Is the unemployment crisis for real?
Employment opportunities, formal jobs andthe labour force are all shrinking
The jobs situation in India does not reflect a crisis, but it is a matter of serious concern. A crisis is understood as an emergency that demands immediate attention, without which we could see a calamity of sorts. There is no immediate calamity of any kind on hand. But there is a deeply insidious problem at work in the form of shrinking employment opportunities, shrinking formal jobs, and a shrinking labour force.
A populous and demographically young country like India has a lot to gain if the expanding working-age population can join the labour force and be provided with gainful employment. More hands at work can ensure greater prosperity and relatively evenly spread growth.
Problems of unemployment
But if India cannot provide employment to its growing working-age population, it does not just miss a chance to become a prosperous country, but also risks becoming an unmanageable or unruly country. Unemployed youth, beyond a threshold, can lose hope of a job and can easily stray into becoming unsocial elements.
A bigger problem is that those who do get jobs and prosper do not appreciate the plight of those who do not. It is mistakenly believed that those who do not get good jobs are not worthy of getting them. The blame is placed at the door of the unemployed as if it is entirely their problem. The macro-economic and social dimension of the problem is not appreciated in India.
Statistics give us clues of the brewing problem and its insidious nature. First, we are in the midst of a serious investments deficit. CMIE’s CapEx database demonstrates the persistent fall in new investment proposals since 2011-12. New investment proposals had peaked at Rs. 25 trillion in 2010-11. In 2017-18, these were down to Rs. 11 trillion, and in 2018-19, these are unlikely to cross Rs. 10 trillion.
The impact of this fall in investments is visible in shrinking jobs. In a point-to-point comparison, in 2018, the number of persons employed declined by 11 million. An estimated 408 million people were employed in December 2017. This fell to 397 million in December 2018. The average employment in 2017 was 406.5 million. This fell to an average of 402.1 million in 2018. This shows a smaller fall of 4.5 million. Either way, we see a very substantial fall in employment. One (11 million) is only much worse than a fairly bad fall of 4.5 million, or 10%.
Labour participation rate
This fall in jobs is not translating into a proportionate rise in unemployment. But it is showing up in a fall in the labour participation rate. A rise in unemployment is bad, but a fall in the labour participation rate is worse. The former reflects a shortage of jobs compared to the number of people looking for jobs. The latter reflects a fall in the number of people looking for jobs. When we juxtapose this against falling jobs, we see a glimpse of the hopelessness of people who should be looking for jobs.
The crisis is the response
Our real crisis is in the nature of the government’s response to the situation. When the establishment works hard to rubbish sound statistical practices and results of large sample household surveys and instead uses back-of-the-envelope calculations to measure employment, we are headed towards a bigger crisis than the jobs crisis.
Source: The Hindu, 15/02/2019
