nov 2013 said 65% of
the Indian population is below 35 years age and they are struggling under
“unemployment”. UPA failed to provide Jobs to educated Youths despite its
promise in 2009 elections, if BJP came to power it will provide 1 crore Jobs.
The whole accusations and counter-accusations seem to be like causality dilemma
of Egg or Chicken.
What is present India reeling under, Unemployment or Un
Employment? Before answering the question lets analyse some historical facts
and data;
Unemployment or joblessness is the state of being
without any work yet looking for work. It is also a key economic indicator
which describes the ability/inability of workers to readily obtain gainful work
to contribute productive output of the economy. In simple terms less works means
less total economic production and high rate of labour participation means high
economic production. However, the low rate of unemployment is not at all a good
sign of economics as it implies overheating the economy, inflationary pressure and
tight condition for business. So we need to contain unemployment ratio at a
balanced rate. Economists divide unemployment into 4 major types; Cyclical,
Structural, Classical or institutional and Frictional or transitional.
 |
| Unemployment Trend, Table-1 |
Cyclical as the word itself implies it is temporary in nature
and directly linked to economic boom and recession. Structural is linked with
technological change; the rate of automation determines the use of manual labour.
Institutional is the most negative type of unemployment, as it is a consequence of
long term government policies like populist, generous social benefits programs,
high rate of unionization, Restrictive occupational licensing laws. Another
type of unemployment is Hidden Unemployment
or underemployment or disguised unemployment. This type of unemployment is a by-product when the agrarian economy shifts to Industry or service. People of this
type of category generally not willing to work or their overall productivity
has so meagre that can’t influence economic growth.
 |
| Unemployment Trend sector wise, Table-2 |
Now analyse the data related to employment and unemployment
in India (See Tables 1 to 5). The unemployment rate
is equal to the total unemployed workers divided by total labour force
multiplied by 100. According to the CMIE on 31 May 2019 (30-day moving
average) the unemployment rate in India is 7.1%, (See Table-7)in Urban areas it is 8.6% and
in rural areas, it is 6.5%. The April 2019 unemploymentdata of states shows Haryana which is mostly an agrarian state which is
under transition towards rapid urbanisation and industrialisation, having
highest unemployment rate i.e. 26.4 followed by Tripura (25.4%) which is one of
the most literate states having 87.7% literate rate. The state’s GDP primarily
depends on the service sector (53.98%), Agriculture & allied (23.07%), Industry
(22.95%). Out of the total dependants in the secondary sector, 28.21%
depends upon the retail sector. In the unemployment list 3rd state with the highest
unemployment
rate in Himachal Pradesh (19.6%) followed by Bihar and Jharkhand
(12.2%), Uttar Pradesh (11.1%), Jammu Kashmir (10.6%), and states having lowest
unemployment rate is Puduchery (0.4%), Karnataka (0.5%) Tamil Nadu (1.2%),
Meghalaya (2.3%), Telengana (2.7%), Gujarat (3%), Chhattisgarh (3.4%). Almost 15 states falls below and 11 states
are above the national average unemployment rate.
 |
| Table-7 |
 |
| Unemployment Trend age-wise, Table-3 |
If we look at the annual average rate of unemployment, it is
not so worrying. The unemployment data
of the CEIC on India shows that since Dec 2007 the unemployment rate is not
crossed more than 3 percent. It was highest in 2013 (2.823) and Lowest was in
2008(2.268) and in 2018 it is 2.551. Even the data of the International Labour Organisation (ILO) shows that the unemployment
rate of India is 2.6%. CEIC data shows
that the Labour Force Participation Rate (LFPR) has been decreasing since 1990.
