Jobs

Women Are Bearing the Brunt of India’s Unemployment Problem

This piece is an extension of a piece on unemployment I wrote sometime back. Nevertheless, you don’t have to read that piece in order to make sense of this.

Honestly, this is probably the most disturbing data driven piece that I have ever written, despite the fact that I started writing on the issue of unemployment more than half a decade back, when it wasn’t very fashionable to do so.

The brunt of India’s unemployment problem is being borne by women. This is not to say that the men are having an easy time. They aren’t, given that many more men enter the labour force than women.

Nevertheless, the proportion of women who are employed and get paid was low to start with, and it has become even lower over the years. This, at a time, when more and more women are going to school and college.

As the All India Survey of Higher Education for 2018-19 points out: “Total enrolment in higher education has been estimated to be 3.74 crore with 1.92 crore male and 1.82 crore female. Females constitute 48.6% of the total enrolment.” But all this education isn’t helping them find paid employment.

Let’s start with the unemployment rate for men and women. The following chart plots this data since January 2016.

Source: Centre for Monitoring Indian Economy.

The above chart tells us several interesting things.

1) The unemployment rate for women is significantly higher than that of men. In February 2021, the unemployment for women stood at 12.39% whereas for men it stood at 6.23%.

2) The unemployment rate for women in February 2021 is much lower than it was in January 2016, when Centre for Monitoring Indian Economy (CMIE) published the unemployment data for the first time. Have things improved? Keep reading to know the answer.

3) The peak unemployment rate for women during covid was 29.22% as of April 2020. The rate has fallen since to 12.39%, as of February 2021. Again, have things improved?

In order to answer the questions raised above, we need to understand how unemployment is defined. (For those who have read the earlier piece I wrote on unemployment, the next few paragraphs may seem like a repetition, which they are. I have repeated these paragraphs, simply because it is important for every piece to stand on its own, so that first time readers can also read and understand it easily).

A person is categorised as unemployed “because of a lack of job and where such a person is actively looking for a job”. The word to mark here is actively. Hence, a person can be categorised as unemployed only if he doesn’t have a job and is searching for one.

As the Centre for Monitoring Indian Economy (CMIE) puts it, a person categorised as unemployed, “should be unemployed on the date of the survey, should be actively looking for a job in the 100 hundred days (approximately three months) preceding the date of the survey and should be willing to take up the job if a job is found.”

They further point out: “A person is considered to be actively looking for a job if such a person has contacted potential employers for jobs, contacted employment agencies, placement agencies, appeared for job interviews, responded to job advertisements, online employment sites, made applications, submitted resumes to potential employers or reached out to family members, friends, teachers to look for jobs from them.”

To put it in short, waiting for a job offer to come, is not considered as actively looking for a job.

Let’s move on and plot the next two charts, the labour participation rate for men and women.

Source: Centre for Monitoring Indian Economy.

Source: Centre for Monitoring Indian Economy.

Before we interpret these charts, we first need to define what labour participation rate is. Labour participation rate is the ratio of the labour force to the population greater than 15 years of age. And what is the labour force? As per CMIE, labour force consists of persons who are of 15 years of age or more, and are employed, or are unemployed and are actively looking for a job.

Now we are in a position to interpret the above two charts. Let’s do that pointwise.

1) The labour participation rate for women is miniscule on the whole. In February 2021, it stood at 9.42%. What does this mean? It means that a very small proportion of women over the age of 15, are employed and get paid for it or are unemployed and are actively looking for. a job. And the tragic part is that this rate is falling. It was at 17.7% in May 2016. Since then it nearly halved.

2) The labour participation rate of men is considerably higher. It was 67.82% in February 2021, even though it has been falling. Hence, two in three men over the age of 15, are employed and are getting paid for it, or are unemployed and actively looking for a job. For women, this ratio is less than one in ten. That’s the difference between the two sexes and it’s huge. 

