Does high economic growth deliver better jobs for people? Not quite.
Gujarat, despite having the highest growth rate among Indian states, is ranked fourth from the bottom in a new report that seeks to take the jobs debate in India beyond unemployment numbers and examine the quality of work available.
Indian voters have repeatedly identified jobs as their biggest concern. But in the recent elections they voted back the Bharatiya Janata Party despite the unemployment rate being at a 45-year high.
To be fair, the unemployment data from the Periodic Labour Force Survey was suppressed until the elections were over. It had been leaked to the Business Standard in January but was contested by senior ministers for months, and given an official stamp only in June.
While the data is important – the unemployment rate of 6.1% is dramatically higher than the 2.2% of six years ago – the number alone does not tell us a lot about the nature of India’s job crisis.
Are existing jobs secure? Do both men and women have equal access to them?
To find a number that captures some of these concerns over what jobs ought to mean in a just society, Sabina Dewan and Divya Prakash of the JustJobs Network, a private research and policy organisation, have come up with the Just Jobs Index, in partnership with the Centre for Policy Research and supported by Azim Premji University.
The index measures five dimensions of employment and ranks states on their basis.
What is a good job?
“We focussed on the job itself rather than the worker experience,” said Dewan. “Most of our indicators are measuring some form of quality of work, in the sense that only the first dimension [employment] is looking at quantity.”
- Employment: This covers the labour force participation rate, the unemployment rate and the youth unemployment rate.
- Formality: This looks at how many among the total workforce have written job contracts or earn regular wages, compared to those engaged in informal work, which can range from self-employment, unpaid family work to working for informal businesses.
- Benefits: State expenditure on pensions, the proportion of workers who are part of a union and the proportion of workers that have pension funds make up this dimension. It is a measure of the social protection afforded to workers, especially vital in an economy where millions are one expensive illness away from poverty.
- Income equality: Since credible income data is hard to come by, the authors have used consumption data to calculate consumption-based inequality as one of the indicators of income inequality. The other indicators are the ratio of minimum wages to average real wages and the ratio of informal wages to average wages.
- Gender equality: This is quantified by the ratio of female to male employment rates, labour force participation rates and the ratio of their wages.
Framing the index in this manner – by looking at what jobs provide to workers instead of what skills or education workers have – allows the authors to define what a “good” job ought to look like, and how much progress Indian states have made in creating them.
Where is the data from?
Each of these dimensions is quantified by indicators based on official data from the National Sample Survey Organisation, the Labour Bureau, the Annual Survey of Industries, the Reserve Bank of India as well as the Periodic Labour Force Survey.
Not all of these datasets are updated annually, which is why the Just Jobs Index is based on official data collected over eight years between 2010 and 2018.
But Dewan hopes as the Indian government gets better at collecting annual data on jobs, the Just Jobs Index will eventually become an annual exercise.
“People look at financial data, or the Ease of Doing Business index on a regular basis,” she said. “Why don’t we have a tool that allows people to look at an index that matters most to regular people: jobs?”
How do the states perform?
Using these parameters, an index score was calculated for India as a whole and for 22 states. The states in the North East were excluded because sufficient data was not available for them, and Andhra Pradesh and Telangana were clubbed together since some of the data preceded their bifurcation in 2014.
Among the 22 states, many which posted higher economic growth rates than the national average did badly when it came to jobs.
This is best exemplified by Gujarat, which has the highest economic growth rate in India. While the state scored high on the employment dimension in all the other four that described the quality of the employment, it performed poorly.
Its score in the benefits dimension – which measures unionisation, state expenditure on pensions and the share of workers with provident funds – was the lowest among the states measured.
A breakup of the index into its various dimensions draws a clearer picture of which areas the states are underperforming in.
For instance, it is apparent that while some states are good at providing jobs to their people, every state does badly in providing workers with benefits like pensions and provident fund.
Kerala’s poor performance on the employment dimension is attributed to its high youth unemployment rate, with the highest unemployment among those with a university education. In the same period, the daily wage rate was nearly double the national average and migrant labour increased. This indicates a mismatch between the education people are acquiring and the jobs available to them in the state.
The states’ poor performance on benefits in turn could be partly linked to the large degree of informality in India’s employment landscape: workers who receive wages but have no contracts and no social protections.
Unemployment and informality tend to have an inverse relationship. States like Goa that performed poorly on the employment dimensions manage to keep informality in check, while Chhattisgarh, which had low unemployment also has high informality and so scores badly in the formality dimension.
Kerala recorded the worst score on the income inequality dimension, because it has the highest levels of consumption inequality in the country. This runs counter to the fact that Kerala has the second lowest poverty rate in the country after Goa. However, pockets within the state record a high incidence of poverty, and the gap between rich and poor in the state is wide.
Bihar and Uttar Pradesh ranked lowest on gender equality, which also mirrored their ranking in the overall index. The correlation between performance on gender equality and overall performance on the index shows the significance of women’s participation in the economy.
How can the government ensure that citizens have ‘good’ jobs?
Economists have known for a long time that employment elasticity of growth is falling in India – which means that for every percentage change in the Gross Domestic Product, the percentage change in employment is growing smaller.
Simply put, even higher economic growth rates are not delivering more jobs.
This is alarming in light of projections that India’s population will continue to increase for the next four decades.
So what is the solution?
Dewan and Prakash, the authors of the report, propose the establishment of a National Employment Strategy with a three-pronged focus.
First, generating labour-intensive jobs in industry and in agriculture.
Second, making investments in human capital, especially in quality education and universal healthcare, not just in short-term skill training. “As our economy becomes more technologically-driven, we are going to need people that have the skills to be able to engage with that technology. Three-month, six-month, one-year skills training cannot compensate for years of poor quality education,” said Dewan.
And finally, by strengthening labour market institutions through simplifying and rationalising labour regulation and providing a national minimum wage.
Not just the central government, even the states could make interventions, the authors point out. They hope the state level index would be useful for that.
