Working for jobs

The government wants to attack the problem of unemployment. It has proposed to give 100 days per year of work to rural job-seekers. Employment guarantee schemes, designed for coping with droughts, are sought to be used to solve chronic problems. How bad is unemployment? The available data on employment is based on the National Sample Survey Organisation (NSSO). According to NSSO data, in the period from 1987-88 to 1993-94, while the size of the labour force grew by 2.3 per cent per year, employment grew slightly faster, by 2.4 per cent per year. In the period from 1993-94 to 1999-00, the period which is claimed to be one of “jobless growth”, the size of the labour force grew much more slowly — by only 1.03 per cent per year.

Various explanations for this have been suggested, including that of young people spending more time in college, and lower participation by women. In this period, employment grew by 0.98 per cent, a shortfall of 0.05 per cent per year. Unemployment is highest among the highly educated. NSSO data shows that in 1999-00, unemployment among illiterates was just 0.2 per cent. For those educated up to primary school, unemployment was 1.2 per cent. In contrast, unemployment among college graduates was 8.8 per cent. No wonder, it is easy to recruit a clerk, but it is hard to find a maid. Employment guarantee schemes are indeed quite effective tools for targeting poverty, and they are a good idea — as a replacement for failed anti-poverty programmes. But the pitiful resources of the government can hardly overcome economy-wide labour market issues. If there is a chronic problem in the labour market, a government EGS can hardly address it. It is not the job of the government to give jobs. The job of the government is to create an environment where the economy grows well. That will create jobs. If India had succeeded in massive industrialisation, like China, this would have generated a great deal of employment, particularly for college graduates who would be technicians operating machines. If the government is serious about the unemployment problem, this is the area where a concerted policy focus is required. Why are foreign investors putting up hundreds of factories in China, each of which employs over 10,000 workers?

What can we ask for from the coming budget? We should ask for concerted efforts to match China in the game of globalised production. This includes rationalisation of customs and excise and VAT, removal of small scale sector reservations, easing FDI procedures, and reforms to labour law.