3) Urban women are in a much worse position on this front. The labour participation rate for urban women stood at 6.56% in February 2021. The rate had peaked at 16.58% in August 2016 and has been falling ever since. What does this mean? It means that it is more difficult for a woman to be employed and get paid, if she is in urban India than in comparison to rural India.

Also, the dramatic fall in the rate since August 2016, tells us that once a woman loses a job or a source of income, it is very difficult for her to get it back. And finally, very few women in urban India are stepping out of their homes to go to work and get paid for it. This has only increased post the spread of covid. The labour participation rate for women was 9.92% in January 2020. It’s not at 6.56%.

4) Now comes the worst part. Between January 2016 and February 2021, the number of women greater than 15 years of age has gone up by 5.41 crore to 49.49 crore. Hence, the number of women who have entered the working age population has gone up by 12.26% (5.41 crore expressed as a percentage of 49.49 crore). On the other hand, the female labour force, has shrunk by 2.75 crore to 4.66 crore. In January 2016, it was at 7.41 crore. This is a collapse of 37% (2.75 crore expressed as a percentage of 7.41 crore).

Let me just repeat this again. While the working age population for women over the last five years has gone up by 12.26%, the female labour force has collapsed by 37.11%. This also explains the fall in unemployment rate for women, given that much fewer women are actively looking for a job. Many women who haven’t been able to find jobs, have stopped actively looking and simply dropped out of the labour force.

Economists have struggled to come up with an explanation for this phenomenon. One possible explanation lies in the fact that the number of jobs available haven’t grown at the pace that could accommodate the new individuals, both men and women, entering the workforce. Hence, in a patriarchal society, men in deciding positions, have offered jobs to other men, forcing women who have searched and not found jobs to stop actively looking for a job and drop out of the labour force altogether.

5) Let’s take a look at the overall population. The working age population, between January 2016 and February 2021, has gone up from 93.85 crore to 105.8 crore, this implies an increase of 11.95 crore. Nevertheless, the number of people employed or unemployed and looking for a job, that is the total labour force, has fallen from 44.76 crore to 42.85 crore, or by 1.91 crore.

So, the working age population has increased by 11.95 crore between May 2016 and February 2021, but the total labour force as such has fallen by 1.91 crore. What does this really mean?

While, the total labour force has shrunk by 1.91 crore, 2.75 crore women have dropped out of it. This basically means that the number of men in the labour force has gone up.

Hence, the brunt of India’s unemployment problem is being borne by women. Women who lose their jobs find it difficult to find a new one and over a period of time simply drop out of the labour force. Many women who enter the labour force and actively look for jobs, are unable to find one and eventually stop searching and drop out of the labour force.

Given that chances of men finding a job are higher, they continue to look for a job and the situation is not as bad as it is for women. Between January 2016 and February 2021, number of men who crossed the age of 15 and entered the working age population, increased by 6.54 crore to 56.30 crore.

During the same time, the number of men entering the labour force (that is either they were employed or were unemployed and actively looking for a job) increased by 83.62 lakh to 38.19 crore. Hence, in this case of men, the labour force at least hasn’t shrunk.

6) Given that more and more women are dropping out of the labour force, it makes it easier for the men who don’t drop out of the labour force to find a job, from the opportunities that come up. (I am using the word easier here and not easy. Kindly appreciate the difference between the two).

7) Urban women are likely to be more educated, but their labour participation rate is very low. Hence, what that means is that they are unable to utilise their education to work and earn money in the process.

8) Now let’s take a look at how things have been post-covid.  In January 2020, before covid had struck, the working age population had  stood at 103.13 crore. By February 2021, this had jumped to 105.8 crore, a jump of 2.67 crore. Meanwhile, the labour force as of January 2020 stood at 44.24 crore. It has since shrunk to 42.85 crore, by 1.39 crore. So, post-covid, the working age population has gone up by 2.67 crore, but the labour force has shrunk by 1.39 crore.

