'Jobs will exist at very high levels or low levels of skill sets.'
'People, who are in middle level jobs, are the ones who are facing the problem as such jobs are fast disappearing because of technological advancement.'
In the concluding segment of his interview sith Rediff.com's Syed Firdaus Ashraf, Raghavan Jagannathan, editorial director, Swarajya magazine and author of The Jobs Crisis in India, explains how Prime Minister Modi's digitisation, formalisation and anti-black money drive in the short run actually impact jobs in a negative way.
"Everybody blames demonetisation, but its impact was only for three quarters," Jagannathan, below, says. "The real impact comes with GST because you have to formalise jobs which means you have to pay higher tax and your compliance costs go up initially."
What has happened to the concept of roti, kapda aur makaan? Today, is there any guarantee of makaan as EMIs are linked to one's job?
There are no guarantees in life. Ten thousand years ago we had to do everything to survive.
It is only the agricultural revolution that started the concept of a job -- then the industrial revolution and finally the services revolution.
Now we have arrived at a situation where almost everything is getting automated.
It means jobs will exist at very high levels or low levels of skill sets. It is easy to get a job of an Ola or Uber driver or as a delivery boy for Amazon or some work in a warehouse.
There is a boom of blue collar jobs and it is good for the poor because there are many jobs that pay anywhere between Rs 15,000 and Rs 25,000 per month.
People, who are in middle level jobs, are the ones who are facing the problem as such jobs are fast disappearing because of technological advancement.
At the top end there is high demand for jobs and at the low end too there is high demand, but the quality (of jobs) is not that great.
If you are going to deliver pizzas for the next three years travelling in polluted and crowded streets, it is not a 'good' job, but what you earn is indeed good.
Earlier, if these jobs were paying Rs 10,000, now they are shelling out Rs 25,000 with bonus.
Jobs and earnings are directly related to your output (in such jobs).
People are unwilling to work for minimum wages as you mention in your book. Don't you think employers must pay more rather than expect people to work on low salaries and exploit them?
This is where the government has to step in.
In India we have very high regulatory costs -- like provident fund deduction and employee's state insurance deduction.
Even if your salary is Rs 15,000, you only get about Rs 9,000 in hand.
It is difficult to survive on Rs 9,000 in a city like Mumbai even if you stay in a slum. You must at least get Rs 12,000 in hand if you are earning Rs 15,000.
Such regulatory things must come at a later stage in life when you earn a salary of Rs 25,000 or Rs 30,000.
In the early stage (of a job) social safety must either be subsidised or abolished altogether.
In your book you mention that if one does not find alternative employment, then it must be taken for certain that one's present employer is actually doing charity. Please explain this.
Many people confuse job loyalty with the fact that you actually cannot get another job.
In case of government service, most non-skilled jobs are actually public charity.
When you are hiring a peon, why employ thousands just to move files?
In private sector offices e-mails can be sent to the next guy so you don't need these peons.
Prime Minister Modi is ensuring that physical file movements stop. Why do you need peons? They are actually living on public charity.
Is this restricted to government jobs for peons?
Even in private companies. Suppose you own a large company, you have not sacked some peons because it is a very low-cost operation.
I think people need to realise that without skills you are actually a recipient of charity.
In your book, you mention about paper wealth creators who do not generate jobs. Can the concept of a permanent job itself be considered a Luddite thought, as we are transforming more into a gig economy?
The world before agriculture was a gig economy. Everybody had to do things on their own.
Today, we are coming back to the situation where a large number of people -- not all -- will have to think of short-term jobs, save money, wait for the next option and then invest in skills.
Permanent jobs are not there even in automobile companies, as 70 to 80 per cent of the work is being done by robots.
So most jobs will actually be outside the company -- like running a garage.
It may not be a gig, but a business, but even that will change. Today's car needs repairs, but tomorrow cars may not need repairs so your garage work will also come down.
You make an interesting point in your book that there are no jobs, yet there is a cash surplus of $7 trillion in the world. Can't this cash, in some way, be used to create more employment?
The problem is that this cash rests mainly with tech companies and some very large companies, mostly in the US and Europe, and they do not have great opportunities to invest.
Logically, it would be very good. Say, for example, Apple has $280 billion and it says it will invest $30 billion and build great rural roads in India.
Their return would be higher compared to if they invest in the US treasury where they get 3 per cent interest.
They can do that, but investing in India's rural roads has a long gestation period. There are risks involved and also exchange rate risks.
The money which is accumulating at one end of the global economy is not being put to use in such (rural road) projects.
So at the end of the day, Apple invests more in tech, which speeds up automation because they are comfortable with tech and they are not comfortable in investing, say, with some skill building job in India as it looks more like charity for them till it starts giving returns.
Money is huge, but that money is creating more technology, not jobs.
Don't these companies with a huge cash surplus know this? Or is it that they don't care (about building rural roads)?
Human beings invest typically in an environment where they are most comfortable.
So whether it is Steve Jobs or his successor Tim Cook, he will invest in the US treasury where he will get 3 per cent returns, which is safe according to him, rather than invest in the rural roads of India, where he may get 20 per cent returns. Tim Cook may think what will happen if, tomorrow, PM Modi swallows my money.
Outside their own developed economies, these companies are very uncomfortable, but post Brexit even in their own countries they are feeling the jitters.
(US President Donald J) Trump too is talking of protectionism. The economic environment is changing and people tend to remain invested in their core economies.
Globalisation is going through de-globalisation.
Could you explain why you call MGNREGA a partly defeatist solution?
You can dig a hole and fill it, but it does not serve any economic purpose beyond giving you money. In that sense, MGNREGA is defeatist because basically it is creating artificial jobs.
The same thing is with MUDRA.
The government can't give you a job, but it can give you a loan. You sell pakoras and make some money.
Now both MGNREGA and MUDRA are absolutely necessary from a social point of view, but essentially they are not solving any long-term problems. They are just like giving an unemployment allowance.
In the case of MUDRA, the government gives a loan. In many cases, the loans turn bad so it is like giving a donation. The same thing with MGNREGA -- you are getting a salary.
Both are just two ways of transferring money.
But these schemes are necessary or else there will be a proletariat revolution as Karl Marx predicted if you don't give anything to the poor.
MGNREGA and MUDRA are social sector schemes and meant to prevent social unrest, but ultimately they don't do much for the economy.
They don't create productive capacity.
The Modi government has announced more than 100 schemes -- like Skill India, Startup India, etc. Are they helping people get jobs?
Modi has done 3 things: Digitisation, formalisation and anti-black money schemes. All these things in the short run actually impact jobs in a negative way, be it demonetisation or GST (the Goods and Services Tax).
Everybody blames demonetisation, but its impact was only for three quarters.
The real impact comes with GST because you have to formalise jobs which means you have to pay higher tax and your compliance costs go up initially.
The short-term impact of formalisation is always slightly depressing, but in the long term it will be beneficial.
The government gets more revenue in the long term and it will likely spend more money which might start creating jobs.
However, the government is an inefficient spender. If you leave Rs 15 in my hand I will spend and create jobs.
And the minute I pay Rs 15 as tax it goes to the government and we don't know where it will be used. It may go into wasteful expenditure or some freebies and not do anything in terms of creating jobs.
Government spending is always more inefficient than private spending as private spending has a direct impact on jobs and consumption.
The government may invest in building roads, but there will be some gap and time lag by the time the impact is evident in the economy.