The Hindu Business Line : The myth of employment growth

According to a recent OECD report, India is creating more jobs than Brazil, China and Russia. India was creating 11.3 million net new jobs per year against 7 million by China, 2.7 million by Brazil and 0.7 million by Russia. The message was loud for the critics of globalisation — India’s growth was not ‘jobless’ after all.

But there is more to the OECD study beyond this happy note. According to the report, the growth in employment was entirely in the informal sector. Which means these jobs do not provide such benefits as provident fund, minimum wages and weekly holidays, and often involve long hours of work.

The share of the informal sector in the total employment is above 90 per cent against 53 per cent in China and 44 per cent in Brazil. This means that the quality of jobs in Brazil and China is better than that in India. While 50 per cent of the jobs in these countries provide long-term benefits, it is less than 10 per cent in India. Worse, the informal sector’s share in India increased from 92.7 per cent in 1994 to 94.1 per cent in 2005.

WAGE INEQUALITY

Also according to the OECD report, the inequality is rising. “High employment growth has gone hand-in-hand with wider wage inequalities over the past decade in China and India and persistently high wage inequalities in Brazil and the Russian Federation. This suggests that the international integration of Brazil, China and India has not been associated with higher relative wages of unskilled workers in these countries,” it says.

The implication is that few high-paid jobs are capturing most of the wage incomes. A large numbers of Indian workers are living on subsistence wages. The problem of inequality is spreading its tentacles from Brazil and Russia to India and China.

There has been a substantial rise in wages in the manufacturing sector in China. Taking the wages in 1990 as 100, they have increased to 290 in 2005. The increase is smaller in Brazil, with the index at 130.

In Russia, wages have risen sharply in the last five years — the index going up from 100 to 190. Alas, not in India. The average wage index in the manufacturing sector in India fell from 100 in 1990 to 90 in 2005. The wages in the services sector have risen, but that does not take away the fact of declining wages in manufacturing. Globalisation, if it is good, must lead to increase in wages both in manufacturing and services sectors. The unemployment level is also reported to be rising. In China, it declined from six per cent to five per cent of the workforce between 2000 and 2005. The drop was from 10 per cent to eight per cent in Russia, and 10 per cent to nine per cent in Brazil. But this has not happened in India; the level remains unchanged at four per cent.

The overall picture that emerges is of India creating more number of jobs, but mostly in the informal sector in contrast to Brazil, China and Russia. Wage inequality is rising as in other countries. Manufacturing wages are declining in contrast to their increasing in other countries. The unemployment has not shrunk as it has in other countries.

Yet, the OECD report is quoted as saying that India is creating more jobs! It seems the urban middle-class benefits from the few high-paid jobs in the services sector. This class is making a one-sided projection that India is creating more jobs. Is it also suppressing the various negative aspects of employment that are contained in the same report?

THE UNTOLD STORY

That said, how do we explain the contradictory findings? What is the story behind growth of employment alongside low wages? The current model promotes capital-intensive production by big companies. Handful of skilled employees get huge pay packets, but there are few openings for the unskilled — in services or manufacturing. The number employed in the organised sector is declining. The common man is helpless in this situation. In other countries he joins the ranks of unemployed, but in India he ekes out a living in the informal sector by making paper envelopes, pulling rickshaws, picking rags, and doing odd jobs. This is the secret of the large number of jobs created in India. Though presented as a great achievement, it is, in fact, a saga of poverty, inequality and helplessness.

The ability of the elite lies in convincing the downtrodden to accept their poverty gracefully. Thus many economists are telling the people that globalisation is good because more jobs are being created than in other countries. The effort is to convince the people that their low-paid informal sector jobs are ‘good’ and thereby convince them that the going is good and there is no need to upset the apple cart of globalisation that involves increasing informal sector jobs, inequality, lower wages and unrelenting unemployment.

(The author, an economist, is a freelance writer.)