How have the women done on this front? The working age population post covid for women has gone up by 92.23 lakh whereas the labour force has shrunk by 78.03 lakh. Again, more women have dropped out of the labour force than men, given that the labour force has shrunk overall by 1.39 crore. Also, do keep in mind that the fact that a lower number and proportion of women enter the labour force in the first place.

To conclude, the world celebrated the international women’s day a few days back (on March 8). On that day, the corporates and the government institutions talked about the importance of the women who worked for them. The social media influencers talked about women. Many women talked about what it means for them to be a woman.

But almost none of them talked about one of the most important issues at hand, the fact that Indian women are bearing the brunt of India’s unemployment problem.

If you are reading this(man or woman) please share it with your friends and family. The first step towards solving any problem is knowing and acknowledging that it exists.

All You Wanted to Know About India’s Economic Contraction This Year

The National Statistical Office (NSO) published the first advance estimates of the gross domestic product (GDP) for 2020-21, the current financial year, yesterday.

The NSO expects the Indian GDP to contract by 7.7% to Rs 134.4 lakh crore during the year. The GDP is a measure of the economic size of a country and thus, GDP growth/contraction is a measure of economic growth/contraction. Data from the Centre for Monitoring Indian Economy (CMIE) shows that this is the worst performance of the Indian economy since 1951-52.

Let’s take a look at this pointwise.

1) This is the fifth time the Indian economy will contract during the course of a financial year. The last time the Indian economy contracted was in 1979-80, when it contracted by 5.2%, due to the second oil shock.

Before 1979-80, the Indian economy had contracted on three occasions during the course of a year. This was in 1957-58, 1966-67 and 1972-73, with the economy contracting by 0.4%, 0.1% and 0.6%, respectively.


Source: Centre for Monitoring Indian Economy.

Hence, in the years after independence, the Indian economy has seen two serious economic contractions, the current financial year is the second one.

2) One way the GDP of any country is estimated is by summing the private consumption expenditure, investment, government expenditure and net exports (exports minus imports), during the year.

The government expenditure has always been a small part of the Indian economy. It was at 5.6% of the GDP in 1950-51. It has gradually been going up since then. In 2020-21, it formed 13% of the GDP, the highest it has ever been. This tells you the times that we are living in. The government expenditure as a part of the GDP has been going up since 2013-14, when it was at 10% of the GDP. Hence, the government has had to spend more and more money to keep the growth going over the last five to six years.

Given this, while the spread of the covid-pandemic has created a massive economic mess this year, the Indian economy has been slowing down for a while now. This is the broader message that we shouldn’t miss out on, in all the song and dance around the economic recovery.

3) If we leave out the government expenditure from the overall GDP figure, what we are left with is the non-government GDP. This is expected to contract by 9.5% during this year, the worst since 1951-52. What this also tells us is that the non-government part of the economy which will form 87% of the economy in 2020-21, is in a bigger mess than the overall economy.

4) This isn’t surprising given that investment in the economy is expected to contract by 14.5% during the year. What does this mean? It first means that for all the positivity that  the corporates like to maintain in the public domain about the so-called India growth story, they clearly aren’t betting much money on it.

As the new twist to the old proverb goes, the proof is in the pudding. During the period October to December, the new investment projects announced, by value, fell by 88%, and the investment projects completed, by value, fell by 72%. This is a period when corporates were talking up the economic recovery big time.

5) It is investments into the economy that create jobs. When the investments are contracting there is clearly a problem on that front. It also leads to the question of what happens to India’s so-called demographic dividend. One fallout of a lack of jobs has been the falling labour force participation rate, especially among women, which in December 2020 stood at just 9.28%. This is a trend that has been prevalent for five years now and Covid has only accelerated it. More and more women are opting out of the workforce.

