CPI-ML New Democracy

Intensifying Unemployment Problem in India

D.V. Krishna
The fundamental contradiction of world capitalist system is between Labour and capital. This contradiction is intensifying very fast universally. This contradiction is expressing itself in the intensifying unemployment problem, worsening living and working conditions of labour, informalisation of work, ever – declining real wages and sharply widening gap between wealth and incomes of working class and capitalists. Some new features in the world economy, influencing the above fundamental contradiction in both developed and developing countries should be taken note of.
Industrial production became global, rather than national. This means, multinational companies are producing the components of their products in different countries, then these are being assembled in some other country and thereafter, marketed in some other country. So, production of any product is not being done under one roof, at one place and may not be in one country. Global value chains are created. Value addition is hidden and manipulated. Appropriation of surplus value created by the labour in the global south is intensified and covered. The Global finance capital, for keeping labour costs lower and lower, had created a large global Reserve army of labour from the ranks of peasantry. According to I.L.O. the global labour force had grown from 1.9 billion to 3.1 billion, between 1980 and 2007. This increase amounts to 63%. Out of this global labour force, 73% is located in the developing world. Further, 40% of this is located in China and India alone. (These details are mentioned in the article titled ‘The Gobal Reserve Army of Labour and the New Imperialism’ by John Bellamy Foster and others, published in Monthly Review November, 2011). Utilising the abundant excessive labour available at cheapest rates in the global South, the M.W.Cs have shifted their industrial production from global north to global South in a big way. This development is being termed as global labour arbitrage. By virtue of this development, on the one hand, unemployment and under employment problem had intensified in the developed countries, and the real wages of labour in these countries have steeply declined or stagnated. On the other hand, despite some industrialization and job creation, abundant surplus labour of South, also could neither be provided employment, nor be provided with higher wages. Job killing high technology, is also not providing any relief either to unemployment problem or to low wage problem in the countries of South. The M.N.Cs are able to utilize the wide variations in wage rates amongst the countries of South. As a result, the problems of unemployment, underemployment, low wages, worsening work conditions, are haunting both the developed and developing countries.
Case of India
Although, official figures had always projected unemployment rates at a lower level, the objective reality had been quite opposite. Unemployment had been rampant all along. N.D.A. Government, soon after coming in to power second time, released the first periodic labour force survey (PLFS) report, which showed the unemployment rate at 45 years’ high of 6.1 percent in 2017-18 (July – June). Above Report had also mentioned that the ‘Labour Force Participation Rate’ (LFPR) – the proporation of population either seeking jobs or are employed, fell to below 50 percent (49.8%) in 2017-18 against 55.9% in 2011-12. These figures have shocked the whole country. Now, the Labour Beareau annual survey (2015-16) data and Centre for Monitoring Indian Economy (CMIE) data (post 2016), have been made available. An exhaustive discussion has taken place in the past few months amongst the economists, social activists and researchers with regard to Employment and unemployment situation obtaining in the country.
There is broad agreement amongst the economists and social thinkers on the following features.
1) Open unemployment:
Open unemployment is the number arrived at by the surveyors, calculating (or taking into consideration) those people who declare themselves unemployed. But, this number is too conservative and unrealistic. This is because many unemployed people declare before Surveyors that they are engaged either in their family agriculture or some family handicraft profession or some small family business, although there no work left to be performed in addition to their family members’ labour. In the same way, many people report that they are self employed, whereas, they will be finding only part-time work for a few hours a day or few days’ work in a month which will not provide them with remuneration which can fulfil their minimum requirements. As a matter of fact, majority of these people, are unemployed only. They are engaged in these jobs only because they are not able to find whole time and remunerative jobs and only because of compulsion.
Although the open unemployment rate does not reflect the real unemployment situation, the sharp jump in this rate too captures the gravity of the situation.
The open unemployment rate had been 2.2% in 2011-12. This had always been 2 to 3% only. Now, this rate’s climbing to 6.1% in 2017-18 has shocked one and all. This hike in unemployment rate had been analysed by different experts.
