People's Democracy

Can Job-Loss Growth be Really Inclusive?

Veeraiah Konduri

THE results of the 68th round survey of the National Sample Survey Organisation (NSSO) on employment and unemployment reflect the deep-rooted convulsions that are taking place in the labour market in general and in rural India’s labour market in particular. The survey findings are based on a large sample of 1,01,724 households covering 7,469 villages and 5,268 urban blocks. The findings of the survey counter the government’s claim of inclusive growth and of benefits reaching out to a higher percentage of the working age population, vis-à-vis the overall population --- a claim which is typically coined in the policymaking circles as reaping of the demographic dividend. The survey, in fact, confirms the persistence of job-loss growth in India. 

The latest survey’s findings bring out three basic features. The first is about the transformational changes in Indian agriculture, the second relates to informalisation of the job markets and the third is about the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

FINDINGS IN

A NUTSHELL

It would be appropriate to consider a comparison of the results of 61st, 66th and 68th round surveys in order to assess the developments in job market during the UPA’s tenure, as this is the first government which has continued for more than one term in succession since India embarked on the globalisation policies.   

To present the findings in a nutshell, the rate of employment creation slipped from 39.2 per cent in 2009-10 to 38.6 per cent in 2011-12 while it was at 42 per cent in 2004-05. That means the nine years tenure over nearly two terms of the United Progressive Alliance saw our employment generation capacity going down by 3.4 per cent. This happened when the GDP growth graph rose more than nine per cent along with all three sectors witnessing upward change. (See Table 1 alongside.) The 68th survey findings are being interpreted in such a way, however, as if the fall in the growth rate of economy is the reason behind the slide-down in employment generation. The pace of economic growth is no doubt on a downturn for the last two years, but the downturn in employment generation goes far back, and the record over the last nine years which clearly indicates the job-loss growth.

TABLE I

Several studies about the development of capitalism in our society talk of the need of an economic system in which the overall dependence on agriculture for employment is replaced by dependence on wage labour. To put it simply, in a capitalist economy, gainful employment through industrialisation has to be higher than that in agriculture. Since independence, several analyses have criticised the government for not taking steps to reduce the pressure on agriculture. But for the first time now in India’s economic history, the overall dependence of the labouring population on agricultural work has come down to less than 50 per cent. Table 2, given alongside, reflects the sectoral composition in terms of employment, as the changes in abstract numbers. On an average, the table says, 840 people out of 10,000 opted out from agriculture between 2004-05 to 2011-12, which reflects the reduced potential of employment generation in agriculture. The table presents the distribution of workers (per 10,000) according to the Usual Principal Status by Industry in different rounds of NSSO surveys.

TABLE 2

The working age population -- labour force -- which stood at 400.8 million in 2004-05 (61st round survey of NSSO), increased to 423.9 million by 2009-10 (66th round survey) and further to 431.7 million by 2011-12 (68th round survey). That means the growth in workforce increased by 30.9 million between 2004-05 to 20011-12 whereas it could add only absorb 15 million during the last nine years in the actual working population. Though it looks like a great achievement, when compared to the levels of job creation during the period 2004-05 to 2009-10, it could only add up one million new jobs while the remaining 14 million jobs were added during the second term of the UPA, which is a major addition but comes in the form of jobs generated by the MGNREGA.

It is thus clear that the working population actually declined during the most sizzling phase of economic growth. But while less labour force is coming into the job market, the economy is using them as an instrument to displace the formal or regularised workforce. However, their inclusion in the informal sector is nothing but a loss for both types of labour. The creation of decent employment outside agriculture is one of the biggest challenges that confront India which is trying to achieve faster, sustainable and more inclusive growth, at least in the words of policymakers.

INFORMALISATION

OF WORKFORCE

Now we come to the second feature, i.e., informalisation of workforce. During the 11th Five Year Plan period the average GDP growth was eight per cent whereas the average annual growth in employment generation was down to a mere 0.6 per cent. This indicates the fact that a higher GDP growth did not translate into a higher rate of employment generation. Since the global depression, employment slid down further in tandem with the overall growth rate of Indian economy. In the interim period unemployment rate went up to 10.2 per cent.

