Two studies and a tale of divergent views on employment in the country

One study points to a staggering drop of nine million jobs, the other says no jobless growth, but only the educated are getting employed

Jobless growth in recent years has been a topic of heated discussion among policy makers, economists and the general public. Two recent studies throw up interesting, albeit divergent, findings on the issue.

One of these studies—India’s Employment Crisis: Rising Education Levels and Falling Non-agricultural Job Growth—says employment actually fell by around nine million between 2011-12 and 2017-18 in the country.

However, the other study—Emerging Employment Patterns of 21st Century India—says there is no jobless growth, but that the growth is only creating employment avenues for the better educated.

What the first study says

The first study, penned by Santosh Mehrotra and Jajati K Parida, and brought out by the Centre of Sustainable Employment at the Azim Premji University, attributes the overall decline in jobs between 2011-12 and 2017-18 to tepid agricultural and manufacturing employment, which could not be offset by a corresponding spurt in construction and service sector jobs.  

The total employment in the economy stood at 474.2 million during 2011-12, and declined to 465.1 million during 2017-18, this study says.

It adds that the farm sector continued to register a decline in employment, shedding 4.5 million jobs a year, or about 27 million in all, between 2011-12 and 2017-18.

The share of employment in agriculture and allied sectors also declined from 49 per cent to about 44 per cent during this period.

There was a drop even in manufacturing sector jobs, which fell by 3.5 million, due to which its share in the overall employment pie fell from 12.6 per cent to 12.1 per cent.

The non-manufacturing sector (mostly construction) which was creating about four million jobs a year between 2004-05 and 2011-12, created only about 600,000 jobs per annum between 2011-12 and 2017-18.

The slow growth of construction jobs has negative implications for low-skilled employment, real wages and the incidence of poverty, the report says.

"Since real wages remained flat during 2011-12 and 2017-18, particularly in rural areas, it could be argued that the incidence of poverty may not have declined unlike what was anticipated by some optimists," the study says.

The only sector that sustained job growth—at three million a year—is services, though the quality of jobs here is quite poor (outside of modern services).

The second study's take

The second study, authored by Laveesh Bhandari and Amaresh Dubey and brought out by Indicus Foundation, says the trickle-down is working but only for the better educated.

It shows that about half (48.77 per cent) of those employed in 2004 were either illiterate or had not attained any level of primary education. It is these groups that saw a massive drop in employment—by as much as 58.8 million—between 2004 and 2017.

On the other hand, there has been an increase in the employment of the educated, starting from the level of primary education, by 104 million between 2004 and 2017 (See chart).

The study also shows that the huge decline in the employment of illiterates and literates below the primary level is mainly in the rural sector. Of the 58.8 million drop between 2004 and 2017, 56.9 million is in the rural sector alone.

For all others who attained some education level of primary or above, there has been a moderate-to-significant increase in employment between 2004-05 and 2017-18.

When contacted, Laveesh Bhandari told Business Standard that there is a structural change that the Indian economy has been going through. Those educated are getting jobs, but destruction of jobs is happening for the uneducated.

Given that educational attainments are increasing, this augurs well in the longer term, though, of course, the immediate problem of the less educated not having job avenues or preferring other household work or going for an education upgrade needs to be much better understood before policy implications can be deciphered, says the study.

At the outset, it also seems the nature of employment is getting more formalised since jobs provided by the organised sector rose most rapidly between 2011-12 and 2017-18.

Though still quite low at 64 million during 2017-18 than what was employed by the unorganised sector and agriculture cropping, it grew at a compounded annual rate of 3.3 per cent between 2011-12 and 2017-18. The pace was quite higher than 1.8 per cent in the case of jobs provided by the unorganized sector or deceleration of employment given by the cropping sector in this period, says the study by Indicus Foundation.

The same holds true for the period from 2004-05 to 2011-12.
 

The study says in absolute terms, the unorganised sector has grown rapidly over the 13-year period. However, the organised sector has been growing at a more rapid pace.

This should have resulted in more formalization of the economy, but it didn't.

This was so because while organized sector employment has grown rapidly, contractual employment hasn't.

Contractual employment rose just two million between 2011-12 and 2017-18 or at a CAGR of 0.7 per cent. In 2004-05 and 2011-12, these kinds of jobs rose by five million or 2.4 per cent CAGR.

Contractual employment entails a contract of any duration, be it less than a year or greater than four years or in between these two.

On the other hand, non-contractual employment was far higher at 145 million in 2017-18 and grew 3.5 per cent CAGR between 2011-12 and 2017-18.

Circumventing labour laws

The study says not only is contractual employment fairly low—at barely 27 million in 2004-05—it has also grown slower than non-contractual employment both in absolute and percentage terms.

Taken together, these facts show that while organised sector is growing rapidly contractual employment isn't, and while non-contractual employment is growing rapidly, the unorganised sector is growing at a slower pace. These point in a single direction. That is, entrepreneurs and employers have found ways of circumventing labour laws which appear to be constraining organised sector growth, despite the sidestepping of labour laws through non-contractual employment.

What was fallen significantly is the agri-cropping sector. This, according to the study, reflects low human capital story where those who are less educated, lower in age and therefore presumably less skilled (everything else being the same) are more likely to have withdrawn from the ranks of the employed.

Typically, the agriculture sector is the most likely employer for those less skilled and educated and these results only underscore the same pattern.