N Chandra Mohan: Jobs in the times of crisis

Employment in India was not insulated from the 2008 meltdown

Union Minister for Labour and Employment Mallikarjun Kharge observed that “despite the global slowdown, India not only maintained its employment standards but also succeeded in reducing unemployment from 8.3 per cent in 2004-05 to 6.6 per cent in 2009-10”. Addressing a conference on innovation in public employment programmes, he attributed this to the success of public employment policies and stimulus measures initiated in response to the 2008-09 crisis. His statement is noteworthy since little is reliably known whether adequate employment opportunities were generated during that period.

What the minister was citing were unemployment rates on a current daily status basis – that capture the average volume of unemployment in a day – of the National Sample Survey Organisation (NSSO) and not the Labour Bureau that comes under his ministry. Interestingly, the Labour Bureau also conducted a survey on employment and unemployment for 2009-10 that showed a massive rate of unemployment of 9.4 per cent on a usual principal status basis that refers to people looking for work for a longer part of the year. Nearly one in 10 workers being out of work obviously did not fit the minister’s narrative!

To be sure, the global economic crisis of 2008-09 certainly affected employment since India is now a more open economy. The share of exports and services in GDP has steadily gone up from 14 per cent in 2000-01 to 22 per cent in 2010-11. So the loss of orders as demand severely contracted in advanced countries is bound to result in huge job losses in the country’s export sector. Despite this dismal situation, the minister stated that the employment front held up owing to public policies and stimulus measures. The big question is whether there is data to shed light on this robust pace of job creation.

The official Economic Survey noted that organised sector employment that typically accounts for 13.69 per cent of the labour force was extremely sluggish from 2004 to the onset of the global crisis in 2008. This is unlikely to have improved thereafter. The ministry of labour and Employment has so far conducted 12 successive quarterly surveys on the effect of the global slowdown between October-December 2008 and July-September 2011. The focus is on export sectors like textiles including apparel, leather, metals, automobiles, gems and jewellery, transport, information technology (IT) and business processing outsourcing (BPO) and handloom.

According to these surveys – especially those conducted between October-December 2008 and January-March 2010 – the global crisis did impact employment. The earlier quarters, October-December 2008 and April-June 2009, in fact, showed a net decline in employment across most of these industries like textiles, apparel and metals. But there was a turnaround thereafter, especially since July 2009. Overall, there was a net addition of 850,000 jobs that were solely generated in the IT/BPO sector, while it remains weak or negative in most of the other labour-intensive export sectors.

This hardly indicates any broad-based upswing in overall job creation so as to result in falling unemployment rates. This picture of an IT/BPO-centric process of employment creation persists even in the later surveys. The labour ministry’s surveys indicate that this sector continues to account for 80 per cent of the 2.3 million jobs generated till September 2011. In sharp contrast, job creation in important labour-intensive export sectors like textiles, including apparels, has been negative in six out of the 12 surveys. The global crisis, thus, continues to affect the employment front in the export sector.

The upshot is that the labour ministry’s surveys confirm the views of quite a few economists that the rapid recovery of the Indian economy from the global crisis has been jobless in nature, notwithstanding the good news regarding hirings in the IT/BPO space. This is why they remain equally sceptical of the results of the NSSO survey for 2009-10 that indicated a sharp fall in unemployment rates cited by the minister. How can there be falling rates of joblessness on a daily status basis when there is only limited growth of employment despite a booming economy between 2004-05 and 2009-10?

However, researchers are also unlikely to be enthused by the Labour Bureau’s estimate of unemployment as high 9.4 per cent on a usual principal status basis for 2009-10, which is four times higher than the comparable NSSO’s estimate for that year. India is not a republic of joblessness. Longer-term unemployment rates are unlikely to capture the impact of the global crisis on GDP growth in India. They generally remain low because in a country with pervasive poverty, few can afford to remain unemployed for a long time. They take up casual odd jobs or self-employment in the unorganised sector to eke out a living.

The upshot is that there is a critical need for reliable and timely data on employment creation in the Indian economy. If the Labour Bureau’s capabilities can be beefed up in this direction, there is no reason why the labour minister cannot cite his ministry’s surveys on employment and unemployment the next time.

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