Jobs for every Indian? A reality by 2009!

In two to three years, there could be zero unemployment in the country, the way the economy is growing. But this large increase in employment could be at very low wages, implying that it is not jobs per se, but the quality of employment that will increasingly become the issue.

These are the broad conclusions of a paper written by Economic Advisory Council Chairman C Rangarajan, Padma Iyer Kaul and Seema for the forthcoming issue of Money and Finance.

The paper begins with pointing out that the latest NSS survey (61st round) shows employment growth has never been faster (2.89 per cent from 1999-2000 to 2004-05) – if unemployment remains high at 2.39 per cent, that's because the number of those wanting jobs (the labour force) also grew at an exceptionally high rate (2.93 per cent), and the bulk of this comprised women.

The NSS numbers show two things, the paper points out. One, it debunks the notion of jobless growth in the post-reforms period.

Second, though the share of agriculture in the workforce has fallen, the sector still absorbed 30 million more people from 1999-2000 to 2004-05; there was a small increase (5.5 million) in those employed in manufacturing and around 17 million were absorbed in the services sector.

While the proportion of casual workers has fallen, that of the self employed has risen, a possible sign of the quality of jobs declining.

Whatever the quality of jobs, the increased employment resulted in the overall employment elasticity, which measures the impact of GDP growth on the growth rate in employment, more than tripling from 0.15 in the 1993-94 to 1999-2000 period to 0.48 in 1999-2000 to 2004-05.

The employment elasticity for agriculture rose from zero to an amazing 1.52, manufacturing from 0.26 to 0.34, mining from zero to 0.82, and so on.

Based on the trends, the paper argues that while The Report of the Task Force on Employment Opportunities (2001) had concluded India would solve its unemployment problem in 2012, this would now be achieved much earlier due to a higher economic growth and higher employment elasticity.

The paper projects that there will be zero unemployment in 2009 if the economy grows at 9.1 per cent and the labour force continues to grow at 2.93 per cent – the numbers, of course, vary considerably with the assumptions.

If overall growth is reduced to 8.5 per cent, zero unemployment takes place only in 2012 and if agriculture growth falls to 2 per cent, it can take till 2017 to achieve the target.

The worrying issue is that at full employment, agriculture will still account for more than half the work force and the bulk of the increase will take place in the informal sector where wages are low.

The report does not offer any explanation for why informal employment is rising faster or the role of tax and other policies in this.