I will discuss three claims made by government economists, basing my analysis on the government’s own National Survey Organization’s (NSO) data, the Labour Force Surveys.
First claim: there has been ‘jobful growth’!
It was claimed that there was a 58 million increase in jobs between calendar years 2019 and 2022, the highest in Indian history over three years. The same authors also claim, bizarrely, that employment growth from 2004-5 to 2011-12 (India’s highest ever GDP growth period) during the United Progressive Alliance years was very weak – just 13.3 million.
Such claims ignore that most of the 58 million ‘jobs’ claim rests upon the increase in ‘employment’ in agriculture during Covid. In 2019, there were 188 mn workers in agriculture; in mid-2020, reverse migration raised it by 45 million. For anyone believing that in 2021, the migration had reversed back to the cities and away from agriculture, the NSO data throws up a surprise: in 2021, 7 mn additional people were working in agriculture compared to 2020. Between 2004-5 and 2011-12, 37 million workers exited agriculture, a good development, as non-farm job growth rose sharply to 7.5 mn per annum.
However, as non-farm job growth had fallen post-2013 (to only 2.9 mn pa till 2019), the rate of exit from agriculture also fell. GDP growth fell sharply from 2016 for each quarter until Covid broke. India’s open unemployment rate in 2017-18 had risen to a 45-year high. And then the ill-planned national lockdown caused massive reverse migration.
Agriculture is labour surplus, and rising employment in it lowers productivity and real incomes among those dependent on agriculture. Worse, it is the opposite of the structural change sought ― a fall in the share of agriculture in GDP and a rise in non-farm employment.
Worse still, most of this so-called increase in ‘jobs’ in agriculture since 2019 is in ‘unpaid family labour’, a form of self-employment where women, youth and children join other family members to appear ‘employed’. In ILO’s definition, followed by 92 other countries but not India, for no reason other than the NSO’s cussedness to not adopt definitions that ILO members, under India’s chairmanship in 2013 of the 19th International Conference of Labour Statisticians, had agreed upon. The Centre for Monitoring the Indian Economy, generating monthly data on employment since 2016, follows the ILO definition, and hence has shown consistent increases in unemployment, and reductions in labour force and workforce participation rates in India since 2016, while NSO shows the opposite, despite falling growth.
The second claim: real wages have increased recently!
Figure 1: Real Wages (in Rs. at 2011 price) by sector and type of employment, 2018-2022
Panel A: Agriculture & Allied
Panel B: Manufacturing
Panel C: Non-manufacturing
Panel D: Services
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(Source: Authors’ estimation and plot using PLFS unit level data.)
The second claim also does not stand up to scrutiny when we examine, based on Periodic Labour Force Survey (NSO), the entire workforces’ wage or earnings data. The wage data for casual or regular workers or earnings data for self-employed – whether in agriculture, manufacturing, non-manufacturing (including construction, mining, utilities) industries and services demonstrates that wages and earnings have stagnated for the last five years (Figure 1). This finding needs to be read with the fact that the NSO’s Employment-Unemployment Round between 2004-5 and 2011-12 had shown a sustained rise in real wages. However, they stagnated in 2013-2017.
It is fairly easy to understand why real wages have either stagnated or fallen over the last five years. The period 2017-18 was the year following demonetisation in late 2016, which had caused widespread damage to large parts of the economy, especially agricultural incomes as well as the entire unorganised sector.
Just as the economy emerged from demonetisation, a poorly designed Goods and Services Tax (GST) was introduced in July 2017, which subsumed 17 other central and state taxes. It caused widespread disruption, again to the unorganised sector, and especially to MSMEs, which were even less prepared to make the transition. The economy went into a gradual slowdown, with GDP falling in every quarter continuously till the pandemic.
Joblessness had reached a 45-year high in 2017-18 and with the continuous slowdown, joblessness continued to increase. Ten million were unemployed in 2011-12; it rose to 30 million by 2018-19, before COVID-19 broke.
The pandemic began with a lockdown announced at four hours’ notice for nearly 1.4 billion people, and brought the entire economy and transportation to a standstill. This pushed unemployment higher.
The third claim
Finally, the senior-most government economic adviser has claimed that because India’s population growth rate has fallen to 0.8% pa and the total fertility rate fell to 2 (below the replacement rate of 2.1) in 2021, India does not need to create 10 mn jobs a year. This claim assumes that those born today will start to work very shortly, which is obviously wrong. It takes them 15 years from birth to even complete eight years of education, and legally enter the labour market.
The claim also ignores three facts of critical significance to job creation. First, India needed to pull millions out of agriculture even before the catastrophic reverse migrations of 2020 and 2021, who were underemployed (>42% of workforce generating 15% of GDP). Because non-farm jobs were not growing fast enough to absorb the numbers looking for work, the number of workers in agriculture rose even in 2022 (PLFS) – which is what a government economist calls ‘jobful’ growth. The share of workers in agriculture fell from 60% in 2000 to 42% in 2019, and shot up to 45.6% in 2022.
The second group that need non-farm jobs are youth, who are getting better education since the beginning of this century and don’t want to work in agriculture, given continuing rural distress. Girls had achieved a gross enrolment rate of 80% in secondary education by 2015. They aspire to marry later than age 18, as a Nandi Foundation survey of teenagers had found (75% want to marry at 18-25 years). Yet, India has the lowest female labour force participation rate in the world, similar to that of Saudi Arabia.
Finally, the third group needing non-farm jobs are the openly unemployed. The current government inherited about 10 mn unemployed; that number grew to 30 mn, we estimate, by 2019. Thanks to poor economic management during COVID-19, and a K-shaped recovery, open unemployment grew to 38 million by 2022 (PLFS).
In sum, India needs at least 10-12 mn new jobs each year at least until 2030, after which the number of new entrants to the labour force could decline due to the slowing of population growth.
Professor Santosh Mehrotra is editor of Reviving Jobs: An Agenda for Growth, Penguin, 2020, soon to be out also in Hindi.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here.