6) Getting back to corporates. The profitability of Indian corporates went through the roof between July and September. This when the broader economy was contracting. How did this happen? The corporates managed to push up profits by driving down costs, in particular employee cost and raw material cost. While this is corporates acting rationally, it hurts the overall economy.

This means that incomes of those working for corporates and those dealing with them (their suppliers/contractors etc.) have come down. Net net this will hurt the overall economy and will eventually hurt the corporates as well, because there is only so much cost-cutting you can do. Ultimately, only higher sales can drive higher profits and for that the incomes of people need to grow.

7) It is hardly surprising that investments are expected to contract during the year, given that private consumption expenditure, the biggest part of the Indian economy, is expected to contract by 9.5% during the year. Ultimately, corporate investment leads to production of goods and services that people buy and consume, and things on the whole don’t look too good on this front.

In fact, even in 2019-20, the last financial year, the private consumption expenditure had grown by just 5.3%, the worst in close to a decade. This again tells us that while covid has been terrible for the economy, things weren’t exactly hunky dory before that.

8) The final entry into the GDP number is net exports. Typically, this tends to be negative in the Indian case, simply because our imports are much more than our exports. But this year that is not the case with net exports being in positive territory, the first time in four decades. This has added to the overall GDP. But is this a good thing? The exports this year are expected to contract by 8.3% to Rs 25.8 lakh crore. In comparison, the imports are expected to contract much more by 20.5% to Rs 24.8 lakh crore.

What does this tell us? It tells us that the demand for Indian goods in foreign countries has fallen because of covid. At the same time, the contraction of Indian imports shows a massive collapse of demand in India. Non-oil, non-gold, non-silver goods imports, are a very good indicator of consumer demand and these are down 25.3% between April and November this year, though the situation has been improving month on month.

9) There is another way of measuring the GDP and that is by looking at the value added by various sectors. If we were to consider this, agriculture growth during the year remains sturdy at 3.4%. While, this is good news on the whole, it doesn’t do anything to change the fact that close to 43-44% of the workforce is employed in agriculture and contributes just 15% of the economic output.

Come what may, people need to move away from agriculture into professions which add more value to the economy. This hasn’t been happening at the pace it should.

10) The non-agriculture part of the economy, which will form around 85% of the economy this year, is expected to contract by 9.4%, This clearly isn’t good news.

11) Industry is expected to contract by 9.6%. Within industry, manufacturing and construction are expected to contract by 9.4% and 12.6%, respectively. The construction sector is a big creator of jobs, especially jobs which can get people to move away from agriculture. With the sector contracting, the importance of agriculture in the economy has gone up.

12) The services sector is expected to contract by 8.8%. Within this, trade, hotels, transport, storage and communication (all lumped into one, don’t ask me why) is expected to contract by 21.4%. This isn’t surprising given that people continue to avoid hotels and travelling, thanks to the fear of the covid pandemic.

13) The GDP during 2020-21 is expected to be at Rs 134.4 lakh crore.  The GDP during 2019-20 was at Rs 145.6 lakh crore. Given this, when it comes to the GDP growth during 2021-22, the next financial year, the low base effect will be at play. Even if the GDP in 2021-22 touches the GDP in 2019-20, we will see a growth of 8.4%. Nevertheless, even with that sort of growth we will be just getting back to where we were two years ago. In that sense, the covid pandemic along with the slow growth seen before that, has put India’s economy back by at least two years.

To conclude, the economy will do much better in the second half of this financial year than the first half. In fact, it already is.

The question is whether this is because of pent up demand or covid induced buying or is a genuine economic recovery already taking place. I guess, there is a little bit of everything happening.

But how strong the economic recovery is, will only become clear in the months to come, as the covid induced buying, and buying because of pent up demand, start to dry out.

Watch this space!

