More Evidence of Jobless Growth

IT is a feature that sullies a pretty picture. Growth in post-reform India accelerates, but fails to deliver adequate jobs for its citizens. As is widely acknowledged, the large sample surveys of employment by the National Sample Survey Organisation (NSSO) undertaken once in five years provide the most exhaustive data on employment trends and conditions in India. The NSSO has just released the leading indicators yielded by the latest such survey on this subject – the 66th Round, covering 2009-10. This helps to assess the impact on employment of growth during the reform years, and especially after 2003-04 when GDP growth accelerated to touch 8-9 per cent.

DECLINING EMPLOYMENT

The results suggest that while the deceleration of employment growth recorded during 1993-94 to 1999-2000 had been partially reversed in the period 1999-2000 to 2004-05, the record over the five years after 2004-05 is even worse than it was during the 1990s. To summarise, the rate of growth of employment (on a usual, principal and subsidiary, status basis), which rose from 1.07 and 2.62 per cent in rural and urban areas respectively during 1983 to 1987-88, to 2.55 and 4.08 per cent during 1987-88 to 1993-94, fell to 0.80 and 2.73 per cent during 1993-94 to 1999-2000. The scepticism about the dynamism unleashed by reform that this generated was dismissed once the results of the 2004-05 survey were announced that showed that rural employment growth had actually risen to 2.41 per cent in rural areas and 4.22 per cent in urban areas over 1999-2000 to 2004-05. Based on the results of the 2004-05 survey, some like the chairman of the Prime Minister’s Economic Advisory Council C Rangarajan argued that “with a sustained growth of 9 per cent per annum by 2012, unemployment will be totally eliminated.” The challenge was to achieve and sustain high growth rather than to generate employment, since “accelerating growth is central to expanding employment opportunities” (Times of India, March 15, 2006).

Since then, India seems to have managed to achieve and sustain high growth, except for the brief downturn during the global crisis. Yet the recently released results from the 2009-10 (66th Round) NSSO survey are disconcerting. Over the five-year period 2004-05 to 2009-10 employment declined at an annual rate of -0.34 per cent in rural areas, and rose at the rate of just 1.36 per cent in urban area. In the aggregate, the volume of principal and subsidiary status employment rose by a negligible 0.1 per cent.

However, government spokespersons have been quick to play down the significance of these numbers by referring to two other aspects of the NSS 2009-10 figures. The first is the fact that part of the deceleration in workforce expansion is the result of the substantially larger number of young people opting to educate themselves.

If we focus on the 15-24 age group, which is the one that is most likely to choose between education and work, we find that a the increase in the number of those reporting themselves as occupied with obtaining an education was much higher over the five years ending 2009-10 (16.7 million in the case of males and 11.9 million in the case of females) than was true over the previous five years (5.6 and 5.2 million respectively). This huge difference, which is a positive development from the point of view of generating a better and more skilled workforce, would have substantially reduced the number entering the labour force, contributing to the deceleration in the growth of the total number of workers.

However, the aggregate numbers of principal and subsidiary status workers suggest that this alone would be inadequate to provide a satisfactory explanation of what seems to be a dramatic collapse of employment. The total number of usual status (principal and subsidiary) workers, which increased by 60 million during the five years ending 2004-05, rose by just 2.3 million over the subsequent five years. (If we restrict the comparison to just changes in principal status workers the difference is still substantial though less dramatic, standing at 48.3 and 13.1 million respectively).

This too has been discounted by pointing to the fact that the fall in employment increments over the two periods under comparison has been substantially due to a fall in female employment. Rural female employment, which rose by 18.3 million between 1999-2000 and 2004-05, registered a decline of 19.2 million during 2004-05 and 2009-10. Even in the urban areas, the figures for changes in female employment during the two periods were significantly different at a positive 6.4 million and a negative 1.7 million respectively. This has been cited as evidence of a definite underestimation of female employment.

The figures have provided the basis for the criticism from within the government that the NSSO’s 2009-10 survey has significantly underestimated female employment, which is difficult to capture, especially in rural areas. On the other hand, it cannot be argued that this difficulty affected only the 2009-10 survey, especially to the extent needed to explain the dramatic differences noted above.

Moreover, if we stick to usual status (principal and subsidiary status) employment, the change in male employment also points to significant deceleration. Between 1999-2000 and 2004-05 male employment increased by 20.2 million in rural areas, while between 2004-05 and 2009-10 it rose by only 13.4 million. The corresponding figures for the urban areas were 15 million and 9.8 million respectively. In the case of only principal status workers, the increases had fallen from 19.2 to 13.6 million in rural areas and from 14.4 to 10.3 million in urban areas.

As mentioned earlier, this decline in employment is partly explained by the sharp increase in those pursuing an education in the 15-24 age group. We, therefore, turn to a separate examination of the trends in employment in the two main working age groups: 15-24 and 25-59. Let us initially restrict the analysis to trends in usual principal status employment for males, to accommodate for what may be the partially correct criticism that female employment was underestimated to a greater degree in 2009-10 than before.