A more critical structural shift in Indian labour market comes from the agriculture sector. The proportion of workers engaged in farm related activities now accounts for only 49 per cent. Of the remaining, manufacturing absorbed 24 per cent and the service sector, 27 per cent. The pace of employment generation in these sectors, in numbers as well as in percentage, slowed down, leading to a dramatic decrease even in the number of the self-employed. But the Planning Commission refused to acknowledge the fact as well as the survey results till recently. Self-employment came down from 25.8 crore to 23.3 crore between 2009-10 and 2011-12 --- a clear 2.5 crore fall. However, it is not that this reduction in self-employment was counter-balanced by any growth in formal employment. These 2.5 crore self-employed individuals who lost their livelihood joined the casual labour force which went up from 13 crore to 15.3 crore --- a clear indication of the informalisation of labour force. This shift reflects the fact that the labour force is moving away from low value employment in agriculture to underpaid employment in the informal sector instead of moving up on the value scale by becoming parts of the formal labour market.

TABLE 3

Table 3 helps us to understand the changing dynamics of labour market in India. All the figures are about the usual principal status. Decline in Labour Force Participation Ratio (LFPR), an indication of an economy’s inability to put to use the labour power for productive gain, is increasing, which is not a good indication. The LFPR was down from 40 per cent in 2009-10 to 39.5 per cent in 2011-12. The reason for the decline in labour force participation rate is the failure of manufacturing and service sectors to absorb the labour force that has moved out of agriculture; these people in turn had had to join the standing army of the unemployed or the casual labour force.

This indicates that the economy has kept aside a considerable section of the working age population, preventing them from taking part in nation building by being gainfully employed. Also, this indicates a decline of the share of labour in the GDP and national wealth.

When it comes to the women workforce, during the last nine years, it witnessed a steep reduction. As per the survey findings, it witnessed 90 lakh reduction in women workforce from causal labour.  Out of every 1,000 women capable of working, only 327 could be employed in 2004-05, and the proportion went down to 261 by 2009-10 and further to 248 by 2011-12. On an average, the rate of reduction of women in the workforce was around 4.5 per cent between 2004-05 and 2009-10, which slightly improved by 2011-12, thanks to the MGNREGA. As the chances of being employed by the rural economy are drying up, male workers are migrating to urban locations, leaving the agricultural operations to women workers. Had the MGNREGA not been there, the fate of women workers would evidently have been much worse.  

As for the third feature, the findings of the 68th round NSSO survey brought out an important fact about the MGNREGA which is being ridiculed by various sorts of thinktanks and self-declared experts. There has been a widespread misinformation campaign that the pressure of wages is increasing due to the high benchmark set out by the MGNREGA. The average daily wage received by casual labours in rural areas engaged in public works other than the MGNREGA work was Rs 121 whereas those engaged in the MGNREGA earned only Rs 107 a day. At the same time, the average daily wage received by casual labours engaged in works other than public works was Rs 170 in urban areas. This confirms that the MGNREGA is not functioning as an impediment in the job market.

After the implementation of the MGNREGA, the number of jobs generated by it went up substantially, as mentioned above, by around 14 million, out of which women accounted for an addition of 3.5 million. This is one third of those who lost their livelihood sources during the pre-MGNREGA period.

It is evident that while the agrarian distress is pushing the workforce to move out of agriculture and other rural employments in order to try their luck in urban areas, the rural as well as overall employment scenario would have much worse than this if only, contrary to the criticism being mounted by a few, the MGNREGA had not been there.

In sum, the 68th round of NSSO survey confirms that India is now undergoing a phase of what has been called job-loss growth. But job-loss growth excludes and restricts a considerably large number of working population from entering the job market, and this has its own spiralling effects on the economy in the long run. It is clear that any job-loss growth can never be inclusive in its nature, no matter what our policymakers shout from the rooftops.