The first feature of the unemployment rate hike is, while unemployment rate (UR) for the population aged 30 years to 59 years is only 1%, the UR for the 15 to 29 years age group is 19.2%. While the unemployment rate for illiterate workers is 2.72%, it is considerably high for educated Youth. U.R. for literates below primary level is 3.07%, for primary level incumbents 4.06%, for Middle level 4.42%, for Secondary level 7.31%, for higher secondary level 12.54%. for people with certificate course at under graduate level 21.46%, for people with Diploma at undergraduate level 0.63%, for graduates 29.84%, for post graduation and above 28.35%. The average U.R. for literates is 10.33%.
The U.R. rates are higher with the education level reaching higher. The significant feature that this data reveals is that enrolment to secondary and higher levels of school and college education, increased significantly after 2011-12. Among Rural men (15-29 years), the population with secondary or higher education increased from 43% to 53% between 2011-12 and 2017-18. In Urban areas, there was a five percentage point increase from 61% to 66%.
All the above facts go to prove that this hike in UR is driven by 1) Rise in Youth unemployment and 2) Rise in educated unemployment. Most of the educated unemployed are NEET (Neither in Employment, nor in Education, nor in Training)
Our ruling classes are claiming day in and day out that we are reaping a demographic dividend (population of 15-29 age group bring in large number (66%) in our case of population). But, the UR for educated youth show that the energies of this group of people are wasted by their being unemployed. This situation is turning our demographic dividend into a demographic disaster.
2) The challenge of Quality and Regular Job creation
The erstwhile UPA Government and the present N.D.A. Government have been agreeing that one crore, 20 lakh people, are entering the country’s work force every year. The country is facing the challenge of creating jobs for unemployed backlog number (may not be less than 5 crore). It is also facing the additional challenge of creating jobs for 1.2 crore Youth entering the job market every year. UPA and NDA regimes promised to the people that they will create one crore jobs every year. But the track record of the past and present Governments in job creation is dismal.
During 2004-05, India’s GDP grew by 8.43 percent on average. From there-on, the average growth rate is being maintained at more or less 6 to 8 percent. While G.D.P. growth rates remain high, job creation rates do not stand for comparison. NSSO data on employment in 2011 showed that between 2004-05 and 2009-10, only 1 million jobs were created per year, whereas 55 million people joined the labour force. As a result, 50 million or 5 crore people, are added to the labour force in 5 years. The statistics released by the Ministry of Labour reveal that the jobs created year wise from 2009 to 2015 are as follows.
Jobs created (in lakhs)
Year No. of Jobs
2009 8.89
2010 8.65
2011 9.3
2012 5.48
2013 4.19
2014 4.21
2015 1.35
According to an article published in Economic and Political Weekly recently, the employment growth declined from 2% per annum between 1999-2000 and 2004-05, to around 0.7% per annum between 2004-05 and 2009-10, and further declined to around 0.4% per annum between 2009-10 and 2011-12. Total employment in India shrunk by about 0.4 percent per annum, during the period 2013-14 to 2015-16. This corresponds to an estimated reduction in employment of about 37.4 lakh jobs during the period 2013-14 to 2015-16. The above article exclaims that this is perhaps the first time in independent India that we have an absolute decline in employment.
3) Immediate Backdrop of UR hike
Consumer Pyramids Household Survey (CPHS) estimate for the period January to April, 2017 shows that 408.91 million people are employed in India, whereas it estimated that the employed people for 2018 are 405.77 million, i.e. less than the number for 2017. The employed people for January to April, 2019 are estimated to be 404.25 million i.e. 1.5 million less than those employed in 2018. These figures prove that the employed people in India went on declining from year to year from 2017 to 2019.
