More townies, please

Final estimates for the September-December 2018 Wave of employment / unemployment statistics were released last week. This is the ninth Wave of such estimates made by CMIE since 2016. These final estimates include those for all the individual four months of the Wave.

Final estimates paint a slightly better picture than the one presented so far. The final unemployment rate in December 2018 turns out to be 7.02 per cent compared to the preliminary estimate of 7.38 per cent released earlier. The final November 2018 estimate turns out to be higher at 6.65 per cent compared to the preliminary estimate of 6.62 per cent. The October 2018 estimate has declined from 6.91 per cent to 6.83 per cent and the September 2018 estimate is revised from 6.61 per cent to 6.47 per cent.

The unemployment rate during the September-December 2018 period was 6.68 per cent. In comparison, the unemployment rate was 4.89 per cent during the same months of 2017. The unemployment rate has been rising steadily since the May-August 2017 Wave when it clocked a mere 3.9 per cent.

Our earlier estimate of 11 million jobs lost during 2018 stands revised to 10.1 million jobs lost. This is a point-to-point estimate between December 2017 and December 2018. A better measure of the job loss in 2018 is 9.5 million. This is based on the full Waves data. It shows that 4.8 million jobs were lost during January-April 2018, 3.5 million jobs were lost during May-August 2018 and another 1.2 million jobs were lost in September-December 2018.

Job losses were mostly concentrated in rural regions and in small towns. The losses were lower in the larger towns but, there are serious problems here and there are lessons to learn. We explore urban India using the unemployment and labour participation rates.

We consider four groups of towns -- Very Large towns, Large towns, Medium sized towns, and Small towns -- by the number of households in these as per the 2011 Census. Very Large towns had more than 200,000 households in 2011; Large towns had between 60,000 and 200,000 households; Medium sized towns had between 20,000 and 60,000 households and, Small towns had less than 20,000 households.

The unemployment rate is highest in the Large and Medium towns, in that order. In comparison, Small towns and Very Large towns faced lower unemployment rates.

Very Large towns see the lowest unemployment rates. This is a very good sign because these towns provide the best quality jobs. In the September-December 2018 period, the unemployment rate in Very Large towns was 6.35 per cent. This was lower than not just all other town-size classes but also rural regions. It is a welcome sign that the lowest unemployment rate is in the region that provides the best quality jobs.

The low unemployment rate of Small towns is likely a reflection of the fact that these towns share characteristics that are similar to those of rural India where unemployment is similarly low. The low unemployment in these towns is likely to reflect compulsions of relatively vulnerable sections of society that keep the unemployment rate low. Most Small towns are Census towns. These were classified as towns only in 2011. Till then, these were classified as villages.

Like rural India, Small towns suffer underemployment, low wages and poor quality jobs. It is important to lift these regions out of the equilibrium they seem to maintain at the low-levels of economic well-being that these characteristics imply.

The most worrisome part of India seems to be the Large towns. These suffer the lowest labour participation rate and the highest unemployment rate.

During September-December 2018, they had a labour participation rate of just-under 41 per cent and an unemployment rate of 8.4 per cent. 

Medium sized towns are also quite stressed. These had an unemployment rate of 7.9 per cent. In the preceding three Waves (i.e. for an entire year), these towns had witnessed the highest unemployment rate.

If there is a political problem with respect to the rising unemployment rate, then it is likely to be concentrated in large and medium towns. These are towns where unemployment is high and it is also rising. If there is a fire there, then it must be doused. But, that is not where the solution lies.

The best solutions for India's labour markets begin in Very Large towns. Raising labour participation and motivating private sector to provide jobs in these regions would provide the best results. The best jobs in recent memory were found in Bangalore, Gurgaon, Pune, Hyderabad and even in Noida. These were provided by large private sector enterprises. We need many more similar large towns and even more large private enterprises set up by visionaries who can convert India's young working-age population into worthy townies.