The Indian Employment Puzzle

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Very few jobs were created in the past six years. But the count of job seekers has been on the decline. How come?

Let’s begin with the bad news. According to the latest data on employment released by the National Sample Survey Organisation, while 60 million new jobs were created in India between 1999-2000 and 2004-05, the figure was a mere 1 million in the past six years (2004-05 to 2009-10). This implies that the country’s high rate of economic growth has not translated into more jobs. And that should worry policymakers, who tend to believe that growth is the panacea for most problems.

Now, let’s look at the good news. Despite the above trend, the number of unemployed people came down from 11.15 million in 2004-05 to less than 10 million in 2009-10. This seems unbelievable, given the country’s population growth and the fact that more people join the list of employables every hour. So, how does one reconcile these two contradictory trends?

A recent article in Economic and Political Weekly answered this question. It concluded that more and more Indians did not wish to work or chose to exit the labour force. So, the number of people available for employment fell from 470.14 million in 2004-05 to 469.87 million in 2009-10. And the number of people employed rose from 458.99 million to 460.17 million during the same period.

The ‘opting out’ phenomenon was more evident in the case of women; for instance, while 22 million new males joined the workforce between 2004 and 2010, almost a similar number (21 million) of females chose to stay at home. Most women who took this seemingly-brave decision were from rural areas, and primarily employed in the agriculture sector.

So, why did these women do this? One reason was the growing incomes of men, especially in villages. An indicator: while female wages were just a little more than 60 per cent of male incomes in rural areas, the figure was over 80 per cent in the cities. The National Rural Employment Guarantee Scheme also made a difference by pushing up wages in the private sector. Another reason was that ‘with increasing rural incomes, women moved out of low-paying self-employment activities choosing either to study or devote themselves to domestic duties’. And this happened in a ‘drought’ year—the NSSO carried out its survey in 2009-10—that spelt ‘appropriate conditions for women to seek distress employment, especially in rural areas’.

However, these trends don’t augur well for India. They seem to imply that we can attain higher growth rates with a nearly stagnant labour force. With productivity in focus, job creation could get short shrift from policymakers.