How to Tackle India’s Massive Rising Unemployment
by Annavajhula J.C. Bose*
As has been widely reported, the number of unemployed in India has risen sharply in recent years. This is due to the stalled economy and a sharply rising population. Most analysts agree that the economy has been hit in part by the demonetization of currency notes of Rs.500 or more, in November 2016, and the clumsy introduction of a goods and services tax in July 2017.
The massive size of India’s unemployment problem, as well as the policy measures that can help fix it, are cogently discussed in the State of Working India, 2019, published by the Azim Premji University’s Centre for Sustainable Employment. The report is available free: https://cse.azimpremjiuniversity.edu.in/state-of-working-india/.
Hiding unemployment data to avoid political criticism?
Unemployment data is a major political tool used by opposition parties in India to criticize the ruling party. So, it is not surprising that the collection of official employment statistics has been abandoned or much delayed. In the absence of recent official data, the Premji report makes inferences based on surveys conducted by the Centre for Monitoring the Indian Economy.
In 2018, those in the working age group, that is those above 15 years of age, totaled 983 million. Nearly 80% of them seek jobs in the unorganized or informal sector, in farming, construction, mining, retail and other local, small businesses. The rest, most of whom who have finished high school or college, seek work in the organized or formal sector, which includes government, public sector and private companies.
The recent rise in unemployment, the Premji report notes, is due to both demand and supply factors. From fiscal year 2012 to fiscal 2018, the total number employed by the formal sector fell by about nine million. This drop in demand, coupled with a rise in population, led to a sharp spike in unemployment in the formal – as well as informal - sector. The freshly unemployed add to the total pool of the unemployed, which rises each year as over 16 million teenagers enter the working age group. In 2018, the unemployment rate among those seeking jobs in the formal sector is estimated to have been about 6%.
More women losing jobs
On the supply side, there has been a big rise in population, mainly those in the 18-23 age group. India is a country of youth, with the median age being only 28 and over 600 million, about half the total population, being under the age of 25.
The recent rise in unemployment, the Premji report notes, is far higher among the young, educated and women. In 2018, among those under 35 years of age, the unemployment rate was about 9%. Prior to 1991, the educated youth were mostly concentrated in the large cities. Today they are found all over, including in small towns and villages. Though a small part of India’s 1.3 billion population, they are a vocal and politically influential group.
The youth, especially those who have a high school or college education, want jobs that provide them with the comforts of a middleclass lifestyle. While their parents may have been mostly poor farm or urban laborers, the educated youth are unwilling to take up similar low paying jobs. This aversion to low paying jobs also has a caste angle. Youth from the lower castes do not want to work in jobs defined by their castes, while those from the upper castes do not want jobs that have a manual, low caste stigma.
From 2012 to 2018, the proportion of women losing jobs in the formal sector was far higher when compared to men. This is because women are less mobile in their job searches, given their obligations to take care of their children and families. In fiscal 2018, a third of urban women were unemployed.
Lack of job-related skills
In 2018, 18% of the educated youth, those with a high-school or college education, had no jobs. An estimated 110 million plus Indians have college degrees. One reason for the rise in unemployment among the educated is that most college graduates have little or no professional or job-related skills. They studied Arts, Science or Commerce, degrees that do not provide any job skills which are sought by businesses. Consequently, there is a huge supply of college educated labor seeking clerical jobs, especially in the central, state and local government bureaucracies.
What makes the situation worse is that many of the 800,000 colleges, in both the general and professional streams, provide very low-quality education. So, their graduates have a far tougher time finding jobs than the graduates of the better run colleges. Also, even fresh graduates from the top engineering and technical programs need additional training to be able to perform a skilled job. So, companies like Infosys have set up in-house programs to train recruits for the tasks they need to perform on their jobs.
Fewer government jobs
The central, state and local governments constitute India’s largest employer in the formal sector. They employ about 22 million, excluding over two million working in the defense services. In addition, since the 1950’s, central and state government run companies, or the public sector, have been a large employer, including of professional and general college graduates. Major public sector companies include the State Bank of India and other major banks, Hindustan Aeronautics, Air India and ONGC. These companies, like the government jobs, offer stable, long term jobs until retirement, with good salary and benefits.