During these periods, all sectors of Indian economy faced severe decline. Agriculture, Industry and services sectors faced decline. Mining and Manufacturing sectors accounted for 10% of the total employment in the country. In both these sectors, employed declined. No additional jobs were created in these sectors. The real estate and construction sectors, which usually provide employment to low skilled agricultural labourers, shed 4.6 million jobs between January – April 2018 and January – April 2019. The services sectors shed 1.2 million jobs in this period. Here, three segments are responsible for the fall in employment in services – retail trade, hotels and restaurants, and the IT industry. Retail Trade employs 56 million people and it has been a big absorber of labour in recent times. But its rate of absorption of labour has been falling. In 2017, it absorbed an additional 10.4 million persons. In 2018, this fell to 3.7 million. And, in January – April 2019, this sector absorbed only 3 million additional persons over the employment a year ago.
Travel and Tourism Industry provided employment to an estimated 20 million persons during January – April 2019. But, this was 2 million lower than the 22 million jobs it provided in 2018.
The IT industry lost an estimated 1.4 million jobs in 2018 and in early 2019, it lost another 0.2 million jobs.
Agriculture sector with all its allied segments had faced a decline during 2018-19 period. Yet, the surprising development is its recording an increase in employment from 142.8 million to 147.9 million, a net growth of 5.1 million over this period. This development proves a reverse migration from Industry and services to agriculture. This is a regressive development. As a matter of fact, no new employment is created in agriculture but displaced people from other sectors are forced to fall upon agriculture for their survival.
All the above details are provided by Mahesh Vyas, the M.D. and CEO of CMIE, in an article titled ‘Labour migrates to its last resort’ published in Business Standard dated. 25.6.2019. Mahesh Vyas concludes his article with the comment “the fall in employment in the services sector is new and worrisome. It strengthens the view that consumption expenditure growth is slowing. And the broad sectoral fall in employment strengthens the view that the economy’s growth has slowed down in 2019″. The later development of outburst of slow down proved the words of Mahesh Vyas to be prophetic.
4) Sharp increase in Work Force
The size of the work force in India was 381.1 million in 1993-94. It increased to 487.7 million by 2011-12. This is an increase of 104 million i.e. 6 million growth per year during the period. Now, the work force increased to more than 50 crores. This is a fairly good measure of increase in work force.
The ‘Update Study Group’ which had published a book with the title “Condition of the workers in Asia” remarked in that book that “the astronomical increase in work force with little scope of creation of new jobs increases the reserve army of labour enormously who are available to do any kind of jobs at any wages and under any precarious working conditions.”
5) Migration from Agriculture to Non agricultural sectors and from Villages to Urban Areas
During the ten year period ending at 2011-12, 5 million labourers left agriculture per year. This amounts to 5 crore people in total. The Update Study group adds that ‘To be more precise, during 2004-05 and 2009-10 period, 24 million workers left agriculture (4.8 million per annum). This happens for the first time in the history of the Indian economy, which indicates a structural change in employment during the high economic growth period. Moreover, the additional 13 million workers (6.5 million per annum) left agriculture during 2009-10 and 2011-12’. It further quotes from an article published in EPW, which says ‘an absolute decline in employment in the rural agricultural sector by about 200 lakh between 2004-05 and 2009-10’. It was in decline by “130 lakh during 2009-10 and 2011-12. Much of the decline in employment during this period was due to decline in female employment in the sector and shifting male employment to non farm sectors”.
According to the above analysis, these job seekers have managed to find work mainly in the construction sector. Others have gone to either the manufacturing or to the services sectors. Since the job creation is abnormally low, it may be said most of these uprooted and displaced people are forced to do any type of ‘menial’ jobs or remain dependant on the doles (such as 50 to 100 days of work under NREGA) delivered by megre schemes of the Government.
The fact of shift in employment from agriculture can also be confirmed by the statistics of out of state migration in this period. The Economic Survey 2015-16 reports that net out of state flows of migrant labourers across India peaked at almost 9.4 million in 2013-14. It slightly fell to 9.1 million in 2014-15 and to 8.4 million in 2015-16. Much of this migration occurred from poor states such as UP, Bihar, Rajasthan, Madhya Pradesh, Odisha, West Bengal and Assam to better off states such as Maharashtra, Delhi N.C.R., Gujarat, Tamilnadu, Kerala and Karnataka. Therefore, each year migration of workers ranging from 80 to 90 lakhs per annum, is taking place primarily from agriculture to informal sector. We have seen above that because of economic slow down taking place in the country and because of its intensification in 2018-19, reverse migration has also taken place from urban to rural areas, i.e. into agriculture.
