From jobless to job loss


Contradictory narratives have been built around the issue of unemployment in the last few months. However, the most puzzling aspect is that the years of high economic growth have been years of joblessness too, especially amongst the educated youth, which is a cause of concern. Rahul Sapkal and Kaustubh Ban try to analyse the reasons for this trend.

Recent years, especially post-demonetisation (December 2016) followed by the introduction of Goods and Service Tax (GST) (July 2017), have generally been characterised by the period of “jobless growth” in India, as revealed by various media reports and micro-level studies.  In a quest to achieve higher economic growth, India’s slated pro-market economic reforms have turned out to be a folly. One of the direct manifestations of these targeted policies is the rising rate of unemployment among youth.

India’s unemployment rate stood at five per cent in 2015-16 compared to 3.8 per cent in 2012-13, according to the fifth annual survey of employment-unemployment published by the Ministry of Labour and Employment. According to the Centre for Monitoring Indian Economy (CMIE), an economics and business think-tank, as of 2018, unemployment in India had risen to 31 million individuals looking for jobs. The lowest unemployment rate in India was 3.4% (July 2017) but has now risen to 7.1%. The shrill debate on jobless growth in the absence of credible official data of the magnitude and character of the erstwhile National Sample Survey (NSS) database became quite controversial and even served fodder for electoral discourses preceding the General Elections, 2019.  The National Democratic Alliance (NDA) government reportedly withheld the release of the revised and refined Periodic Labour Force Survey (PLFS) till April 2019. However, after the declaration of election results on 31 May 2019, the Ministry of Labour and Employment uploaded the PLFS report for a larger public.  Economic reforms undertaken by the present government, assume that the structural problem of India’s growth trajectories could only be resolved by peddling pro-market strategies which will decontrol the private sector and by reducing the active state intervention in the market activities. The government also believes that the sluggish economic performance is largely externalised by the rigid institutional mechanism that constraints the employers ability to take its decision regarding closure of factories, mass layoff of workers and access external finances. As a result, the Indian economy is crawling on the path of low-development.

Debunking the unemployment debate

Official economists and politicians deny there is jobless growth, with claims of jobs having been created during the previous term of the government. However, evidence from multiple sources points to a far more serious crisis of employment generation than is accepted.

Figure 1 shows that there has been drastic decline in the net job creation in India. Despite the increase in the size of economy (i.e. gross domestic product or GDP), the employment growth has been poor for the given period. This phenomenon to a larger extent shows that we are witnessing a period of job loss growth. The job crisis among educated youth has often been described as a ticking time bomb, given that half of India’s 1.3 billion population is below the age of 25. According to the PLFS report, the paradox is the more educated one is, the more difficult it is to get hired. The unemployment rate among male job seekers with secondary-level education far exceeds joblessness among illiterates, in both rural and urban areas. A similar trend is seen among females. When educated youths are unable to find suitable jobs and are compelled to accept low-wage, low productive jobs, we push them to the margin of vulnerability and follow low path to development.

The report also indicates that the unemployment in current weekly status1 is 8.9 percent and usual status2 is 6.1 percent. In the weekly status, the unemployment rate is 9.6 percent in urban areas and 8.5 percent in rural areas. Similarly, in usual status, the unemployment rate is 7.8 percent and 5.3 percent in urban and rural areas respectively. Female workers both in urban areas had higher unemployment rate in both approaches as compared to male workers, while in rural areas it was obverse of urban picture.

Source: Ministry of Labour and Employment

Youth unemployment, i.e. unemployment of persons aged between 15-29 years showed a tremendous spike over the period, 2004-05 and 2017-18, irrespective of gender or rural or urban spaces, though the rate of increase over the period was higher for rural (4.5 or 3.2 times over the period) as compared to that for urban (2.1 and 1.83 times). What is far more serious is that the unemployment rate of rural young males increased the fastest (4.5 times) and as a result the gulf between rural male and urban male unemployment has considerably reduced over the years (from 4.0 to 1.3 percentage points). Though youth unemployment for both males and females in urban areas remained always higher, during this period wherein the urban female unemployment was always in double figures and in 2017-18 peaked at 27.2 percent. The youth unemployment in 2017-18 ranged from 13.7 to 27.2 percent, and these are worrisome figures.

The survey clearly shows that the vital metrics of Indian labour market is a cause for concern. Some serious aspects of the foregoing analyses need serious attention from the policy makers. A dramatic reduction in female labour and workforce participation rates, rise in and alarmingly higher macro unemployment rates in general and rising unemployment among educated youth pose not only economic problems but raise serious social concerns. Higher unemployment rate also indicates that the business promotion strategies of the government have failed to create new jobs for the youth, especially for the highly educated ones.

Fear of recession

Failure to create decent jobs and absorb new workforce pose another macroeconomic concern. When the person’s ability to demand decreases due to lack of earnings, it exposes various sectors to macro-shocks. As we see, since the beginning of April 2019, many firms in the automobile sector were forced to shut down factories for days and axe shifts. Lack of demand for automobiles have reportedly triggered massive layoffs of 3, 50,000 skilled workers in the last couple of months. Many commenters argue that it is the global slow-down in the automobile sector which has truncated the employment growth. However, policies premised on the belief that pro-market reforms will unleash economic growth rates, and labour flexibilities extended to firms will incentivise them to generate jobs, have failed to achieve the desired results. For all the signs that the economy is humming, if we don’t understand the current signals, sooner or later we will be engulfed in the period of recession.

1 The Current Weekly Status (CWS) approach to measuring unemployment uses seven days preceding the date of survey as the reference period. A person is considered to be employed if he or she pursues any one or more of the gainful activities for at least one-hour on any day of the reference week

2 The Usual Status approach to measuring unemployment uses a reference period of 365 days i.e. one year preceding the date of the survey of NSSO for measuring unemployment.

Rahul Suresh Sapkal

Rahul Suresh Sapkal is Assistant Professor, Maharashtra National Law University, Mumbai.

Kaustubh Bam

Kaustubh Bam is Final Year Student, Maharashtra National Law University, Mumbai.