At the heart of job creation

The government should restore its role as the main generator of jobs

The government should restore its role as the main generator of jobs

With his announcement that 10 lakh government jobs will be provided over the next 18 months in “mission mode”, Prime Minister Narendra Modi sent four messages. First, job creation is indeed a problem and can no longer be hidden from public discourse. Second, the private sector, especially modern sectors such as the service and manufacturing sectors, which are dominated by multinational companies, have not created many jobs. Even if the information technology sector or the modern labor economy have created jobs, they are either high-skilled jobs or low-skilled jobs. Third, government in the Nehruvian development scheme was prominent in the labor market. The National Democratic Alliance (NDA) government, whose ideology is different and which often attacks the Nehruvian model, is now ironically forced to intervene as the persistent rise in inflation, unemployment and underemployment threatens to affect him politically. And fourth, the NDA government blew the horn of the 2024 general election.

Employment Trends

A populist announcement made by any government should be studied critically. Let’s look at some employment data. Firstly, the latest year for which we have information on employment in the organized sector from the Directorate General for Employment and Training is 2012. The statistics were provided as part of the job market information. The NDA government currently relies on enrollments and discharges from the Employee Provident Fund Organization/National Retirement System/Employee State Insurance Scheme as indicators of the formal labor market. This could be misleading as companies may increase registrations to cross the threshold to become eligible for one of these criteria. Therefore, it could be more a case of formalization than job creation. Second, media reports show that more than 85% of those who aspire to these 10 lakh jobs could be filled by existing vacancies in central government departments (8, 72, 243). In this sense, the statement may not indicate 10 lakh new jobs. Third, 241 Central Public Sector Enterprises (CPSEs) have cut jobs in recent years – jobs fell from 10.84 lakh in 2017-18 to 10.71 lakh in 2018-19 and 9.22 lakh in 2019- 20. Mr. Modi did not speak about job creation by CPSEs although this downward trend is worrying.

The job creation of 10 lakh should also be seen in the context of the labor market. Even though labor force and labor force participation rates have increased slightly, there is a decline in the quality of jobs, viz. there has been an increase in the unpaid segment of the self-employed and an increase in the share of the agricultural sector in total employment over the last three periodic labor force surveys (43% to 47%). It is a historical regression. This huge mass of workers contributes, through low productivity, to about a sixth of our national income, which does not bode well for a healthy economy. On the other hand, the share of the manufacturing sector in national income decreased in 2020-21 (10.9%) compared to that of 2018-19 (12.1%).

Again, even though the aggregate unemployment rate in usual status has slightly decreased by a few percentage points (from 4.8% in 2019-20 to 4.6% in 2020-21), the current figure for unemployment in daily status (statistic for international use) is 7.5% for all people in 2020-21. The unemployment rates for graduates (college and above) in general and young people (15-29 years old) in particular in urban areas fell very slightly from 2019-20 to 2020-21, but they remain high enough to cause concern (in two digits). The share of employment in informal enterprises has increased – for men (71% to 75%), women (55% to 57%) and all people (68% to 71%) from 2017-18 to 2020 -21. Even though the share of regular salaried workers who did not have a formal employment contract, paid holidays and eligibility for any form of social security has decreased for both sexes, the level remains high. The government could score a point or two by showing that there is a downward trend in several labor market variables. But an honest government would concede that levels of several variables have remained uncomfortably high even after three decades of economic reform.

Role of the private sector

Even as the Nehruvian model of development comes under attack in the current mainstream political discourse, one cannot avoid placing the state at the center of job creation beyond a certain point. The private sector creates jobs in response to market forces and taking into account radically changed technological developments. We cannot rely on projections of job creation by the gig economy. These are estimates calculated by a professional organization or by consulting firms with vested interests. As they are agents of the political economy influencing government policy, their predictions should be read with a grain of salt. The employment recovery stories, which appear from time to time in the pink press, based on employment service providers such as Monster Employment Index, should be seen against the backdrop of a very poor in jobs like ours. Modern private sector projects consume a lot of capital to generate very few jobs. For example, recently there was a report that Adani Group invested ₹70,000 crore (or ₹700 million) in Uttar Pradesh to create only 30,000 jobs. Foreign direct investment, which is capital intensive anyway, goes mainly to non-manufacturing sectors.

Quantity and quality of jobs

Employment is not just about numbers and growth numbers. We must focus on creating decent jobs and a sustainable labor market to which India is committed as a member of the United Nations and the International Labor Organization. Consciously or not, the role of government in job creation has entered popular discourse and policy discussions. Although one job is a miracle, we need millions. The government should soon play an important role. A lean and mean government, which is often prescribed by the neoliberal project, often results in a governance deficit. The government should re-establish its role as the main job generator through jobs in its ministries and CPSEs and through assured job creation programs like the MGNREGA.

KR Shyam Sundar is Visiting Professor, XLRI, Xavier School of Management, Jamshedpur

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