The problem no one wants to face

Soon after I started working for NCAER as a consultant last year, my friend Raj Liberhan, Director of India Habitat Centre in New Delhi, asked me if I could help him organise a forum on the key, long-term economic policy issues.

We went back and forth on it for a few weeks and finally decided that it would be best to gather together some MPs and expose them to economists. Perchance, we thought, they might learn from each other.

The topic was employment. The reason: to disabuse the political class of the belief that employment is a consequence only or mainly of public works and/or other forms of direct intervention by the government.

Around 100 invitations were sent out by Raj in late July, mostly to MPs. Twenty confirmed that they would attend. I will not mention their names.

Suffice it to say that around half of them are prominent spokespersons for their parties, seen regularly on TV. The NCAER presentation was entrusted to Sunil Sinha, a young economist of great promise.

On the appointed day, September 30, Raj, Sunil and I met in the conference room at 9.45 am and formed a sort of reception committee for the MPs. Precisely at 10 am, Dr Manmohan Singh walked in. Then the wait began. By 10.30 not a single other MP had arrived.

In fairness to others who had, we started the presentation. The discussion, in which Dr Singh took an active part, finished at 12.30. Not a single other MP had arrived by then. And none came after that, either. The message was clear: employment was not an issue worth bothering about for our legislators.

And yet, now that the elections are upon us, MP after MP, party after party, is waxing eloquent about it. The NDA, defended for some reason solely by the BJP, says it has done a great job. The Opposition says rubbish, don't lie.

The first thing to note about this 'debate' is that no one really knows what has actually happened because the official data collection agencies are slothful beyond measure.

There is no uniformity and the data is old by the time it becomes available for analysis. This allows everyone to say whatever comes into his or her head. It is all very convenient.

But whichever way one looks at it, there is no gainsaying one stark fact: unemployment has grown by almost 5 per cent between 1994 and 2000, whereas in the previous decade it had declined by about 1 per cent.

Sinha brought out another most disturbing fact: even the people who make themselves available for employment have declined -- from 2.43 per cent during 1983--94 to 1.37 per cent during 1994-2000.

The huge growth in the number of self-employed could be an explanation, but we simply don't know what has really happened beyond the fact that in some way the increase in unemployment must be related to the low rates of public and private investment in the 1990s.

It also turned out that while in the 1980s there had been a fairly substantial growth in agricultural employment, this growth went missing in the 1990s.

In rural India, about 25 per cent of the population are landless. Evidence shows the net output growth and the employment elasticity of output in agriculture have declined very sharply. In Bihar, Orissa, West Bengal, and Andhra Pradesh there is growing unrest. It will spread to other parts of India if we don't watch out.

In mining and quarrying, electricity, gas and water supply, there was an actual decline in employment, clearly because of the sharp cuts in public investment. These industries are dominated by the public sector.

But manufacturing employment appeared to have grown very slightly from 2.26 per cent during the 1984-94 to 2.58 per cent during 1994-2000. But its share, which was 16.28 per cent in 1993-94, declined to 15.33 per cent during 1999-2000.

At the aggregate level also, the share of organised sector employment declined from 7.26 per cent in 1993-94 to 7.06 per cent in 1999-2000.

Everyone knows why this has happened. Since 1996, investment virtually dried up. If the heightened activity in the capital market is a sign, it is showing signs of reviving now.

But even if there is an investment boom matching or surpassing the one between 1993 and 1996, what is the order of employment that we are going to create, given that the new investment will be highly technology -- and capital -- intensive?

If about 700,000 people are joining the ranks of the unemployed educated every year, how are they are going to be accommodated?

I think the political class owes it to the country to explain two things. The first is that the days when everyone could expect a full-time, lifetime job are over.

The other is that wages/salaries are going to remain low forever. Unless this message is driven home consistently -- instead of the opposite one -- we will have serious social problems in about a decade.

The irony is that when the Planning Commission looked into the employment issue a couple of years ago, via the Montek Singh Ahluwalia and S P Gupta reports, it was the latter that came up with the more realistic approach.

Leave it to the unorganised sector to deal with the problem, it said and drew a lot of flak for it. In fact, this approach is absolutely right. This does not mean that we don't need to change policies designed to increase the share of manufacturing in GDP and employment. Of course we do.

But the sobering fact remains: even China where employment in manufacturing has grown so rapidly since 1985, does not expect to employ more than 120 million (up from the current 95 million) in manufacturing over the next decade and a half.

Not just this. Only around a quarter of them are expected to have lifetime employment, and wages are likely to remain at the current levels in real terms.

It is hard to see India escaping this outcome because it is well near impossible to provide a workforce of 330 million with gainful employment, on a permanent basis, for eight hours a day, for 30 years.

So politicians have a responsibility not to promise precisely the opposite. There is no way that they can deliver.

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