Opinion Numbering the young and work-hungry

Aside from the severity and scale of the human cost,unemployment has other indirect negative manifestations. Direct cost to the government in the form of payouts and unemployment benefits (state berojgari bhattas),loss of economic productivity and lost tax revenues are examples. In the absence of an accurate measure for our unemployment rate,as is the case today,the problem gets more perplexing.

On one hand we have NASSCOM numbers that indicate shortage of skilled manpower in technology and higher value-added services,and on the other we see hundreds of thousands of applicants toppling over each other to make a handful of openings for police constables or clerks or the army. We are a young nation getting younger and more restless. Our latest official unemployment rate based on the 2005-6 NSSO survey is 8.3 per cent,the next upgrade to that statistic won’t be seen until five years from the last survey.

The US unemployment rate currently hovers at above 10 per cent and is measured every single month. Imagine a recruitment rally stampede there. Easy answer — why compare ourselves to the US or some other advanced economy? Difficult reply — why not? And by the way,even if we believe the official NSSO figures,the glorious period of our economic growth starting from early ‘90s till today,actually coincides with a period of constant rise in unemployment (from 6 per cent in ‘93-‘94 to 8.3 per cent today).

The real question,however,is — what is our actual unemployment rate? Is it the 8.3 per cent,an estimate in the steering committee report in the eleventh five year plan (based on NSSO estimate) or is it 10.7 per cent as in the CIA Fact Book,or is it 6.8 per cent as mentioned by a leading website specialising in Indian statistics? Nobody really knows.

It is this very problem of lack of accurate and timely unemployment data that I wish to highlight. We must regard frequent unemployment tracking as important as inflation or GDP measurement. Rapid economic growth is desirable,as are lower unemployment and inflation rates. However,there may be limits to how compatible those goals are. The success of macroeconomic policy cannot be measured by just one of these variables in isolation,because they are interdependent.

Over the long run,the faster the economy grows,the materially better off people are. In the short run,however,the rate of growth has consequences for other economic variables. If growth is too slow,then there is a risk of rising unemployment. Although rising unemployment is typically associated with economic contractions,or recessions,it is entirely possible for an economy to be growing but not rapidly enough to prevent unemployment growth.

Then there is also a relationship between unemployment and inflation. For a while,it was believed that there was a tradeoff between inflation and unemployment that policymakers could exploit. That is no longer widely considered sustainable. While minimal unemployment might seem a desirable policy goal,few economists would define full employment as employment for everyone seeking a job. Instead,many would argue that full employment is the lowest rate of unemployment consistent with a stable rate of inflation.

While tracking all three (inflation,GDP growth and unemployment) is necessary,one can argue that given our demographics,unemployment numbers should take centre-stage this decade. I,for instance,am happily willing to accept certain inflation in short run,if I know precisely how many additional jobs are getting created as a trade-off. Those with keen economic sense would know that this expectation is fully affordable in the short run (a short-run Philips curve).

In the absence of updated,accurate employment statistics,we tend to overly focus on inflation and GDP figures. To be clear,I am not suggesting that the government has failed to focus on generating employment opportunities. In fact,the UPA has broadly been successful in adopting a two-pronged approach to unemployment — betting on economic growth to generate more jobs,and also investing heavily in education and skill development to upgrade “employability”. The NREGA’s phenomenal success points to the need for more such schemes. Again,to better judge the impact of these initiatives one needs more frequent monitoring of unemployment statistics. I would suggest that all government schemes and expenditures be evaluated in terms of jobs they are likely to generate.

There are interesting examples around the world. In the EU,Eurostat,its statistical office,collects quarterly data from member states and for monthly calculations it refers to national surveys and employment office registers. In the US,the Bureau of Labour Statistics (BLS) measures employment data using two different surveys that gather data from 600,000 households on a monthly basis. Other countries that largely derive statistics from household labour force surveys based on ILO guidelines.

This is not the first time that red flags are being raised on this issue. The Planning Commission had issued a recommendation in 2003,requiring the Department of Statistics to perform a full scale annual household enquiry on unemployment as a replacement to the current five-yearly exercise. There have been similar suggestions from different quarters but no concrete steps have seen the light of day.

I await a day when an Indian finance minister opens the budget speech with a report on fresh job creation in the previous fiscal,down to previous quarter and month — and I’ll call that the Youngistan budget!

The writer is a Congress MP.