Slow Growth in Employment

 

1.     Slow Growth in Employment

 

2.       First is the extraordinarily slow growth in regular employment. Regular employment in the organised sector over the last decade or so grew at only about 1%, while the rest of the average 6 to 7% growth in GDP came from the growth in output per worker or labour productivity. In contrast, during the earlier decades, when GDP grew on an average at less than 4%, regular employment grew at the annual rate of 2%. The recent drive to increase labour productivity is related to globalisation. International trade means increasing the importance of the external compared to the internal market, while corporations compete in the export market mostly by cutting costs to increase their international competitiveness. This usually means shedding labour force through mechanisation. For instance, if the labour force in a corporation is downsized to half at the same wage, labour cost per unit of output would also be halved. Let one example suffice to illustrate how this process is working in practice. Tata Motors in Pune reduced the number of workers from 35,000 to 21,000 but increased the production of vehicles from 1,29,000 to 3,12,000 between 1999 and 2004, implying labour productivity increase by a factor of four. The aggregate picture broadly conforms to this. According to the Economic Survey of the government of India (2006-07), total employment in the organised sector declined from 28.2 million in 1977 to 26.4 million in 2004, because the much talked about growth of the private organised sector under the reform policies of the government hardly compensated for the decline in employment by the public sector. Another telling piece of evidence against the belief that corporate-led industrialisation and greater direct foreign investment would promote more employment came from the headlines of The Times of India (7 July 2008). Long hailed as most dynamic in these respects, a recent comparison of the various states of India suggested Gujarat and Maharashtra have been among the slowest growing states in terms of creating either nonagricultural or manufacturing jobs.

 

3.       With regular employment opportunities growing far too slowly compared to the number of job seekers, more and more people are being pushed into the unorganized sector. Agriculture, in particular, has become even more overcrowded. According to the National Sample Survey (61st round), approximately 110 million agricultural workers (out of a total workforce of 400 million) found employment for 209 days in 2004-05 compared to 220 days in 1999-2000. People desperate for a livelihood join the ranks of the so-called self-employed in the unorganised sector, the fastest growing category, marked by long hours of work with negligible earnings, lack of any social security or labour protection and extensive use of child labour. More than half the hawkers of Kolkata, and more than one-third of the hawkers of Ahmedabad belonging to this category of the self-employed are retrenched industrial workers, now threatened once more with the corporatization of retail trade in this era of globalisation in the name of economic efficiency. This vast informal sector is increasingly becoming a refuge for people devoid of all hopes, and reminds one of the hell imagined by the great Italian poet Dante. On its gate is written, "You enter this land after abandoning all hopes".

 

4.       The second reason for growing inequality lies in the style of economic management pursued by the government. While opportunity for regular work is growing at a grossly insufficient pace despite a high growth rate of output, the government has become increasingly weary of spending more for social welfare like health, education, public distribution and social security for the poor. Government expenditure remained more or less steady around 22% of GDP throughout 2000-07, with health receiving 1.4% and education receiving 2.9% of GDP, on the average. The apparent reasons given are lack of "money" and poor public delivery system for social services. However, these are superficial justifications, and there is a more compelling reason which has come out into the open due to the financial crisis. Globalisation of finance made the government highly sensitive to the moods of the stock market and the financial sentiments of major players in that market. Even after the recent dwindling, India still has a relatively large foreign exchange reserves ($250 billion), but unlike China which has been enjoying export surplus for several years, our reserves come mostly from capital inflows exceeding balance of payments deficits, like deposits from non-resident Indians and portfolio investments by various international financial institutions. These are far more fickle in nature and can be withdrawn at a relatively short notice if the mood of the financial market turns sour. A main thrust of the pro-market government policy has been to keep the financial market happy by being on the right side of the international Monetary Fund and the World Bank insofar as they have a central role in shaping international financial opinion for banks, credit-rating agencies, and other financial institutions. This means following their economic guidelines in formulating policies. As a result, the government minimised its welfare spending by letting it stagnate as percentage of GDP even during the years of high growth. The cost of this squeeze of expenditure on social security, education and health falls mainly on the poor who cannot turn to the market due to lack of purchasing power and job opportunities.