One positive signal here is that male employment in the 25-59 age group rose when that in the (education-opting) 15 to 24 age group fell. Male employment (rural and urban) in the 15-24 age group fell by 6.2 million between 2004-05 and 2009-10 as compared to an increase of 6.5 million during 1999-2000 and 2004-05. Contrary to this, the figures for the changes in the 25-59 age group were 28.8 and 26.2 million respectively. That is, there was a larger absolute increase in 25-59 age group employment in the more recent period when compared with the previous one. However, the difference here too is small and the rate is marginally lower (13.3 as opposed to 13.8 per cent) given the rising base value.

In the case of females, however, even in this age group employment fell during the recent period by 5.1 million, while it had increased by a huge 13.1 million during the previous period. Thus, even if we restrict ourselves to the most favourable category in aggregate principal status employment in the case of males, which is the 25-59 age group, the most we can say is that employment growth has not been lower during the five years ending 2009-10, as compared to the previous period. This is despite the fact that these were the years when there was a substantial acceleration of GDP growth from the 6-7 per cent range to the 8-9 per cent range between these two periods.

There seems to be a second positive that emerges on first examination of the data relating to male, 25-59 age group employment, which is that much of the increase in employment is paid employment as opposed to self-employment. This points to a structural shift in employment generation since most of the additional male employment generated in this age group during the 1999-2000 to 2004-05 period was in the self-employment category.

Self-employment rose by 21.8 million during that period, as compared with just 4 million during the more recent period. On the other hand, during 2004-05 to 2009-10, paid (regular or casual) employment increased by 24.6 million, as compared with just 4.4 million during the previous period. Given the fact that self-employment could be substantially distress-driven, this is indeed welcome.

INCREASING INEQUALITY

But that assessment needs to be moderated on three counts. First, the structural shift in the nature of additional employment occurs in a period when aggregate employment even among 25-59 years-old males has not been rising any faster. Second, around two-thirds of the increase in paid employment in the recent period is in the casual work category, which is likely to be less well-paid and volatile, leading to much lower earnings. Third, if we consider female employment in the 25 to 59 age group, while there has been a decline of 7.7 million in the number of self-employed workers, the number of paid workers rose by just 2.6 million. The increase in paid employment here has been far short of the loss of self-employment.

These features have to be seen in the context of certain changes observed in the sectoral composition of the expansion of employment during the two periods. The figures show that over 1999-2000 to 2004-05, the increase in employment was distributed across agriculture, manufacturing, construction and services, though services and construction dominated in the case of males and agriculture in the case of rural females. As compared to this, during the 2004-05 to 2009-10 period, agriculture and manufacturing made negative or negligible contributions to the increase in employment, whereas construction played the dominant role in the case of both males and females. Clearly even the small contributions made by the commodity producing sectors to employment increases are disappearing, making the system dependent on construction and services, especially the former.

In sum, even among sections of the population who would not and have not been opting for education as activity and for whom the identification of work participation may not be difficult, the main source of employment during the high growth years seems to be casual work in the construction sector. This is likely to be among the more volatile among employment categories, with lower wages, higher uncertainty of employment and, therefore, limited earnings potential. So even if we take account of the increased participation of the young in education and the possible underestimation of the employment of women, the evidence seems to point to unsatisfactory labour market outcomes in the period when India transited to its much-celebrated high-growth trajectory.

All this is significant for at least two reasons. The first is that it indicates that the pattern of growth that India is experiencing is woefully inadequate to provide incomes and livelihoods and the dignity that comes from work to a substantial number of those seeking it. It seems to be time to shift from an obsessive and single-minded devotion to growth and focus more on employment. The second is that the picture of near-jobless growth changes the whole notion of “inclusiveness”. If the trajectory continues, India’s poor and marginalised would have to be “included” not by integrating them into the development process through employment, but through special programmes that reek of state patronage and are dependent on government prerogative. The right to a decent life is not ensured but merely assured.

The implications of this scenario where increments in GDP are not accompanied by anywhere-near-adequate increments in employment are many. One is that the growth process India is experiencing is such that the new activities that displace old and traditional ones deliver much fewer new jobs relative to the number they displace. The second is that in a whole set of new activities that are “additional” to what existed before, “value creation” is far less dependent on leveraging “work” and based more on intangible notions of meeting felt needs and offering quality. The corollary is that the value created goes less to finance an expanding wage bill and more to enhancing surplus incomes in the form of profit, rent and interest. Not surprisingly, there are clear signs of an increase in inequality and a worsening of income distribution in recent years.

Thus, the evidence points to the need to have a close look at the growth strategy and make corrections to ensure higher employment growth. This would require measures to rebalance demand, change the composition of output and alter technology choice to ensure a higher rate of growth of employment. Even if this involves some trade off between GDP growth and employment growth at the margin, a case can be made in its favour. Unfortunately, the government seems disinclined to move in this direction. Rather, senior government economists have chosen to launch an attack on the NSSO, which has a much-deserved reputation and an excellent track record, for what they perceive to be shoddy statistical work. The presumption is that these officials in high places knew the numbers even before they were collected. That may sound absurd, but it only reflects the new ethos: when faced with evidence that calls for a policy rethink, the tendency is to trash the evidence (or to manipulate it) and pretend the problem does not exist.

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C P Chandrasekhar People's Democracy 31 July 2011