 

Rising Corporate Profits Aren’t Good News for Indian Economy

Salaam seth salaam seth kuch apne layak kaam seth,
Aap to khaayen murgh musallam apni to bus rice plate. 
­– Shaily Shailendra, Annu Mallik (now known as Anu Malik), Annu Mallik and Kawal Sharma, in Jeete Hain Shaan Se.

Corporates have reported bumper profits for the period July to September 2020.

This led a friend, who is generally unhappy with most of my writing given that he dabbles in the stock market which just keeps going up, to quip: “How are the corporates making profits if the economy is not doing well?”

This is an interesting question and needs to be addressed. Having said that, the right question to ask is, how are the corporates making profits with the economy not doing well.

Let’s look at it pointwise.

1) A newsreport published in the Business Standard on November 17, 2020, considers the results of 2,672 listed companies, including their listed subsidiaries, for the period July to September 2020. During this period, the net profit of these companies touched a record Rs 1.52 lakh crore, up by 2.5 times in comparison to the same period in 2019.

2) There is a base effect at play here, with last year’s low base making profits this year look very high. During the period July to September 2019, telecom companies faced massive losses. Their losses have come down during the period July to September 2020. Take the case of Vodafone Idea. The company reported a loss of Rs 50,000 crore last year. The loss during July to September 2020 was much lower at Rs 6,451 crore. Similarly for Airtel, the loss came down from around Rs 23,000 crore last year to Rs 776 crore this year.

These losses pulled down overall corporate profits by close to Rs 73,000 crore, during the period July to September 2019. This time around the losses of these two telecom companies were limited Rs 7,227 crore. Hence, these two companies had a disproportionate negative impact on the overall corporate profits last year. The same hasn’t happened this year and in the process has ended up pushing up the overall corporate profit growth this year.

3) Interestingly, companies have managed to report an increase in net profit despite shrinking sales. The Business Standard report referred to earlier suggests that the net sales of these companies shrunk by 5.2% during July to September 2020. This is the fifth consecutive quarter when the sales of listed companies have shrunk. Depsite shrinking sales, profits have gone up.

4) Economist Mahesh Vyas of the Centre for Monitoring Indian Economy, looked at a sample of 1,675 listed manufacturing companies. He found that their combined net profit stood at Rs 72,600 crore, despite their net sales shirking by Rs 96,100 crore.

5) The question is how have companies managed to increase their net profit, despite doing less business than last year, leading to lower revenues. There are sectoral reasons at play. Thanks to the ongoing case in the Supreme Court, the banks did not have to report bad loans as bad loans. This has led to banks setting aside lesser money to meet the losses that may arise from these bad loans. This has clearly pushed up the profit number in the banking sector.

More specifically, the companies managed to cut more costs than they saw a fall in sales and thus pushed up their net profit.  Take the case of the manufacturing sector that Vyas has considered in his analysis, while their sales shrunk by Rs 91,600 crore, their operating expenses came down by Rs 1,33,100 crore or around Rs 1.33 lakh crore. The companies managed to drive down the cost of raw materials thanks to a favourable shift in trade terms and drawing down their inventories.

6) Other than driving down raw material cost, companies have also managed to cut down on employee costs. Economist Sajjid Chinoy of JP Morgan in a column in The Indian Express writes that net profit of companies went up despite shrinking revenues because “firms aggressively cut costs, including employee compensation.” “Indeed, a sample of about 600 listed firms reveals employee costs (as a per cent of EBITDA) was the lowest in 10 quarters,” he writes further.

A survey carried out by the Mint newspaper and Bain found that half of the companies had reduced employee costs by either firing employees or cutting their salaries.

The above points explain why corporate profits have gone up disproportionately despite shrinking revenues. Let’s try and understand pointwise why this is not good for the Indian economy.

1) A major reason for raw material costs coming down is a favourable shift in trade terms. What does this mean? No company produces everything on its own. It uses inputs which are produced by other firms. In difficult times, companies are able to drive down the cost at which they purchase things from their suppliers, that is, inputs. The suppliers are other companies, which have  to drive down their costs as well, and this is how things are pushed down the hierarchy.

