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Jobless growth, ha'ah!
November 20, 2006
Given the announcements from the National Sample Survey's (NSS's) latest results from its large sample round in 2004-05, all those who've been talking about how reforms have led to jobless growth, especially those within the United Progressive Alliance, are in a serious bind.
They have to either accept that there was some problem with the data that suggested employment growth fell sharply in the post-reform years, from 2.6 per cent per annum in 1983 to 1993-94, to 1.2 per cent in the 1993-94 to 1999-00 period. Or that, industry, and the economy in general, shed labour while becoming more efficient, and now that this phase of trimming is over, the economy's creating jobs at more than twice the earlier pace -- latest NSS data show employment growth during 1999-00 and 2004-05 was 2.7 per cent per annum as compared to the population growth of around 1.7 per cent.
Indeed, for the 2000-01 to 2004-05 period, the growth has been even faster, at 3.8 per cent. This should put paid to the theory that the common man voted against the National Democratic Alliance since he was not finding a job as it is clear the upturn in employment had begun virtually mid-way through the NDA's tenure -- that it hasn't though is evident from the Prime Minister's speech at the HT Leadership Summit about how just half of India is shining!
If you accept the second point of view, the next problem that arises relates to poverty reduction. In 1993-94, we're told India's poverty level was around 36 per cent, and this fell to around 26 per cent in 1999-00.
That is, it fell by around 1.7 percentage points per annum (it fell 0.9 per cent per annum between 1983 and 1993-94). In 2004-05, however, the NSS data suggest two poverty estimates, 22 or 28 per cent. Why there are two estimates is a long story related to how two types of questions were used for different samples, but suffice it to say the 22 per cent figure of 2004-05 poverty levels correlates with the 1999-00 levels of 26 per cent. That is, poverty levels fell by just 0.8 per cent per annum in a period when jobs growth rose anywhere between two and three times!
It is true, the country's poverty experts will tell you, poverty estimates are not calculated on the basis of wages, but from consumption data. But eventually, the two have to give the same results -- if wages go up, consumption will logically go up since the poor are too poor to save, and consumption cannot go up unless wages do, right?
Which corroborates the point economist Surjit Bhalla has been making all these years, that the NSS data capture less and less of the country's actual consumption. Consumption levels in the country can be got in two ways, from the National Sample Survey type of consumption surveys or from the National Accounts, which is where the GDP numbers come from, by aggregating value added in various sectors.
In the perfect world, the total national consumption should be the same from both methods. But, in India, the share of total consumption that you get from the NSS figures is consistently getting smaller -- in the latest round, the NSS consumption figure is less than half got from the national accounts.
Indeed, the wage data from the latest NSS round also throw up some really wonky stuff. In a period when employment was growing at a snail's pace between 1993-94 and 1999-00, male wages in urban areas for those who were graduates or more rose 13.2 per cent per annum.
When the pace of jobs doubled, however, this wage hike fell nearly 60 per cent, to 5.3 per cent between 1999-00 and 2004-05!
Wage growth for men in urban areas for those who'd passed at least secondary school, according to NSS data, was supposed to be 12.3 per cent per annum in the 1993-94 to 1999-00 period and this crashed to a mere 1.6 per cent in the subsequent period. In real terms, this means salaries actually declined for all categories of male urban workers except for graduates -- in the case of urban women, real salaries fell even for graduates.
Anyone familiar with the market for jobs in the country, either as an employer or as an employee, would know that this simply isn't true. It also doesn't square with the country's consumption boom.
All of which points to a very serious problem in the manner in which data are collected/analysed in the country. Since such data not only affect specific policies (the Employment Guarantee Act being the best example of this since it assumes there is little employment growth), but also affects the government's overall policy stance (hence, the aam aadmi 20-point programme humbug), it is vital this be tackled on a war footing.
Till then, it's best to forget expert poverty estimates and just go out into the countryside and get a first look, just like the agriculture experts in the Planning Commission used to estimate crop production by looking at the monsoon clouds outside their windows!
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