Entrepreneurship or salaried employment?

In "A Bitter-sweet Success", Business Standard, December 25, 2018, we noted an increase in self-employed entrepreneurs over the past two-and-half years.

This growth of self-employed entrepreneurs notwithstanding, the most preferred employment of the average young educated man and woman is that of being a salaried employee. The greatest hope of a young Indian is to get a government job or a formal five-digit monthly salary in the organised private sector.

When we say that we need to create 12 million jobs every year (human development economist, Santosh Mehrotra would like to correct that number to a much lower ask) to absorb the influx of new entrants into the labour market we mean jobs such as those described above. Self-employment is not a job in any sense that young aspirational educated India appreciates or even understands.

The emphasis here is on the educated young population. Uneducated and middle-aged employment seekers do not have many choices. They are driven by compulsions. So, when it comes to choices or preferences we must restrict our discussions to the educated. This is the aspirational India of today and tomorrow. They expect decent jobs.

CMIE's Consumer Pyramids Household Survey offers an opportunity to understand some of these choices and some related trends in employment.

Here is one piece of evidence of what the educated choose.

We consider the choice made by the qualified professionals. These are engineers, doctors, surgeons, dentists, physiotherapists, teachers, architects, accountants, lawyers, etc. These also include chemists, mathematicians, statisticians, meteorologists, geologists, biologists, etc.

This is obviously not a comprehensive list but it illustrates the kind of educated people we are talking about. These are not just High School graduates. These are a subset of college graduates.

During January-April 2016, there were an estimated 12.5 million such salaried employees. And, there were 1.6 million such entrepreneurs. Roughly, for one professionally educated person who chose to become an entrepreneur, there were nearly 8 who chose to be salaried employees. 

Evidently, reasonably well-educated people chose formal jobs over becoming entrepreneurs in the ratio of 8:1. And, this ratio is getting worse for entrepreneurship among the educated.

Professionally educated entrepreneurs are reducing in numbers. Between January-April 2016 and May-August 2018, ie over about two-and-half years, their count declined from an estimated 1.6 million to less than one million. During the same period, the count of professionally educated salaried employees increased from 12.5 million to 14.8 million.

Possibly, the business of the professionally educated entrepreneurs was hit by demonetisation. Some doctors, lawyers, accountants, even teachers are known to earn a lot in cash which is often not declared in tax returns. Demonetisation must have hit such incomes hard enough to make the enterprise itself unattractive. Salaried employees, on the other hand remained safe in their formal jobs.

An important factoid worth celebrating here is that the number of white-collar salaried jobs for the well-educated increased by 2.3 million during this period. It is equally worth celebrating the bigger increase we see in salaried jobs for the non-industrial technically qualified employees. These jobs increased by 5 million -- from 9.1 million to 14.2 million.

These are technicians, equipment operators, drivers, cooks, sales persons, assistants to other qualified professionals, etc who are engaged as salaried employees.

Industrial workers are a different class. They work in factories, mines, ports, docks, etc. There were an estimated 16.5 million salaried industrial workers in January-April 2016. By January-April 2017, their number had declined to 10.5 million. This fall is not entirely because of demonetisation. Interestingly, the count of salaried industrial workers has increased steadily after January-April 2017 to reach 16.8 million by May-August 2018.

The story for other salaried employees however, is not as rosy. The category of support staff has taken a big hit. This category also has a big share in all salaried employees. In early 2016, they accounted for 37 per cent of all salaried employees. The count of the support staff has dropped by 9.6 million -- from 34.6 million in January-April 2016 to just 25 million by May-August 2016.

Apparently, salaried jobs for peons, janitors, door-men, security-guards, drivers, sweepers, etc are vanishing. This looks like a major structural shift. 

Since support staff has a large share in the total salaried employees count, this structural shift is causing a fall in total salaried jobs. The count of salaried employees declined from 92.4 million to 88.2 million between early 2016 and mid 2018.

Educated people prefer salaried jobs and such jobs are growing but, salaried jobs are vanishing at the lower end of the jobs spectrum.