Growth but not Employment

(The pattern of growth adopted coupled with recent economic downturn face by the country due to global recession is bringing about casualization in labour market as a permanent feature.)

Directive principle of state policy enshrined in the constitution of India expects state to provide for Right to Work after adequate development of required capacity. Article 41 of the constitution of India reads, “The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want.” Supreme Court of India too in In Bandhua Mukti Morcha v. Union of India Ors., [1984] 2 SCR 67, observed that-

"This right to live with human dignity enshrined in Article 21 derives its life breath from the Directive principles of State Policy and particularly clauses (e) and (f) of Article 39 and Articles 41 and 42 and at the least, therefore, it must include protection of the health and strength of workers men and women,… just and humane conditions of work and maternity relief. These are the minimum requirements which must exist in order to enable a person to live with human dignity and no State - neither the Central Government nor any State Government - has the right to take any action which will deprive a person of the enjoyment of these basic essential."

Right to dignified work at liveable wage thus has constitutional and legal backing and state should endeavour through appropriate policy mechanism to achieve it. Minimum Wages Act, 1948 along with related legislation enacted with the objective of protection of workers right need to be enforced stringently to ensure that workers are paid statutory wages and their rights are duly protected.   

Poverty Alleviation and Employment

Indian Constitution put emphasis in preamble and DPOSP that state should strive to achieve a social order which promotes justice-social, economic and political in all walks of national life. For this to happen it is necessary that effective steps should be taken towards alleviating poverty. Generating adequate quality employment opportunities can turn out to be the most effective poverty alleviation strategy for any government. It can also be a significant policy measure to reach much talked about goal of inclusive development. To ensure this it is essential that various factors of production engaged in the economy in production activities gets fair share of the value added in the process.   The adoption of liberalization policy through ‘structural adjustment’ in early 1990s has brought about its share of impact on the distribution pattern in the economy by altering share of traditional factors of production- Profit, Wage, Rent and Interest.

Casualization of Employment

It has generally been pointed out by eminent economists that informalization or casualization of employment is taking place due to typical pattern of growth that is taking place in the country. A comparison of growth in employment during the period of 1983-94 and 1994-2005 brings out this pattern quintessentially. The date reveals that the growth in organized sector employment on annual basis during the period 1983-94 was to the tune of 1.20 percent which has fallen to -0.31 percent in 1994-2005. During the later period the organized employment generated in public sector has in fact turned negative to the extent of 0.70 percent per annum. The growth of employment in private sector of 0.58 percent annually was not able to compensate for the loss of organized employment in public sector resulting in overall negative growth.

The relative economic high boom period from 2004-05 onwards too has not been able to alter the emerging scenario in any significant way. This is evident from the fact that only 15.6 per cent of the total workforce had regular wage employment/ salaried work during 2009- 10 while 33.5 per cent was casual labour and 51 per cent was self-employed. Employment growth in the organized sector, public and private combined, increased by mere 1.9 per cent in 2010, which is lower than the annual growth for the previous year.

Impact on workers

Informalization or Casualization of labour result in denial of just benefits to workers in form of provident fund, insurance and other social security benefits. It also results in much lower wages to workers coupled with job insecurity due to lack of trade unions and possible collective bargaining in unorganized sector. 66^th NSSO survey brings out this when it states that in the rural areas, average wage/salary earnings per day received by male regular wage/salaried employees was Rs. 249.15 and for females it was Rs.155.87. In urban areas, the figures for male wage rate were Rs. 377.16 against the female wage rate of Rs. 308.79. But this drastically comes down for casual labours. For example in the rural areas, average wage/salary earnings per day received by male casual labours engaged in works other than public works was Rs. 101.53 and for females it was Rs. 68.94 while in urban areas, the wage rates for casual labours other than public works was Rs. 131.92 for males and Rs. 76.73 for females.

Relatively lower growth in employment

For growth to be inclusive it must create adequate livelihood opportunities and add to decent employment commensurate with the expectations of a growing labour force. According to 66^th NSSO survey there was an increase in work opportunities to the tune of 18 million under the current daily status (CDS) between 2004-5 and 2009-10, which were comparatively high growth years. The overall labour force, however, expanded by only 11.7 million which was considerably lower than in earlier periods. This phenomenon is mainly attributable to a welcome trend as it reflects on much larger retention of youth in education and interestingly also because of lower labour force participation among working-age women (see table).  Due to these peculiarities seemingly unemployment in absolute terms did came down by 6.3 million. But the fact that the lower growth in the labour force is not expected to continue is baffling as those in education presently are expected to join the labour force in increasing numbers in forthcoming years . This signifies that the pace of job creation must be greatly accelerated to be able to cope up with the likely growth in labour force. But the trend of growth in employment as brought out by 66^th NSSO survey is disconcerting.

