The 47 million

Why Indian unemployment figures puzzle many

Census data released on Tuesday contained a shocking piece of information: that 47 million young Indians, under the age of 24, were jobless, and looking for work. That's 20 per cent of the youth population. This is hard data confirming a fact that has long been anecdotal: that India has a jobs crisis. The picture that emerges from the Census data is intriguing: many workers are now "marginal" - in other words, they work for between three and six months in a year. The strange thing is that this has come in a decade when, first, growth rates have been high; and, second, wages, particularly rural ones, have seen a solid and sustained increase in real terms. How can these factors be simultaneously explained?

Indian employment has always been a puzzle. Partly this is because the easy intuition about unemployment and employment in macroeconomics, developed for mature industrial economies, simply does not translate well in the Indian context. In India, unemployment is a luxury. Many people cannot even afford to stay at home and look for suitable work - the "search costs" of finding a job they like are unaffordable, given their wealth. This can lead to many counter-intuitive results. For example, it is possible that states doing particularly well also see an increase in the number of unemployed - simply because higher income levels can mean the ability to look for more congenial work instead of staying in a job for reasons of subsistence. In some cases, social preferences intervene. Families that grow richer in some parts of the country expect their female members to stay at home, for example. But young people's expectations have also changed. Over the past decade, there has been an enormous expansion in secondary education, partly driven by government policy on education and rural incomes. Many young men and women in India's rural areas have emerged from school - but have no intention of going to work on the farm. Instead, they want something that approximates white-collar work. This might explain the persistent increase in rural wages even in the presence of rural unemployment. Again, this is a counter-intuitive product of increased incomes and education.

This is not to say that the large number and proportion of marginal workers should not be a cause for concern. It reveals, in particular, that the government has not shifted the focus of the Indian economy quickly enough to meeting these young people's expectations about their jobs. Both the government and the private sector have failed in creating useful skills quickly enough. Nor has a manufacturing sector emerged, which could act as a sink for this excess labour. Indeed many are asking whether it is not too late for India altogether to create a manufacturing sector that could provide mass employment. But what is certain is that unless this vast mass of young people are provided with some form of more regular employment that meets their expectations, social tensions will only grow.