The Hindu Business Line : Productive jobs key to poverty reduction

Enlarging labour market opportunities is the key to reducing poverty and improving the standard of living for a large majority of Asia's workers and their families. This can be best achieved by transitioning out of agriculture into industry and services. Employment levels in these sectors can be raised by policies that promote improvements in productivity and incomes and an enabling environment for private sector initiatives and market forces, says S. Sethuraman.

Surfing for opportunities: Enlarging the labour market is key to reducing poverty.

INDIA, widely recognised as an emerging global power, is yet to come to grips with the challenge of generating employment on a massive scale — the only way to alleviate the dire poverty afflicting over 300 million, the largest concentration in any country. The number of poor becomes much larger if the benchmark of people earning less than two dollars a day is to be applied.

After the dismal record of the anti-poverty schemes so far, some with limited success, India is now embarking on a bolder programme of providing 100 days of guaranteed wage employment to an adult member in every rural household, in 200 districts to begin with, and it is intended to cover the entire country within five years.

Questions are being raised about the Government's ability to finance a programme of this magnitude on a sustained basis, given its fiscal stress, as well as in the effective implementation at different levels without leakages, ensuring fair minimum wages to the worker, creation of durable assets, and the real impact on poverty alleviation.

If the lessons of earlier employment schemes have been learnt and right choices are made on selection of works and there is adequate social and political mobilisation at the levels of implementation, the National Rural Employment Guarantee Scheme can bring some tangible benefits. How the picture unfolds remains to be seen.

Demographic dividend

In the upbeat assessments and projections for India over the coming two decades, its relative demographic advantage is touted as another plus factor, especially in relation to China, that is, its youth and working age group, of 18-60 years, would constitute perhaps the world's largest pool of human resource.

Thus, it is assumed, the country's rates of savings and investments would go up substantially contributing to sustained faster growth of the economy and higher living standards for most of the population.

Such a demographic dividend can be possible only if governments can mobilise capital and employ productively the growing share and number of potential workers. Large-scale job creation is the only way to reduce and eventually eliminate poverty.

Employment growth in India has lagged significantly behind the rate of accretion to the labour force, especially in the post-liberalisation era and the overall picture is one of virtual stagnation in organised sector employment despite higher growth of the economy of recent years (excluding the more recent rise in employment of professionals and other skilled categories in the Information Technology sector).

Employment: Top priority

Formal sector employment grew 1.4 per cent in the 1980s and less than 1 per cent in the 1990s against the 2 per cent growth of labour force over much of this period.

There has, however, been substantial addition to employment in the informal sector which neither guarantees fair wages nor social protection.

Whatever its failings, this sector is growing with the expansion of services of various types, though its precise contribution to the economy is yet to be adequately captured.

Employment has become the core issue of development in low-income countries, especially in developing Asia, where out of some 1.7 billion in the labour force (57per cent of the world total), at least 500 million are conservatively estimated to be unemployed or under-employed, according to the Asian Development Bank's latest publication on Labour Markets in Asia.

China and India together account for 71 per cent of Asia's labour force. Enlarging labour market opportunities for workers is key to reducing poverty and improving the standard of living for a large majority of Asia's workers and their families, the ADB says. This is because most workers depend on their labour to eke out an existence for themselves.

In the current deliberations at the United Nations on the Millennium Development Goals, creation of productive and decent jobs has become the single most important issue. Reporting on the world social situation, the UN says that millions are working but remain poor, nearly quarter of the workers not earning enough to lift themselves and their families above the one dollar per day poverty threshold. Youth unemployment rates are particularly high and make up as much as 47 per cent of a total of 186 million people out of work worldwide.

There is high youth presence in the informal economy and they often work longer hours and with low pay and are vulnerable to shocks in the labour market. Governments are, therefore, called upon to ensure that opportunities are expanded for productive jobs, which are also `decent' in terms of wages, conditions of work and social protection.

ADB study

The ADB study says though Asia has several fastest-growing economies, only some of them have done well in employing workers productively and generating good jobs while in many parts of Asia (India included), labour markets continue to operate with considerable unemployment and under-employment among their work-forces.

The challenge is not only to create productive employment for those currently unemployed but also to strengthen the economy's capacity to provide such jobs to absorb the growing labour force. A variety of growth-promoting policies would be critical if the objectives of full and productive employment are to be met. These would have to be complemented by policies to improve the quality of human capital along with removal of policy rigidities which may inhibit employment, it is noted.

Asia's labour force is expected to grow by 14 per cent over the next ten years and 24 per cent over the next 25. The ADB projects an addition of 245 million persons (in the 15-64 age group) to Asia's labour force by 2015 compared to 2005. This underlines the enormity of the challenge of ensuring productive employment.

While China accounts for a large percentage of this addition, the increase as a share of its current labour force would be low. Other countries have a higher percentage of additions to their labour force.

Labour force estimates/projections show that China's785 million in 2005 would grow to 842 million in 2015 but decline to 812 million by 2030. The corresponding figures for India are 460, 550 and 654 million respectively. In labour participation rates, China has 88 per cent male and 79 per cent female while India has 86 per cent and 45 per cent, the lowest for female participation in Asia though just above those of Pakistan and Maldives. The labour market outcomes in Asia present key development challenges, the ADB notes. Ensuring that this labour force is used productively will not be easy. There are already vast pools of under-utilised labour, notably in South Asia where the majority is employed in agriculture and where low productivity of work has led to "unacceptably high rates of poverty".

The study says transition out of agriculture into industry and services holds the key to improving labour market outcomes over the longer term but meanwhile informal sector work in Asia presents alarming features of worker exploitation.

The ADB does not share the view that labour market rigidities are entirely to blame for lack of growth in informal sector employment in India. Besides addressing any specific rigidity that affects the labour market, it says, complementary policies are even more important.

These should include strengthening of social protection to provide more effective coverage for both formal and informal sectors for a well-functioning labour market. Policies that promote improvements in productivity and incomes and an enabling environment for private sector initiatives and market forces as well as export push should help raise employment in the modern sector (industry and services).

(The author is a former Chief Editor of PTI.)

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