The case of Jobless growth

It is an economic phenomenon in which a macro economy experiences growth while maintaining or decreasing its level of employment. India faced jobless growth from period 2004-05 to 2009-10. The robust growth witnessed by India, has been mostly associated with a rapid rise in labour productivity, rather than an expansion in employment. The total employment grew by only 0.1 per cent during five years till 2009-10 (from 457.9 million in 2004-05 to 458.4 million in 2009-10), while labour productivity grew by more than 34 per cent in total during this period

Over-emphasis on services and neglect of the manufacturing were mainly responsible for this phenomenon. The number of people seeking jobs are growing in India and they need to be constructively engaged to avoid socio-economic conflict and arrest the increasing Informalisation in the economy.

Experts argue that the growth of manufacturing will be the key for growth in income and employment for multiple reasons. For every job created in the manufacturing sector, three additional jobs are created in related activities. The other is that manufacturing in India is scalable and has higher labour absorption in comparison to services.

2.2. Nature of Unemployment in India

♤ Since India is a developing country, the nature of unemployment is starkly different from the developed countries. In developed countries unemployment is primarily driven by a fall in demand. As the demand for goods and services fall, the industries have to stop the production thus rendering the workers jobless.

♤ But in India under-employment or disguised unemployment is a major concern. This is not due to the lack of demand for goods but due to the shortage of capital equipment for setting up new industries. This creates supply side constraints in the economy. Because of the lack of capital, India has not been able to commensurately meet the needs of the growing labour force in the country. This manifests itself in two ways- firstly, the prevalence of large scale unemployment in the urban areas; secondly, in the growing numbers engaging themselves in the agricultural sector resulting in disguised unemployment.

♤ The basic solution to the entire problem is faster rate of capital formation so as to enlarge employment opportunities. For this the government needs to encourage savings and their productive utilization in increasing the rate of investment.

♤ The state itself can participate in the process of capital formation by undertaking such development activities since the private entrepreneurs do not find it profitable to undertake. There is also a need for the government to increase and attract more foreign investment.

2.3. Measuring Unemployment

Currently, the National Sample Survey Office (NSSO) is the principal source of data on employment. Comparable survey rounds of sample populations are done once in five years. Ministry of Statistics and Programme Implementation (MOSPI) has decided to conduct quarterly and annual surveys of employment.

In measuring employment/unemployment in a country like India, certain specific features of the workforce need to be taken into account. The structure of workforce with dominance of self-employment and primary sector tends to depress unemployment rates in general. Inadequacy of the measure of unemployment in terms of open unemployment has, therefore, been well recognised by the method adopted by NSSO.

Therefore, National Sample Survey Organisation (NSSO) uses three different concepts.

♤ Usual Principal Status - A person is considered unemployed on Usual Status (US) basis, if he/she was not working, but was either seeking or available for work for the major part of the reference year. It is generally regarded as the measure of chronic open unemployment. Projections of labour force and employment have been made on the usual status concept, and qualified, where necessary, on the basis of the other two concepts below.

♤ Current Weekly Status - On the basis of a week as the reference period, a person is considered unemployed by Current Weekly Status (CWS), if he/she had not worked even for one hour during the week, but was seeking or available for work. The CWS unemployment rates also measure chronic unemployment, but with the reduced reference period of a week.

♤ Current Daily Status - The third concept of unemployment is the Current Daily Status (CDS), which is in terms of total person days of unemployment, and is the aggregate of all the unemployment days of all persons in the labour force during the reference week. The CDS is considered to be a comprehensive measure of unemployment, including both chronic and invisible unemployment.