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N Chandra Mohan: Jobless growth and other Indian workforce riddles

NSSO data not only shows niggardly employment growth between 2004-05 and 2009-10, but strangely, also declining rates of unemployment

N Chandra Mohan 

The NSSO’s latest survey data not only shows niggardly employment growth between 2004-05 and 2009-10, but strangely, also declining rates of unemployment; the numbers just don’t add up.

The latest five-yearly survey data of the National Sample Survey Office (NSSO) for 2009-10 was eagerly awaited, to shed light on whether India’s economy generated adequate employment opportunities as it recovered from the global economic crisis of 2008-09. In the advanced countries, a modest revival in output occurred, but with rates of unemployment as high as 9.1 per cent in the US and 9.9 per cent in the European Union. Although India’s recovery was much more impressive, the big question was whether its experience was any different on the jobs front.

On the face of it, India’s experience is apparently similar to the advanced countries, as its joblessness rate was pegged at 10.8 per cent in 2010 by The Economist magazine. But this is obviously only a back-of-the envelope calculation, as the official number on the rate of unemployment till the latest NSSO numbers came in was eight per cent on a daily status basis in 2007-08. The last five-yearly survey pertains to 2004-05, which is too dated to provide answers to the country’s recent labour market performance.

Unfortunately, the anticipation with bated breadth for the 2009-10 numbers proved to be disappointing — especially for government officials, as the results raised the spectre of jobless growth. Although India’s GDP growth was a robust 8.6 per cent per annum between 2004-05 and 2009-10, its employment growth was marginal at only two million on a longer-term, usual status plus subsidiary status basis. On a daily status basis, the increase was only around four million person-days per year over this period.

The NSSO provides data on employment and unemployment according to three measures: longer-term of a year, weekly and daily. The innovation of its five-yearly surveys is the daily status rate that captures the average volume of unemployment in a day. The weekly status rates typically are higher than the longer-term usual status ones, while the daily status rates are the highest of the lot, suggesting a high level of intermittent unemployment. This is the one to focus on, as the work force is getting more casualised.

The puzzling aspect of the latest data is that it not only shows niggardly employment growth but also declining rates of unemployment, according to all the three status measures between 2004-05 and 2009-10. On a daily status basis, they declined from 8.2 per cent to 6.6 per cent over this period. On a longer-term basis too, they declined from 2.3 per cent to 2 per cent. Longer-term unemployment rates remain low, as in a country with pervasive poverty few can afford to remain unemployed for long stretches of time.

This anomaly of limited job growth and falling rates of joblessness is there in the 2009-10 data, as it shows a decline in labour force participation rates. In other words, there has been a significant fall in the share of people, especially females, who were working or employed or were seeking or available for work in the population. The employed and unemployed constitute the labour force. Here again, there is a decline in participation rates according to all the three status measures from 2004-05 to 2009-10.

Not surprisingly, government officials have been on the defensive and have been pooh-poohing suggestions of jobless growth. During the last week or so, there has been a spate of official reactions reported in the media regarding the faulty data collection of the NSSO; that insufficient probing questions have been asked to capture those willing to work, seeking work or available for work. There have been suggestions that NSSO survey work has been done by contract staff, and that this has affected the quality of data.

Far from reflecting jobless growth, the government’s spinmeisters have argued that the 2009-10 data when disaggregated by age shows a significant increase in the number of people in the working age groups who were willing to work — and that such growth lowered rates of unemployment! Declining labour force participation rates also reflect increases in post-secondary school enrollment and higher education, especially by those under 25 years of age, who dropped out of the labour force to study.

Such explanations do not address the conundrums of the latest data. No doubt, rising school and college enrollments are a sign of development since Independence, but why are they showing up in declining labour force participation rates only between 2004-05 and 2009-10? On a longer-term basis, labour force participation rates have been stable since 1972-73 — the year of the first five-yearly survey — in a 42-44 per cent range. But they drop from 42 per cent to 39.2 per cent from 2004-05 to 2009-10.

This also applies to female labour force participation rates that have been stable at 28 to 30 per cent since 1972-73 but fell sharply from 29.4 per cent to 23.3 per cent from 2004-05 to 2009-10. The big question is: why is a sign of all-round progress manifesting itself only between 2004-05 and 2009-10? Much is also being made of the fact that 2009-10 was not a normal year, as there was a severe drought in rural India.

But it was a significant year, as India recovered rapidly from the global economic crisis. The biggest disappointment in this context is that the 2009-10 numbers don’t add up. For a booming economy with growth averaging 8.6 per cent per annum, the employment elasticity — or rate of change in employment per unit of GDP growth on a current daily status basis is only a lowly 0.11 from 2004-05 to 2009-10.

To be sure, this is only a continuation of a secular trend of decelerating employment growth since the 1980s. Employment elasticities have declined from 0.52 during 1983 to 1993-94 to 0.28 later on and now 0.11. Applying this elasticity to the GDP growth of 8 per cent in 2009-10 shows much fewer jobs than the annual average 10 million opportunities generated before the global crisis struck. This shrinkage of employment opportunities is bound to swell the reserve army of the unemployed, but not in the latest 2009-10 data!

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First Published: Sun, July 10 2011. 00:08 IST