In 1990, the LFPR is 58.6%, and in 20
17 it is 52% and in 2018 it further
decreased to 51.9%. There is some peculiarity in the Labour Force Participation
Rate, Unemployment and GDP, in most of The developed countries LFPR is increasing but correspondingly GDP and
unemployment rises but in the context of India LFPR and unemployment is
decreasing but has good GDP growth.
 |
| Unemployment Trend years-wise, Table-4 |
The “peculiarity” trend is directly linked to the increase of
Skills of the workforce, In 2002 the labour productivity was 1.32% and in 2017
it was 4.82% and the figure for the current year is 5.80%.
 |
| Unemployment Trend, year-wise, Table-5 |
Now, look at the macroeconomic state of the India the Mining
industry is increasing. The production and export of Coal, Aluminium, Gold, ICT
goods are increased in recent years but there is a decrease in
Telecommunication equipment, Medicinal and Pharmaceutical products. The RBI
data shows that nations composite index for Infrastructure industry grew from
3.8% (2012-2013) to 4.3%(2017-18) in the base year of 2011-12. Similarly, if we
look at the data of Industrial production it shows a positive trend. The
Industrial production index of the Primary goods, Capital Goods, Intermediate
goods, Construction goods, Consumer Durables, and Consumer non-durables for the
March 2019 has an upward grid. The deposits of all Scheduled Commercial Banks
for the 4th quarter of the current years also show an affirmative
movement.
Here, I feel it is necessary to present one of the critical
observations by the “India WageReport-2018” (ILO) as it directly linked to the Unemployment issue. The
report says, “Union density among salaried workers has fallen precipitously
since 1993-94, by 17.7 percentage points to 28.8 percent, while it has
increased for casual workers and among self-employed workers. There have been
some attempts at unionizing worker in the informal economy, especially among
home-based workers either to negotiate for minimum wages or to demand for
better conditions (Brick Workers)...India was one of the first developing
countries to introduce a minimum wage policy...despite this wage floor being
non-binding, one estimate shows that in 2009-10, about 15 percent of salaried
workers and 41 percent of casual workers (i.e. 62 million workers) were paid
less than the indicative minimum wage and the rate of low pay was higher among
women than men.”
From the above analysis, we can draw a few vital points which
automatically speak the present “Employment” situation in India and these are
as follows;
(a) There is a decline in the labour force
participation but growth in labour Productivity; it means the quality of labour
is increasing and the quantity of labour force decreasing.
(b) Unemployment in India is not as
murkier, at least at this present situation as hyped by some intellectual &
political quarters.
As we have discussed earlier that Government’s Populist or
generous social welfare Schemes impinge on the upward growth of the
unemployment. “The planning commission revealed in a remained constant in
number at 55 million (poor) in the past 20 years despite high growth and high
investment in IRDP and wage giving programs...The central and state governments
together spend roughly Rs 42,000 crore a year on poverty alleviation
programmes. in a sense, if the five crore odd poor families in the country were
to be sent money orders, each would get more than Rs 8000 per annum, lifting
them out of the poverty trench. Clearly, re-initiation of the mai-baap sarkar
is not the answer.”( Excerpt from Anarticle in India Today on Union Budget 2004 by Shankar Aiyar and Rohit Sen)
The Government expenditure on populist programs increasing
steadily since 1999-2000 and no government is thinking of a reformation which
can bring long term and yielding benefit in terms of employment generation.