Since 1995, the total number of government jobs has fallen by a fifth due to a freeze in hiring and retirees not being replaced with new hires. A similar process has led to a cut in the total number of jobs in the public sector. Also, several former public sector companies, which have been sold or privatized, have cut jobs as part of their efforts to become profitable. Such job cutting companies include the Indian Petrochemicals Corporation, Hindustan Zinc, Modern Food Industries and the Hotel Corporation of India. India’s public sector, as well as private companies like Maruti-Suzuki, are displacing labor by using new technologies and automating processes.
While government and public sector jobs are being lost, these sectors are still the biggest and best employers. So, there continues to be very high demand and intense competition for such jobs. In 2018, for instance, 23 million applied for 100,000 jobs – 230 applicants for each available job - offered by the government-run Indian Railways. It is hence not surprising that, in their efforts to expand their political appeal, leaders of the Gujjars, Marathas, Patels, Jats and other upper castes seek reservation for their castes in public sector as well as government jobs.
Skills training programs
In addition to analyzing the unemployment data, the Premji report suggests policy measures that can create tens of millions of new jobs. It seeks the implementation of a nationwide Urban Employment Guarantee Scheme. This would provide an educated youth with 100 days of guaranteed work at Rs. 500 a day as well as 150 contiguous days of training and apprenticeship at a stipend of Rs.13,000 per month. The program would cover public works, green or environmentally friendly jobs, monitoring and surveying, administrative assistance and medical care work. It would thus provide job training for a range of skills and education levels as well as help improve the quality of life in the areas they are implemented.
Another suggestion is to create jobs through a Universal Basic Services Program in education, health, transportation, hospitality and other public services. Such services-based sectors have significant potential for job creation but have so far been largely neglected. The Premji report points out that a modest expansion in health and education public services can create over two million new jobs, which would add 15% to the number of those employed by these businesses. Similarly regularizing the employment of anganwadi workers, ASHAs, helpers and other contractual employees in the public health and education system can create good jobs for three million workers. To meet these goals, the central government needs to raise its healthcare budget from 1% to 3% of India’s $3.3 trillion GDP and the education budget needs to be raised from 4% to 6% of GDP.
The Premji report seeks the revival and expansion of manufacturing by gradually shifting from export-led industrialization to domestic demand led industrialization. This would especially provide jobs for those with less or no education. The prospects for vastly expanding India’s exports are bleak given the continuing crisis in the global economy, growing protectionism in America and some other developed countries, and competition from labor surplus economies like Bangladesh and Vietnam. The central government, the report notes, can boost domestic industries by adopting strategies similar to those implemented by South Korea and Taiwan, which have helped them create new jobs.
The higher levels of employment as well as incomes, resulting from the implementation of the policies in the Premji report, will have a multiplier impact on the economy. It will boost demand for food, clothing, consumer durables and other labor-intensive goods produced within India. Hence these businesses will hire more employees and further expand demand.
Good jobs data is critical for economic growth
Overall, the policies in the Premji report show a clear path – similar to the rational spirit of Swami Vivekananda - to creating millions of new jobs. The implementation of the measures suggested in the Premji report requires the central government to invest tens of billions of dollars in public projects. Even if only some of the suggested measures are implemented, unemployment will be sharply reduced. India has little choice.
Given the absence of timely official unemployment data, the Premji Centre ought to collect and analyze its own data. In this task, it can collaborate with a global agency like the United Nations Development Program. Such a partnership, besides providing access to advanced data gathering and analytical skills used in other countries, will reinforce the Premji report’s credibility as an independent source, not tainted by political bias.
If it happens, the jobs data from Premji will be a useful resource for businesses, policy makers, journalists and researchers. More important, good unemployment and other key economic data are valuable tools used by major global investors and businesses to decide if they want to enter or expand their operations in a country. So, if India wants to be a global economic power, there needs to be reliable jobs and other economic data. A broken thermometer is of no use for measuring if a patient has fever or not.
*Annavajhula J.C. Bose teaches Economics at the Shri Ram College of Commerce, University of Delhi, India - ajc.bose@srcc.du.ac.in
Photo: unemployed college graduates waiting to hand in job applications in Allahabad.