How do suppliers and suppliers to suppliers drive down their costs? They also try to shift the trade terms in their favour and at the same time cut employee costs, like companies have.

2) This leads to what economists call the fallacy of composition or what is good for one may not be good for many. A simple example of this is someone going to watch a cricket match. He stands up to get a better view of the game being played and he gets a better view. But then the person behind him also needs to stand up to get a better view. And so the story continues. In the end, everyone is standing and watching the match, instead of siting comfortably and enjoying it. To repeat, what is good for one, may not be good for many.

How does this apply in the current case? When companies cut down on input costs, they are obviously paying a lower amount of money to their suppliers or not buying new raw material or as much raw material as they did in the past, to increase their inventory.

By cutting down on employee costs, they are either paying a lower amount of money to their employees or simply firing them. The suppliers in turn have to cut their costs in order to continue to be profitable or lose a lower amount of money. So, the cycle continues and in the end leads to lower incomes for everyone involved.

3) This leads to what the economist John Maynard Keynes called the paradox of thrift. With incomes coming down, people spend a lower amount of money than they did before. It is worth remembering here that ultimately one man’s spending is another man’s income, leading to a further cut in spending. Even those who haven’t seen a drop in their income or been fired, cut down on their spending. They are trying to save more, given the risk of them getting fired and not being able to find another job. This is the psychology of a recession and it is totally in place right now.

4) One of the ways of measuring the size of any economy or its gross domestic product (GDP), is to add the incomes of its different constituents. This means adding up rents, wages, interest and profits. While, profits of companies have been going up, individual wages have been going down, leading to lower spending and hence, lower private consumption. This explains why despite corporate profits of listed companies increasing at a fast pace, the GDP during the period July to September 2020, contracted by 7.54%.

5) An August 2019 report in the Business Standard said that the combined net profit of companies that make up for the BSE 500 index was at 2.31% of the GDP. Other studies suggest that this figure has constantly been coming down over the years. Despite the fact that listed companies form a small part of the Indian economy, their influence on the initial GDP figure is very high.

A large part of the Indian economy is informal. The measures representing this part of the economy cannot be generated quickly. In this scenario, the statisticians assume the informal economy to be a certain size of the formal one. Corporate profits are an important input into measuring the size of the formal economy. This is something that needs to be kept in mind while looking at the economic contraction of 7.54%. .

To conclude, while corporate profits going up is good news for the companies, there are many ifs and buts, that need to be taken into account as well, and on the whole the way these profits are being generated, it’s not good news for the Indian economy.

Also, over a longer period, the only way to grow profits is by growing sales. This will start hitting the Indian corporates sooner rather than later.

Why Indians Love Govt Jobs

jobs
Indian Railways, the country’s largest employer, recently advertised for 90,000 vacancies. It got over 2.8 crore applications for it.

My calculations suggest that the number of applicants is around one-fifth of India’s youth workforce, which is actually looking for a job.

Nearly two lakh people applied for 1,137 constable vacancies in Mumbai Police. A newsreport suggests that this included 167 MBAs, 423 Engineers and 543 postgraduates. There were 3 individuals with an LLB and 167 individuals with a Bachelors in Business Administration, on the list.

Sometime back,129 engineers, 23 lawyers, a chartered accountant and 393 postgraduates in arts, were among the 12,453 individuals who were interviewed for the job of a peon, in the Rajasthan Assembly Secretariat. In total, 18 posts were to be filled up.

In May last year, nearly 25 lakh individuals wrote the exam for 6,000 Group D posts on offer in the West Bengal government.

There are many other such examples, which have been popping up over the last few years. The moment a government job is advertised, a huge number of people apply for it. The question is why?