Even Modi’s NDA-2 Govt(20014-2019) is not an exception to it, it also embraced
the populist programs of the UPA-1 & 2 (2004-2014). “For instance, 61.4% of
all capital expenditure outlined in the 2018-19 budget is slated to be financed
through EBR, up from 54% in 2016-17. Similarly, while the budget made tall
announcements related to spending on agriculture and rural livelihoods, the fine print shows that 84% of all such spending is slated to be financed outside
the budget, with the biggest component being providing agriculture credit(See Table-6).” (Govt spending before Lok Sabha elections:
What data Shows, Nikita Kwatra)
 |
| Table-6 |
Even after such robust spending on populist programs the
poverty or unemployment not reduced desirably. “However, estimates of the
planning commission show that in the period soon after the implementation of
the economic reforms, from 1993-94 to 2004-05, despite high economic growth
poverty declined by only 0.74 percentage points per annum...this led to the
implementation of some right based developmental initiatives as part of the
minimum needs programme such as MGNERGA-2005, UWSSA-2008, RSBY-2008, NFSA-2013,
as a result, in the latter period i.e from 2004-05 to 2011-12, poverty declined
by 2.2 percentage points per annum ” (IWR-2019, ILO). The World Bank data on India’s Poverty says, “in 2011, we estimate that
14% of the population (or some 306 million people) lived between 1.50 to 1.90 dollar a day ...now the number reduced to 70million (2018)” (See Table-8)
But ironically the unemployment rate increased more than the
previous years i.e. 1993-2005. The current situation of Unemployment is
directly proportional to the poverty alleviation and Socio-economic upliftment
rate. India has meticulously escaped the 2008 global economic slowdown and put
nation’s economic growth on a fast track since 2008-09 but the unemployment rate
also increased. Some of the salient features of the current labour economic the situation of India are as follows;
 |
| Poverty Rate year-wise, Table-8 |
(a) The decline of the labour force is a regular phenomenon since
2011-12
(b) There is an
increase of labour force in the service sector
(b) Labour Force decreasing in agriculture and Industry
sector
(c) The labour force participation rate of 15-29 age groups is
than the 30-59 age groups
(d) The unemployment rate among the 15-29 age groups is higher
than the 30-59 (e) unemployment rate is higher in urban than rural India.
As we have talked earlier that unemployment is also
transitional and seasonal. During April to June, we can observe more
unemployment in rural areas which is more related to agrarian and allied works.
The OECD data shows that the annual working hours per worker
in India is 1710 hours. In USA it is 1780 hours/annum, for OECD countries it is
1746hrs/annum. Greece, Russia, Mexico, Korea, Costa Rica has more than
2000hr/annum per worker and Germany, Denmark, Norway and Netherland has the lowest
working hours per annum per worker (below 1433hrs).
Similarly, the work participation rate religious faith wise
data (TOI) shows that The average the work participation rate for India is 40%. Muslims have the lowest work
participation rate i.e 33% whereas it is 41% for Hindus, Jains and Sikhs it is
36% each, Buddhists having a highest working population (43%) and these figures not much changed in a census decade (2001-2011)
If you see the Caste composition trends (between 2004-2015) of
the principal sectors of the Indian Economy (State of Working India, 2018) you can see, SC population switching
their jobs from Mining and construction to agriculture, manufacturing, whereas
ST population migrating from agriculture to Mining, Manufacturing, construction
and Services (Mining and Service has the highest). Similarly, other castes left
service and manufacturing sector where they are dominating in 2004 and taking
sides of the Agriculture and Mining sectors. However, the OBCs are most distress
caste in relation to Jobs. In every principal sector their participation
rate decreases. Means most OBCs left their jobs and became Hidden employment or
people who are not willing to work.
In this juncture, the hue and cry for the increase in the unemployment rate is middle-of-the-road propaganda. EdmundS. Phelps, a noble laureate in economic Science in 2006 put the healthy the unemployment rate for a country is between 3 to 7 percentage ratio. If The government will succumb to the furore, it will force to shift its concentration
from Poverty alleviation and social welfare schemes, which will jeopardize the
healthy economic growth and the whole thing will be like “For want of a nail
the Shoe is Lost, for want of a shoe the horse is lost, for want of a horse the
rider is lost”. So, My advice to the Government is to focus more on Labour
Productivity and participation rate, to build Healthy working environment,
Healthy working Population; Govt should bring out such plans where Women will
participate in more productive works; Government should create such a working
environment where we can retain more productive brains from going abroad. As “another
simple way to define economic growth is as the sum of the hours that people
work plus their output per hour or productivity...has had an average annual
growth rate of about 3.5%, half of it came from population growth, more
specifically labour force growth or more people working more hours” (The rise
and fall of Nations, Ruchir Sharma, Page 18 & 19). Before concluding my
Discussion I reiterate, “Deal gently with the bird you mean to catch”.
Vande Mataram
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