The results of the 66^th and earlier NSSO survey suggest that while the deceleration in employment growth observed during the period of 1993-94 to 1999-2000 had been partially reversed in the period 1999-2000 to 2004-05. But the record of growth in employment over the five year period beginning from 2004-05 as per the survey is even worse than it was during the 1990s. The rate of growth of employment which rose from 1.07 and 2.62 per cent in rural and urban areas respectively during 1983 to 1987-88, to 2.55 and 4.08 per cent during 1987-88 to 1993-94, fell to 0.80 and 2.73 per cent during 1993-94 to 1999-2000. The scepticism about the dynamism unleashed by reform was sought to be dismissed once the results of the 2004-05 survey revealed that rural employment growth had actually risen to 2.41 per cent in rural areas and 4.22 per cent in urban areas over 1999-2000 to 2004-05. The then Chairman of the Prime Minister’s Economic Advisory Council C. Rangarajan even argued that “with a sustained growth of 9% per annum by 2012, unemployment will be totally eliminated.” The challenge was to achieve and sustain high growth rather than to generate employment, since “accelerating growth is central to expanding employment opportunities”

Though since then, India seemingly have managed to achieve and sustain high growth, except for the brief downturn during the global crisis. But the results from the 66th NSSO survey of 2009-10 are disconcerting as over the five-year period 2004-05 to 2009-10 employment in fact declined at an annual rate of -0.34 per cent in rural areas, and rose at the lowly 1.36 per cent in urban area. This has resulted in the volume of principal and subsidiary status employment being raised by a negligible 0.1 percent in aggregate. The setback to the job creation brought out by the survey is discomforting as in forthcoming years such negligible rate of growth in employment may put many of the educated youth in unemployed category resulting in increasing social tension. 

Falling Share of Wages

The economic reform’s of 1990’s though succeeded in unleashing economic growth but the nature and content of it as brought down share of wages in the Net Domestic Product (NDP) marking greater inequalities in society. The data reflects two significant trends. First, increase in share of organized sector in total NDP but with lower share of wages. Secondly, declining share of unorganised sector in NDP but with roughly same share of total employment. Due to more capital intensive nature of production in organised sector the decline in share of wages of organized sector Net Domestic Product is much sharper and striking, with share of wages falling from 75 per cent in 1980-81 to 60 per cent at the turn of century and registering a further decline to 51 per cent in 2009-10. Another important process that is witnessed in the past three decades is decline in the share of the unorganised sector in GDP. This is obviously a process to be welcomed as it is evidence of desired structural change. However the share of the unorganised employment continue to account for overwhelmingly dominant share of around 80-90 percent of all workers, even through the recent period of rapid growth when its share of national income has been falling sharply. This is accentuating inequalities due to the reason that relatively smaller pie of national income is being shared by overwhelmingly larger number of workforce. 

It is to be observed that the period of growth acceleration was also the period of significant decline in wages share in aggregate NDP, from an average of 38 per cent in the previous period to less than 34 per cent. Meanwhile, the share of the organised sector continued to show substantial increases but with a noticeable trend of significant increase of the share of ‘surplus’ in organized sector NDP. Surplus now accounts for about half of the income accruing to organized sector, a significant hike over three decades. The period of rapid growth has clearly been focussed on the organised sector in GDP terms, though regrettably not as much as on employment and the greater share of the benefits of the growth has accrued to the surplus-takers. This in a way clearly brings out the reality that is increasingly apparent within Indian society, of a growth process that has generated significant economic inequality and concentrated the gains among those who are not supposed to work as workers in the organised and unorganized sector or are self-employed in petty businesses to eke out their living.

Impact of Global recession on Employment

Global recession too has impacted employment especially in the export oriented sector. Labour Bureau of the Ministry of Labour & Employment with a view to assess the impact of global downturn on employment in the industries/sectors affected by the slowdown carried out a survey during the quarter October-December, 2008. 2,581 units spread over 11 States/UTs were surveyed in the sectors like mining, textiles, metals, gems & jewellery, automobiles, transport and IT/BPO. These sectors accounts for more than 60% to GDP in the year 2007-08. It was revealed that about half a million workers lost their jobs during October- December, 2008. The major impact of the slowdown was manifested in the export oriented units as the global demand dipped owing to recession. The most impacted sectors were gems & jewellery, transport and automobiles where the employment declined by 8.58%, 4.03%, and 2.42%, respectively.

Concluding Remarks

The pattern of growth being witnessed in India is woefully inadequate to provide livelihoods and the dignity that comes from work to a substantial number of those seeking it. The picture of near-jobless growth changes the whole notion of “inclusiveness”. There are obvious implications of emerging scenario where increments in GDP are not accompanied by near adequate increments in employment. There is need to shift from an obsessive and single-minded devotion to growth and focus more on employment by expanding investment in public sector employment generating programs like MNERAGA. The nature of the growth process India is facing is such that the new activities that displace old and traditional ones deliver much fewer new jobs relative to the number they displace. In the whole set of new activities that are additional to what existed, “value creation” is much less dependent on leveraging work and based increasingly on notions of meeting felt needs and offering quality. This result in a situation where value created goes less to finance wage bill but more to enhancing surplus incomes in the form of profit, rent and interest. It goes on to explain the phenomenon which is quite evident of increasing inequality and a worsening of income distribution in recent years.

Traditional economic theory assumes that when services dominate growth as is the case with India, the expectation is that employment growth would be more responsive to output growth. But, in practice, despite the expansion, growth of employment in this sector has been limited. Tertiary sector employment amounts to only around 25 per cent of the work force despite the fact that more than 55 per cent of GDP comes from services. This was evidently because GDP growth came from services like ICT services and financial services that delivered substantially in terms of revenues but little in terms of employment. The evidence increasingly demands for a close look at the growth strategy and make corrections to ensure higher employment growth. It will require steps to rebalance demand, change in the composition of output and alter technology choice to ensure a higher rate of growth of employment. Even if it calls for need for some sought of trade off between growth in GDP and employment growth, a case can be made in its favour.

By Saurabh Naruka