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Tuesday, January 25, 2022

India’s jobs crisis is more serious than it seems


Last week, a law graduate in India applied for a job as a driver.

Jitendra Maurya was one of more than 10,000 jobless young people who turned up for interviews for 15 low-skilled government jobs in the central state of Madhya Pradesh. Many of them were overqualified – aspirants, according to one report, included post-graduates, engineers, MBAs and people like Mr Maurya, who is preparing for a judge’s exam.

“The situation is such that there are times when there isn’t enough money to buy books. So I figured I’d get some work [here], “He told a news channel.

Mr. Maurya’s plight sheds light on India’s acute job crisis. The pandemic wreaked havoc on Asia’s third-largest economy, which was already experiencing a prolonged slowdown. It is now on the mend, owing largely to pent-up demand and increased government spending.

But jobs are diminishing. India’s unemployment rate crept up to nearly 8% in December, according to the Centre for Monitoring Indian Economy (CMIE), an independent think tank. It was more than 7% in 2020 and for most of 2021.

“This is way higher than anything seen in India, at least over the last three decades, including the big [economic] crisis of 1991 [when the country did not have enough dollars to pay for imports],” Kaushik Basu, former chief economist of the World Bank, told me.

In most countries, unemployment is expected to rise in 2020. However, India’s rate outperformed most emerging economies, including Bangladesh (5.3 percent), Mexico (4.7 percent), and Vietnam (2.3 percent), according to Prof Basu.

According to the CMIE, even salaried jobs have shrunk. Part of this could be due to companies using the pandemic to reduce their workforce and cut costs. According to Azim Premji University research, young workers aged 15 to 23 were the hardest hit during the 2020 lockdown.

“There was a revolving door. We discovered that roughly half of those who had salaried jobs prior to the lockdown were unable to keep them “Amit Basole, a university economist, told me.

An Indian youth looks through papers as he stands in a queue to apply for a job at a jobs fair
An Indian youth looks through papers as he stands in a queue to apply for a job at a jobs fair

The pandemic is only partly responsible for the sharp decline in jobs, economists say.

“What has happened in India reflects the fact that policy is being made with little attention to the wellbeing of workers and small businesses, as we saw during the lockdown in 2020,” Prof Basu said.

For one, these dismal headline numbers don’t tell us the whole story about persistent joblessness in India.

The number of active job seekers in the working age population has fallen. The proportion of women, aged 15 and older, in the workforce is among the lowest in the world.

However, in India, unemployment primarily refers to educated young people looking for work in the formal economy, despite the fact that the informal economy employs 90% of the workforce and generates half of the economic output.

“Unemployment is a luxury afforded by the educated and relatively well-off. Not the poor, the unskilled, or the semi-skilled, “Radhicka Kapoor, a labour economist, agreed.

The more educated a person is, the more likely they will remain unemployed and unwilling to accept a low-paying informal job. The poor, on the other hand, who have limited access to education, are forced to accept whatever work is available to them.

As a result, unemployment figures don’t reveal much about the total supply of workers in the economy.

Three-quarters of India’s workforce is self-employed or works on a contract basis, with no social security benefits.

An overwhelming majority of jobs in India are informal

Only slightly more than 2% of the workforce has secure formal jobs with access to social security – a retirement savings scheme, health care, and maternity benefits – and written contracts lasting more than three years. Only 9% have formal jobs and have access to at least one social security source.

“The majority of India’s workforce is vulnerable and lives in precarious circumstances,” said Dr. Kapoor.

Earnings are meagre. According to surveys, 45 percent of all salaried workers earn less than 9,750 rupees ($130; £96) per month. That’s less than 375 rupees per day, the proposed minimum wage in 2019 but later dropped.

One reason for India’s endemic unemployment despite high growth is the country’s transition from a primarily agricultural economy to a thriving services economy – no other country of India’s size has seen growth led by services rather than manufacturing. India’s growth has been fueled by high-end services such as software and finance, which are staffed by highly skilled workers. Few manufacturing or factory jobs have been available that can accommodate a large number of unskilled or low-skilled workers.

According to Prof Basu, India’s joblessness is concerning because, even as the country’s growth is resuming, the bottom segment is performing worse than in most other countries. He believes that the government must control inflation, create jobs, and provide assistance to workers. Furthermore, Mr. Modi’s “politics of polarisation and hatred” are “damaging trust, which is one of the most important underlying drivers of economic development.”

Mr Modi, who came to power in 2014 on a promise of plenty of jobs, is offering financial incentives to key industries and launching an ambitious “Make in India” campaign to encourage domestic manufacturing. So far, none of this has resulted in a manufacturing – and job – boom, owing to low demand.

In the short term, many people, including Dr. Basole, believe that India urgently needs cash transfers or an employment guarantee scheme for the bottom 20% of struggling urban households to help them consume and repay debt. In the long run, the challenge is to ensure that all workers are paid a basic minimum wage and have access to social security.

“Until then we cannot have any meaningful reforms in jobs,” Dr Kapoor said.

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