Jobless growth continues in India

ASHOAK UPADHYAY | Updated on March 12, 2018 Published on February 21, 2012

Informal employment is not restricted to agriculture alone, but is prevalent in the urban economy as well.

India's growth since 2004-05 has been driven by labour productivity rather than employment increases.

The report on Global Employment Patterns 2012, released recently by the International Labour Organisation (ILO), is heroically sub-titled “Preventing a deeper jobs crisis”, even as the global economic crisis is deepening. It expresses a fond and vain hope thatits scholarly and detailed profiles of the labour scenario will be effective in protecting it from the warp and weft of a situation that it already considers rather hopeless; as it admits: “The policy space to boost recovery remains limited.”

So, at the outset, the report sounds the right tone — one of scepticism regarding recovery, and therefore, pessimism regarding the impact on the global workforce. It foresees increasing unemployment or what it calls “decent work deficits” this year.

Needless to say, the world's youth will be the hardest hit; the ILO figures for global unemployment for those between the ages 15-24 years are expected to be a percentage point higher than the previous economic crisis. At 12.7 per cent, that's a pretty steep number of fresh and energetic blood to be wasting away for want of “decent work.”

The ILO also finds that an additional 6.4 million may have given up hope of finding jobs and dropped out of the labour force. The report does not delve into the implications, but if history is any guide, that number of individuals will choose from a menu of anti-social occupations to vent their rage at being forced out of society's matrix.

The report finds that the global employment-to-population ratio is declining. As a result, the protracted attempt of developing nations to catch up with living standards of advanced countries is becoming all the more tenuous.

The ILO expresses this in terms of the standard productivity criterion to suggest that the gap between the workers in the developing and advanced regions is increasing.


The report's gloomy scenario regarding global employment rests on the assumption of weak investments, and absence of public policy to stimulate a climate for capital infusion. But its section on India suggests a contrarian view regarding the absence of employment, even when investments are on the uptick.

India's experience with growth and employment undermines the causal relationship between private investments in particular, and employment. This is what the ILO finds: “The robust growth witnessed in the region (South Asia), driven largely by India, has been mostly associated with a rapid rise in labour productivity, rather than an expansion in employment.”

Here's the interesting part. Up until the end of the millennium, that is just a year before the balance of payments crisis and the onset of India's liberalisation, “employment and labour productivity grew at similar rates.”


Right from 1991, “as global and domestic economic conditions improved, increased labour productivity became the driver of growth in the region. Between 2007 and 2011, labour productivity increased by 6.4 per cent on an average, while employment expanded by just 1.0 per cent. This situation is prominent in India, where total employment grew by only 0.1 per cent during five years till 2009-10 (from 457.9 million in 2004-05 to 458.4 million in 2009-10), while labour productivity grew by more than 34 per cent in total during this period.”

But productivity alone isn't to blame. South Asia has witnessed a fall in female labour force participation in recent years: “This has been most pronounced in India, where the participation rate for women fell from 49.4 per cent in 2004-05 to 37.8 per cent in 2009-10 for rural females, and from 24.4 per cent to 19.4 per cent for urban females. This drop in participation can only partly be explained by the strong increase in enrolment in education, because it has been evident across all age groups.”

The “main challenge”, as the ILO sees it is the “is not unemployment, but the high degree of informality that persists despite strong growth.”


In the usage of certain terms, such as “the working poor” or “vulnerable employment located mainly in the informal sector” the ILO echoes not just the Arjun Sengupta committee's remark that the informal economy accounts for the largest share of employment, but also the 66{+t}{+h} Round of the NSSO, that reported a significant rise in contract and casual labour usage.

But its location of informal employment in agriculture alone misses out the extent of informality that exists in the urban economy and in manufacturing, which is the organised economy. The Labour Bureau of Statistics of the US Department of Commerce that surveyed factory wage compensation across many countries, including India and China, based on data till 2005, noted the strong increase in informal contract employment on the shop floor. In more general terms, so did the 66{+t}{+h} Round of NSSO.

From a policy point of view, the ILO's notion of “working poverty” too is restrictive, for it rests on a yardstick of income: $1.25 per day. As in the case of the poverty line used by Indian policymakers, it hides real poverty, judged not just by the availability of a minimum income, but by the absence of access to education, health and, of course, food.

When incomes cannot sustain the means to a standard of living adequate to promote and sustain “productive” labour, when a family has to decide whether to spend on food, or medicine or education, and so leave out one or the other with that bare minimum income, what we witness is “working poverty.”

But the ILO is spot on, when it points to the implications of the South Asian and the Indian scenario on young and women. But it refers to the current crisis. What India has been witnessing is a demographic dream curdling into a nightmare, even as growth measured in GDP terms makes us the second-fastest growing economy globally.

Published on February 21, 2012

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