The jobs and labour debate under scrutiny

Rising employment in agriculture, which is a labour surplus sector, only tends to lower productivity and real incomes of those who are dependent on it
Image used for illustrative purposes only. (Express illustration | Soumyadip Sinha)
Image used for illustrative purposes only. (Express illustration | Soumyadip Sinha)

Strange claims have been made regarding employment in the last couple of months by members of, and advocates for, the government. The first claim was that India is experiencing a ‘jobful’ economy; another that wages have been rising; and yet another that India does not need to create many jobs as there is a mis-measurement of the numbers joining the labour force as population growth rate has fallen. I will discuss each in turn based on the analysis of the government’s own National Survey Organisation’s (NSO) data.

It was claimed that there had been a 58 million increase in jobs between 2019 and 2022 and that this job creation is the highest in Indian history over a minimum of 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 UPA years was weak – a total increase of just 13.3 million. 

Such claims ignore that much of the claim of 58 million ‘jobs’ rests upon the increase in ‘employment’ in agriculture during Covid. In 2019, the number of workers in agriculture was 188 million; in the middle of 2020, that number had risen due to reverse migration by 45 million. For anyone believing that in 2021 the migration had reversed back to the cities, away from agriculture, the NSO data throws up a surprise: in 2021, 7 million 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 million per annum. 

However, as non-farm job growth had fallen post-2013 (to only 2.9 million per annum till 2019), the rate of exit from agriculture also fell. GDP growth fell sharply from 2016 for each quarter until Covid surfaced. India’s open unemployment rate in 2017-18 had risen to a 45-year high. To make matters worse, the ill-planned and sudden national lockdown following Covid caused massive reverse migration on a historic scale.  

Rising employment in agriculture in this labour surplus sector only tends to lower the productivity and real incomes of those who are dependent on it. Worse, it is the opposite of the structural change considered as productive growth of employment with a fall in the share of agriculture in GDP and a rise in non-farm employment. Most development economists would regard only a rise in employment in non-farm sectors (manufacturing, construction/mining/utilities, services), where productivity is much higher than in agriculture, as true employment increases.

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 are joining other family members to appear ‘employed’. The ILO’s definition----followed by 92 other countries, but not India---says that unpaid family labour engaged in work cannot be regarded as employment (as it is not remunerated). The Centre for Monitoring the Indian Economy, generating monthly data on employment since 2016, follows the ILO definition, and has shown consistent rises in unemployment and falls in labour force and workforce participation rates in India since 2016, when NSO was showing the opposite despite falling growth. 

It seems that NDA governments specialise in calling an increase in employment in agriculture as ‘jobs’: there was a similarly sharp increase in jobs in agriculture between 1999-2000 and 2004-5, by 24 million. 

Government economists have also claimed in recent months that real wages since 2017 have risen using the Ministry of Labour’s Labour Bureau data of certain sectors (which too have been rightly disputed by independent economists). The quality of Labour Bureau data on wages has always been suspect, apart from not being comprehensive. We estimated real wages between 2017 and 2022 from NSO’s Periodic Labour Force Survey (like the jobs analysis above) for agriculture, manufacturing, construction, and services. For each category – casual or regular wage/salaried, and self-employed – real wages have remained flat or fallen for the entire period, essentially settling the debate.

Finally, a senior-most government economic adviser has claimed that India’s population growth rate has fallen to 0.8% pa, and the total fertility rate fell to 2 (or below the replacement rate of 2.1) in 2021, so India does not need to create 10 million jobs a year. This claim assumes that those born today are starting 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 answer the question: how many jobs need to be created each year? The first is that India needed to pull millions out of agriculture even before the catastrophic reverse migrations of 2020 and 2021; they were underemployed (>42% of the 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 (Periodic Labour Force Survey data) – which is what a government economist calls ‘jobful’ growth. India had seen the share of workers in agriculture fall from 60% in 2000 to 42% in 2019, which shot up to 45.6% in 2022. 

The second group that needs non-farm jobs are youth, all getting better educated since the beginning of this century. They don’t want to work in agriculture, given continuing rural distress. A large sub-group of the youth is girls, who had achieved an 80% gross enrolment rate by 2015 in secondary education and who have aspirations to marry later than age 18, as a Nandi Foundation survey of teenagers had found (75% want to marry between 18-25 years). Yet, India has the world’s lowest female labour force participation, similar to Saudi Arabia.

The third group needing non-farm jobs is the openly unemployed. The current government inherited about 10 million unemployed; that number rose to 30 million, we estimate, by 2019. Thanks to poor economic management during Covid and a K-shaped recovery, open unemployment increased to 38 million by 2022 (PLFS data). 

In sum, India needs at least 10-12 million new jobs for these groups each year.

Prof santosh mehrotra

Editor of Reviving Jobs: An Agenda for Growth (Penguin, 2020)

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