India is currently going through a phase, where its working age population is growing at a faster rate than the overall population. This is thanks to the fact that people are having fewer children. Nearly a million Indians are entering the workforce every month. This amounts to nearly 1.2 crore a year, or around two and a half times the population of New Zealand.

This stage in any economy is referred to as the demographic dividend. As people enter the workforce and find jobs, earn and spend, the economy grows at a faster rate than it has in the past, and pulls many people out of poverty.

Of course, this is how things are supposed to happen, in theory.

The fact that so many people are applying for government jobs suggests that there are not enough jobs going around for India’s demographic dividend. This is countered by the idea that not everyone applying for a government job is unemployed.

It is just that we Indians love the security of a government job and hence, the huge number of applicants.

Is that true?

India’s unemployment is best represented by the term underemployment. What does this mean? It means that everyone who is looking for work all through the year, does not find it.

Data from Annual Report on the Employment and Unemployment Survey suggests that only three in five Indians looking for a job all through the year are able to find it. This basically means that 40% of India’s workforce is unable to find work all through the year. We may call this underemployment, but this is nothing but unemployment.

Further, there is a huge amount of disguised unemployment in India’s agriculture sector, which produces around 12% of the gross domestic product, but employs nearly 46% of the workforce. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

A bulk of the Indian workforce is employed in the informal sector. Estimates vary from anywhere between 65% to 92%. And these individuals are badly paid. This is something that the government acknowledges as well. As the Economic Survey of 2015-2016 points out: “The informal sector should… be credited with creating jobs and keeping unemployment low. Yet, by most measures, informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector.”

The point being that informal employment pays badly. The average daily earnings of a casual worker in rural areas in 2011-2012 was Rs 138. In urban areas, it was Rs 173. A regular worker made Rs 298 in rural areas and Rs 445 in urban areas. Now compare this with a worker of a central public sector enterprise, who made Rs 2,005 per day, apart from having a secure job and several other benefits. This basically means that a casual worker working in rural areas made around 6.9 per cent per day of what the worker of a CPSE made in 2011-2012.

There is no reason to believe that this would have changed by now. This clearly explains why Indians love government jobs. It takes away the insecurity of working for the informal sector and at the same time pays much better. Who wouldn’t apply for a government job in such a case?

Let’s look at a little more recent data.

As the Report of the Seventh Pay Commission, released in November 2015, points out: “To obtain a comparative picture of the salaries paid by the government with that in the private sector enterprises, the Commission engaged the Indian Institute of Management, Ahmedabad, to conduct a study. According to the study, the total [monthly] emoluments of a General Helper, who is the lowest ranked employee in the government, is Rs. 22,579, [which is] more than two times the emoluments of a General Helper in the private sector organisations surveyed, at Rs. 8,000-9,500.”

Hence, the IIM Ahmedabad study, “on comparing job families between the government and [the] private/public sector, has brought out the fact that… at lower levels, salaries are much lower in the private sector as compared to government jobs”.

As per the Report on the Employment and Unemployment Survey, nearly two-thirds of self-employed and contract workers, make up to Rs 7,500 per month or Rs 90,000 per year. The per capita income in 2015-2016, for which the above data is valid, was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

As far as the salaried workforce is concerned, around 38% of them make up to Rs 7,500 per month. Hence, the salaried part of the workforce is in a much better position. This clearly shows that there is an economic incentive for even the educated lot to apply for low-level government jobs.

India’s underemployment problem can be solved with more job creation in the formal sector, which isn’t happening. As per the Centre for Monitoring Indian Economy, in 2017-2018, Indian companies scrapped projects worth $ 117 billion, which is the highest number ever. 40% of these projects were dropped in the period January to March 2018.

In such a situation, how will formal jobs ever be created?

The Economic Survey summarises it best: “The challenge of creating ‘good jobs’ in India could be seen as the challenge of creating more formal sector jobs.”

The column originally appeared on Firstpost on April 24, 2018.

