Underemployment is the problem, not joblessness

Alok Ray | Updated on March 19, 2019

Bleak future   -  Somashekar GRN

The dismal quality of graduates is impacting the job market. But even high skilled workers are finding the going tough

A big controversy has erupted over job creation under the Modi regime —in particular, over whether the unemployment rate in 2017-18 is, in fact, the highest in four decades as CMIE data as well as the officially undisclosed but reported in the press NSSO data seem to indicate.

Further, the estimated youth unemployment rate is almost three times the overall rate of unemployment. These empirical observations are further buttressed by the anecdotal evidence that tens of thousands of young people, including engineers and MBAs, are applying for a few peons’ jobs.

The government is proposing to release its own data to present a presumably rosier picture. But, whatever be the true extent of unemployment, a number of points need to be emphasised.

First, no data collection methodology is perfect or 100 per cent reliable. Also, data on employment in the organised sector are more reliable than that in the unorganised sector (accounting for some 90 per cent of total employment in India). But that has been the case all the time. So, just because the data are turning out to be unpalatable for a government, its suppression (that is, of NSSO data) is a dangerous trend which destroys the credibility of official statistics and a data collection agency whose reputation has been built over many decades.

Second, why is there a mad rush for a peon’s job by BEs and MBAs? For over the last few decades a proliferation of private engineering and management institutes with no quality control has taken place all over India leading to a surplus of graduates whose employability is in serious doubt, as has come out in various surveys.

Unemployable graduates

Third, some of these pass outs with questionable technical abilities and poor communication skills are laid off as soon as the employing firm is forced to cut costs or go out of business due to intense competition at home and abroad. Many of them are also burdened with student loans which makes them desperate to find some job. By contrast, even class IV public sector employees like peons have job security and the minimum salary and benefits of such jobs are no less than the entry level compensation package of engineering and management graduates from institutes of dubious standards.

For these reasons, for most of the ‘educated’ people in our country, any government job is a coveted one. On the other hand, with economic liberalisation and deregulation, the space for government is shrinking, accentuating the demand-supply gap for public sector jobs. So, unless the quality of our graduates is substantially improved with proper regulation and supervision, this sad state of affairs would continue, irrespective of which political party is in power.

Fourth, the intense competition from big firms enjoying the benefits of economies of scale, cheaper finance, better technology, deeper pockets, huge advertising budget and global marketing and distribution channels is making it difficult for small enterprises and petty traders to survive. That also shrinks the space for job creation in these sectors. Self employment has become the last resort for people not able to find any alternative job. Consequently, the demand for reservations of jobs for newer classes/castes in government and now even in private sector firms is becoming shriller.

Fifth, in the private sector, jobs are mostly being created either at the very low end for workers like delivery boys, security guards, car/cab drivers or at the top end with high skilled people like statisticians/mathematicians, quality engineers (specially in new areas like AI, robotics, cyber security), finance specialists and people with proven management abilities.

But, even for high skilled workers with experience, job security is now a thing of the past. With rapid technological progress, knowledge is becoming obsolete at a fast face. So, a person, in order to remain employable, has to be a life-long learner willing and able to move into new areas in demand. But it is easier said than done.

Consequently, for an increasing number of even high skilled people, the world is becoming a very cruel place. With shrinking employment prospects and rising job insecurity, the clamour for some kind of a Universal Basic Income (UBI) to provide a guaranteed social safety net for all is going to be stronger.

Finally, the basic problem in India is not unemployment but severe underemployment. Even the four-decade highest unemployment rate in India, according to NSS data, is only 6.1 per cent which is considered ‘full employment’ in many Western countries.

Hence, unless people can be transferred from low income jobs in agriculture and unorganised sectors to more higher earning employment in industry and services, a lot of employed Indians would still be having a poverty level existence.

The writer is a former Professor of Economics at IIM, Calcutta.

Published on March 19, 2019

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