NSSO shocker: Sonianomics continues to damage jobs

http://www.firstpost.com/economy/nsso-shocker-sonianomics-continues-to-damage-jobs-893843.html

by Jun 21, 2013

It is too early to say whether the UPA government’s flagship employment guarantee scheme (MNREGA) should be renamed the Sonia Gandhi Guaranteed Job Deceleration Act, but the latest National Sample Survey Organisation (NSSO) data clearly shows that jobs in the economy are disappearing fast.

While the big number is the 10.2 percent increase in the unemployment rate between January 2010 and 2012, which shows that formal unemployment has risen from 9.8 million to 10.8 million in two years, the worry is that it could have gotten worse since then, since India’s GDP growth rate has since crashed further.

Even more significantly, the biggest decline in the working population is among rural women, whose working population fell from 26.1 percent to 24.8 percent, which means working women have fallen from 106 million to 103 million in rural areas over just two years, reports The Economic Times.

The rural emphasis is important because MNREGA is a rural employment guarantee programme, and it is precisely in rural areas that women are dropping out of the workforce in such large numbers.

There could be two reasons for this: one is that the ratchet effect of MNREGA on rural wages may be forcing farmers to use less labour and more mechanisation — and the job loss is impacting women more than men. If farmers had to pay higher wages, they would pay the men more and send the women home.

The other probability is that more women are taking up MNREGA’s make-believe work for 100 days and using the other nine months to be self-employed. There is some evidence of both, and the percentage of self-employed rural women is up from 56 percent to 59 percent.

Reuters

Representational Image. Reuters

The only ray of hope lies in one number: in the last two years (ended January 2012), despite slowing growth, the UPA did manage to push up employment by 13.9 million, as against the increase of just around 2.7 million during UPA-1 (2004-09). During the NDA period, over 60 million jobs were created despite slower growth.

On the bright side, the mere fact that more jobs were created over the last two years compared to the previous five is a positive, indicating a turnaround. But remember, these two years were also the years of expanded fiscal stimulus. Now it’s gone. And even this silver lining is overshadowed by a large cloud: almost all the jobs created were of low quality, mostly as casual labour, as Mint points out. During the NDA period, casual jobs fell marginally; during the last two years covered by the latest NSSO survey, 9.4 million of the new jobs created were of a casual nature.

Worse, the women’s work participation rate has been steadily falling all through the UPA regime. Says Mint: “The women’s labour force participation rate (LFPR or the proportion of labour force to total population) fell from 29.4 percent in 2004-05 to 23.3 percent in 2009-10 and then even lower to 22.5 percent in 2011-12. If fewer women are joining the labour force, even fewer are being employed. The worker participation rate (WPR, or workforce to population) fell from 28.7 percent in 2004-05 to 22.8 percent in 2009-10 and then even lower to 21.9 percent in 2011-12.”

It is tough to avoid the conclusion that despite seven years of fast growth (2003-2011, excluding 2008-09), the economy has seen more or less jobless growth. What growth there was in jobs came in the form of low-quality jobs, while manufacturing jobs started disappearing.

Why did this happen?

First, the hallmark of the UPA has been social spending, not reforms of any kind. This not only ruined the fiscal balance, but also created new disincentives to work, even while pushing up wage-inflation and farm mechanisation.

Second, the 1991 reforms were focused on liberalising the capital markets and reducing the rigours of licensing, but failed to reform the other factor markets – land and labour. Business benefited partially, but is now employing less labour. Hence jobless growth.

This is directly linked to the UPA’s tendency to pamper the farm/rural vote. It has interfered with the labour market with MNREGA, which should ideally have been a scheme for use is chronic unemployment areas and during times of distress (drought, off-season support, etc). Instead it has probably forced women out of the labour market by making them expensive. Worse, by focusing on cheap food and higher prices for land (which is what the Food Security Bill and the Land Bill will ensure), the UPA is planning to compound the malaise. These will create even more workforce abstentions. Ask yourself, if you get easy work (MNREGA) and cheaper grain, will you work more or less? Will the rural worker prefer work or leisure?

Third, MNREGA and high food support prices (combined with high growth in 2003-11) have pushed up inflation and slowed down growth. This has generated a vicious cycle of slow growth, corporate caution, and low investment – which will make jobless growth worsen if the UPA persists with its mindless interventions in half-functioning markets (land, labour, agriculture).

Despite the small spike in job creation over 2010-12, the prognosis is bleak: we should expect jobless growth to worsen over the next two years.

Maybe, it is not such a bad idea to brand the UPA’s MNREGA, coupled with other social spending schemes, as a growth and job destruction programme.

UPA is preparing India to become a basket case.

 

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