Subir Gokarn: Transiting jobs

We have to wait for another five years before we can quantify the full impact of the growth spurt.

Depending on how you look at it, the employment situation in India may be dynamic or dismal. Assertions are made that the current growth momentum is "jobless", while salaries in many skill segments seem to be shooting through the roof. Going by the official data, organized manufacturing does not seem to be hiring workers, but many people question this, suggesting that employers find various ways to hire workers without putting them on record. All these and other apparently contradictory patterns are the result of several segments co-existing in the Indian labour market, with little possibility of crossing over the barriers between many of them, certainly in the short term.

Given the complicated segmentation, getting a macro perspective of labour market dynamics is rather difficult, even perhaps meaningless. Yet, labour mobility, horizontally across segments and vertically up the income ladder, is key to the development process and its effectiveness must be judged at some level by how it is enabling people to achieve this mobility. At a broad level, this mobility can be viewed along two dimensions "" from rural to urban and across sectors, from agriculture to manufacturing and services.

The broadest picture of the record of the Indian economy in achieving these transitions is to be had in the various rounds of the National Sample Survey Organisation's (NSSO) large sample rounds, which, roughly every five years, address the employment profiles of households. The most recent survey was conducted during 2004-05 and reports based on the data have been published at regular intervals. This article is based on data drawn from NSS Report No. 515: Employment and Unemployment Situation in India.

First, let's look at the rural-urban distribution of the working population. Workers are defined as people who are either currently employed or seeking employment. As a proportion of the total population, this number varies significantly, depending on location and gender. For example, in the 2004-05 survey, the Worker-Population Ratio (WPR) for rural and urban males was roughly the same at around 55 per cent, but for females, it varied between 32.7 for rural areas and 16.6 per cent for urban.

Focusing on this segment of the population, and comparing the numbers across the three surveys conducted between 1993-94 and 2004-05, male workers have clearly been more mobile than females. The proportion of male workers in the rural areas declined from 75 per cent in 1993-94 to 69.2 per cent in 1999-00 and thence to 66.7 per cent in 2004-05. By contrast, the proportion of female workers in the rural segment was virtually constant between 75 and 76 per cent over the decade. This is the consequence of a significantly lower WPR for urban females.

Next, let's look at the broad sectoral patterns. In the rural segment, quite obviously, the majority of both male and female workers are employed in agriculture. But, here again, the difference between the genders is rather significant. The proportion of males working in agriculture declined from 74.5 per cent in 1993-94 to 66.5 per cent in 2004-05. For females, the proportion came down by a much more modest amount, from 86.2 per cent in 1993-94 to 83.3 per cent in 2004-05.

While some urban workers employed in agriculture (6.1 per cent for males and 18.1 per cent for females in 2004-05), the majority are obviously distributed between manufacturing and services. In manufacturing, the gender pattern is reversed. The proportion of urban male workers employed in manufacturing remained constant at 23.5 per cent between 1993-94 and 2004-05, having dipped to 22.4 per cent in 1999-00. In contrast, the proportion of female workers employed in manufacturing, while virtually stagnant at 24 per cent between 1993-94 and 1999-00, rose significantly to 28.2 per cent in 2004-05.

Within the services sectors, trade, hotels and restaurants saw a large increase in its share of male workers, from 21.9 per cent in 1993-94 to 28 per cent in 2004-05. The proportion of female workers employed in this sector also saw an increase, though not as dramatic, from 10 per cent in 1993-94 to 12 per cent in 2004-05. On the other hand, in the category "other sectors", which includes financial services, community and personal services and government, the proportion of male workers employed declined from 26.4 per cent to 20.8 per cent between 1993-94 and 2004-05. For female workers, however, this sector is a large employer; its share remained virtually constant between 35 and 36 per cent between 1993-94 and 2000-05.

Some broad impressions can be drawn from the patterns described above, in the context of the economy's overall performance during the decade. First, the relatively small decline in the proportion of the workforce in the rural areas has taken place over a period during which the share of agriculture in GDP has declined significantly and its growth performance been quite volatile. The migration of male workers to urban areas may have contributed to some stabilisation of household incomes, but the magnitude has apparently been relatively small. Also, the relatively low WPR for females and their high dependence on agriculture itself for employment indicate less opportunity for household income growth and stabilisation.

Second, while for males, job opportunities in manufacturing are just about keeping up with their entry into the urban workforce, this sector appears to be giving female workers significant new opportunities. This may be related to the growth of export sectors "" garments, jewellery and so on "" which hire relatively large numbers of female workers, over this period. However, the potential that these offer females to increase income is diluted by the extremely low WPR among urban females. If this is entirely driven by a preference for leisure, nothing can be done about it, but if it is the result of inadequate skills, a lack of public services for child care, health and so on, then it comes at a significant opportunity cost, both for the workers themselves and the employers who would hire them if they were available.

Third, even while the services sector has been the dominant contributor to GDP growth over this period, its contribution to employment of male workers has been diluted by the decline in the share of workers in "other services". This could reflect the net attrition that the public sector, in general, has experienced over this period, something that has clearly not been offset by the manufacturing sector.

There is much food for thought in this, and other reports based on the Survey. It is a pity that we have to wait for another five years before we can quantify the full impact of the recent growth spurt!

The writer is Chief Economist, Standard & Poor's Asia-Pacific. The views are personal