Bold steps needed to meet the crisis in jobs
India is dealing with a serious crisis of employment despite achieving higher than global average rates of GDP growth consistently for many years. The crisis has many dimensions, some of which are low real wage growth, a proliferation of insecure jobs, high rates of unemployment among the educated youth, and low and falling labour force participation rates, particularly among women. Some of these problems are not unique to India. For example, jobless growth, stagnant real wages, and rising insecurity are global phenomena.
Over the past two decades, rising aspirations and education levels among the youth have coincided with declining public employment and weak creation of decent jobs in the formal private sector. In the last two years, the shocks of demonetisation and the introduction of Goods and Services Tax have also affected employment in informal sector.
In India, in addition to rising unemployment among the higher educated, less educated workers have also seen job losses and reduced work opportunities since 2016. Five million men left the workforce between 2016 and 2018. Although no direct causal relationship can be established based only on these trends, the beginning of the decline in jobs coincided with demonetisation in November 2016.
These are findings by the recently released ‘State of Working India 2019’ which examines employment trends since 2016. Together with ‘State of Working India, 2018’, which analysed the long-run trends in the Indian labour market, the reports reveal a crisis-hit, precarious employment situation. Over the past two decades, rising aspirations and education levels among the youth have coincided with declining public employment and weak creation of decent jobs in the formal private sector. In the last two years, the shocks of demonetisation and the introduction of the Goods and Services Tax have also affected employment in the informal sector.
What is the way forward? First, we need to understand the nature of the crisis clearly, and second, we need to address it simultaneously on many fronts. Both these are doable given our current resources and institutional capacities. We need to move beyond the recent controversy over the release of official employment data. It merely indicates that there is now a fully established politics of unemployment in India. The ‘State of Working India, 2019’ report analysed trends in the Indian labour market, but most of it, is concerned with policy ideas for employment generation. A running theme in the report is the importance of public goods and public action. For example, addressing the crisis of the quality of public goods in our towns through an urban employment guarantee scheme.
India has been a leader in this respect thanks to the Mahatma Gandhi National Rural Employment Guarantee Act, the MGNREGA. An urban employment guarantee scheme will provide employment within city or town limits to all those who ask for it and thereby provide services to all residents, build our civic infrastructure, and restore the urban commons. The programme can provide 100 days of guaranteed work at Rs. 500 a day for a variety of works and 150 contiguous days of training-and-apprenticeship at a stipend of Rs. 13,000 per month for educated youth. Such a programme will cost between 1.7 per cent to 2.7 per cent of GDP and will create work for 30-50 million people. This is a huge spend by any standard but it can result in spin off benefits like raising productivity, stimulating the economy via increased demand, arresting or reversing the effects of climate change, and empowering urban local bodies.
Continuing the theme of public action, it is time for India to stop underinvesting in basic social services. Indians spend much more out-of-pocket on healthcare and education than citizens of other comparable countries. A bold public commitment to a universal basic services programme will have the dual effect of supplying quality services while creating good jobs. A key condition for this is an investment in improved and increased public provision of healthcare, education, housing, security, transport, and utilities. This includes filling existing vacancies in the system, expansion of capacity, as well as regularising various forms of contract and ‘volunteer’ workers (such as ASHA and anganwadi workers). A well-executed UBS would go a long way in restoring public goods to their rightful place in society, creating millions of good jobs in the process.
No public action on the ground or at the policy level will succeed if Central, State or local governments are starved of resources. We need to believe in the governments’ ability to deliver public goods and services, and we need to hold them accountable. Indeed, there are many successful examples of public action in healthcare, education, nutrition, industrial promotion and other areas. These deserve greater recognition. But calls for greater government spending are often met with concerns over the fiscal deficits and public debt. While some of the concerns are legitimate, history and empirical analysis show that many of the fears are either unfounded or overblown.
Employment-oriented public policy is vital at the macroeconomic level as well. India’s experience with industrial and trade policy (licensing, reservations, permits, subsidies, tariffs, and so on) during the planning years was mixed at best. Recent decades have seen hostility to such policy measures across the globe, barring a few such as tax breaks or the creation of special economic zones. On the other hand, we know that strategic trade and industrial policy have played a key role in all the successful examples of industrialisation across the world. Even researchers at the International Monetary Fund, an organisation that has been a leading advocate of dismantling the pre-liberalisation era policy structures, have recently written about the importance of industrial policy. The new challenges of the fourth industrial revolution can only be met by a new industrial policy for the 21st century.
Finally, no public action on the ground or at the policy level will succeed if Central, State or local governments are starved of resources. We need to believe in the governments’ ability to deliver public goods and services, and we need to hold them accountable. Indeed, there are many successful examples of public action in healthcare, education, nutrition, industrial promotion and other areas. These deserve greater recognition. But calls for greater government spending are often met with concerns over the fiscal deficits and public debt. While some of the concerns are legitimate, history and empirical analysis show that many of the fears are either unfounded or overblown. Focusing on the fiscal deficit to the detriment of employment generation and public goods creation is dangerous. There are major misconceptions about India’s fiscal policy, government debt and fiscal sustainability that are belied by India’s own experience since the 1980s, and there is ample space for fiscal expansion. Such expansion can pay for itself if it invests in building capacities, raising productivity, and improving the quality of life.
India is at a crucial juncture in its economic development where timely public investment and public policy can reap huge rewards. At the same time, being in denial about the current realities and missing this window of opportunity can have large negative consequences in social and economic terms.
(Dr.Amit Basole is a faculty member at Azim Premji University, Bangalore and lead author of the State of Working India report)