6) Labour Force Participation Rates
Labour Force Participation rate is the combined ratio or percentage of employed workers and those looking for a job. This percentage has been low and ever falling. The average world labour participation rate is 66%. LFPR for India was 43% in 2004-05. It declined to 39.5% in 2011-12, to 36.9 in 2017-18 (a reflection mainly though not only of the falling female participation rate).
India’s female participation rate has been low and is falling. Male labour participation rate has been 74.5% in 2016. This has dropped to 72.4% in 2017, to 71.7% in 2018. In contrast, female labour participation rate was 15.5% in 2016, 11.9% in 2017, and 11% in 2018. Urban female labour participation rate fell more sharply. It dropped from 15.2% in 2016 to 10.5% in 2018. The corresponding values for rural women were 15.6% and 11.3% respectively. Yet, women find it difficult to get jobs. The unemployment rate for men was 4.9% in 2018 and for women in the same year was much higher at 14.9%. The higher unemployment rate for women, despite their lower labour participation rate, reflects bias exhibited in employment of women.
7) Disguised unemployment or precarious employment
Niti Ayog’s new three year action Agenda prepared in 2017, states that “Under employment and therefore low wage employment rather than unemployment is the key challenge faced by India today”. The world also faces the same situation.
While open, formal unemployment rate, even at its maximum right now, is 6.1% only, the formal unemployed may be 3.05 crores.
Out of those counted as employed in employment survey data, many are designated as self employed. This category covers 46.6%. Another 32.8% do casual jobs. Out of the rest 20 odd percent are real wage earners. The rest do the contractual jobs. As a result, it can be concluded that only 20% are wage earners, regular or contract. Amongst the wage workers, many get work only seasonally or for few months in a year.
Further, 92% of the employed are informal workers, who do not enjoy any job security or welfare benefits.
In 2015-16, the Chandigarh based Labour Bureau’s Fifth Annual Employment – unemployment survey indicated that 41.3% of India’s self employed earned Rs. 5,000/- per month and another 26.2% earned less than Rs. 7,500/- per month. This means over two-thirds of those ‘employed’ earned far below the per capita monthly income of Rs. 7774 for that year.
Low wages, real wage stagnation or wage decline is one of the important problems working class is facing. Nandan Nilekani, cofounder of Infosys, in his interview with Raghavan Jagannathan, the author of the book ‘Jobs crisis in India’ emphasized that ‘What we have is a continuing problem of people remaining stuck in low productivity low wage jobs’. Further, while labour productivity had increased in a big way, the share of labour in the value of increased production in the form of wage had drastically declined.
It is true that our country is facing a serious open unemployment problem, a serious under employment problem and also a serious low wage problem.
The neoliberal policies pursued by the ruling classes for the last three decades, apart from creating and aggravating the above problems, have severely deteriorated the living and working conditions of the Indian working classes. The Modi Government has resorted to diluting the labour laws, by way of reducing them into the form of labour codes. Increase in work load, regressive conditions of work, have made the worker’s life unbearable. The Modi Government in its 2nd stint, is pursuing the bankrupt neo liberal policies, with more vengeance. It is pursuing the policies gifting bailouts and sops to the foreign and Indian monopoly finance capitalists in the name of facing economic slowdown. It is pursuing export oriented, F.D.I. dependent policies. Its policies are leading to increase in unemployment, underemployment and wage decline. These bankrupt policies will instead of solving, intensify the economic crisis confronting the country with all attendant problems aggravating further.
The only way out is struggle of the toiling people. The working class, the peasantry and other toiling masses should organize themselves in a big way and launch nation-wide, united and militant struggles against the neo liberal and neo fascist policies of the Modi Government, under the leadership of the working class.