Modi government refuses to acknowledge India’s jobs crisis

narendra_modi
Indian Railways, India’s largest public sector employer, recently received more than 28 million applications for 90,000 jobs posts, it had advertised for. As of March 31, 2017, the Indian Railways employed around 1.31 million individuals.

The ratio of the number of applicants to the number of jobs stood at a whopping 311:1.
The number of applicants was more than the population of Australia, which was a little over 24 million in 2016. It was around 6 times the population of New Zealand, which in 2016, was around 4.6 million.

Using data provided by the Central Statistics Office of the government of India, we can estimate that the number of Indians between the ages of 15 and 29, who are most likely to apply for these jobs on offer, are at 360 million (189 million males and 171 million females).

This basically means that close to 7.8% of the population in the age group that can be categorised as India’s youth has applied for the 90,000 jobs on offer at the Indian Railways. What this calculation does not take into account is the fact that everybody in the age group 15-29 is not looking for a job.

Many individuals in this age group are studying. In case of females, many are married at a young age and take care of the family. In some other cases, females have been pulled out of school or college, and are waiting at home to get married.

We need to adjust for this i.e. take the labour force participation rate of this age group of the population into account, and then recalculate the numbers.

The labour force participation rate for males in the age group 15-29 is 63.1% (as per NSSO June 2012). These are the proportion of people who are actually looking for jobs. For women it is 18.3%.

There are two explanations for the low female labour participation rate. One lies in the fact that many individuals in this age group are still studying. Further, the overall labour force participation rate for females is also very low at 18.1%, and this reflects in this age-group as well.

Taking the labour force participation rates into account, the total number of people actively looking for jobs in the 15-29 age group works out to 150 million (119 million males and 31 million females).

This means close to 18.7% (28 million expressed as a percentage of 150 million) of the population in the 15-29 age group, has applied for the 90,000 jobs on offer at Indian Railways. Or to put it a little simplistically, one in five individuals in the 15-29 age-group has applied for the jobs on offer in the Indian Railways.

This tells us the sad state of affairs for the one million youth who are joining the Indian workforce every month. Another factor at work here is that the government pays much better at lower levels than the private sector in India does, which obviously gets many people to apply.

The above figures clearly show the lack of formal jobs in India. This is a problem that the Indian government is not willing to acknowledge. Recently, Jayant Sinha, a junior minister in the Modi government, called India’s jobs crisis more of a data crisis, in a column he wrote for The Times of India, India’s largest selling English newspaper.

In his column he stated that 6.5 million new jobs were created in the retail sector between 2014 and 2017. While he didn’t state the source of this data, some digging around suggests that he borrowed this number from Human Resources and Skill Requirement in the Retail Sector, authored by KPMG, for the NITI Aayog, a government run think tank.

The 6.5 million jobs that Sinha talked about was basically a forecast, which Sinha passed off as the actual number of jobs created.

As far as the lack of data is concerned, the Labour Bureau carried out six household based Annual Employment-Unemployment Surveys (EUS) between 2010 and 2016. Of this, reports of five rounds have been released till date. (Makes us wonder why has the report on the sixth round been held back up until now).

The report of the fifth round was released in September 2016. One the major findings of the report was that only 60% of the Indians who were looking for a job all through the year, found one. This figure showed the bad state of jobs in India, very clearly. This finding was consistent with a similar finding reported in the report on the fourth round of the survey as well.

Recently, in an answer to a question raised in the Parliament, the government said, “On the recommendations of Task Force on Employment, however, this survey has been discontinued”. Basically, a survey which brought bad news has been discontinued and then the government goes around talking about lack of data.

There is enough data that suggests that India is facing a huge jobs problem. The so called demographic dividend is collapsing. The Modi government refuses to even acknowledge this problem. The first step towards solving any problem is to acknowledge it. If you don’t acknowledge a problem, how do you solve it?

The column was originally published on April 13, 2018, on AsiaTimes.