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Resource centre on India's rural distress
 
 

It's Official: India's growth is jobless

The robust 9 per cent –plus growth in South Asia till 2010, driven largely by India, where it came down to around 7 per cent in 2011-12, had one major qualifier: it was mostly associated with a rapid rise in labour productivity rather than an expansion in employment, according to the latest report Global Employment Trends from International Labour Office.

Up until the end of the millennium, that is just a year before the balance of payments crisis and the onset of India's liberalisation, “employment and labour productivity grew at similar rates”. However, in the past decade, as global and domestic economic conditions improved, growth became driven by increased labour productivity in the region.

Between 2007 and 2011, labour productivity increased by 6.4 per cent on an average, while employment expanded by just 1.0 per cent. This situation is prominent in India, where total employment grew by only 0.1 per cent during five years till 2009-10 (from 457.9 million in 2004-05 to 458.4 million in 2009-10), while labour productivity grew by more than 34 per cent in total during this period.

At the same time, South Asia has witnessed a fall in female labour force participation in recent years: “This has been most pronounced in India, where the participation rate for women fell from 49.4 per cent in 2004-05 to 37.8 per cent in 2009-10 for rural females, and from 24.4 per cent to 19.4 per cent for urban females. This drop in participation can only partly be explained by the strong increase in enrolment in education, because it has been evident across all age groups.”

According to the ILO report, the main labour market challenges in South Asia are twofold and consist of achieving the twin goals of increasing labour productivity, to ensure that incomes are rising and poverty is falling, and creating enough jobs for a growing working-age population, which is expanding by around 2 per cent each year. With almost 60 per cent of the population under the age of 30, governments are seeking to take advantage of this demographic dividend and not let it become a cause of poor labour market outcomes and, ultimately, conflict and insecurity.

Far more important in the South Asian context is the persistence of low-productivity, low-pay jobs, which are mostly located in the agricultural and urban informal sectors.

- Most of the population in South Asia continues to derive a livelihood from agriculture. In 2010, it accounted for 51.4 per cent of employment, although down by almost 11 percentage points from the share in 1991 (62.2 per cent). As of 2010, industry and services accounted for just 20.7 and 27.9 per cent of workers in South Asia, respectively.

- In India the share of employment in agriculture decreased from 59.8 per cent in 2000 to 51.1 per cent in 2010. In Bangladesh, this share has come down even faster, from 62.1 per cent in 2000 to 48.1 per cent in 2006. Therefore, accelerating the movement of poor people out of agriculture into more productive jobs in the non-farm sector remains one of the most critical priorities for the region.

- Reflecting the high share of employment in agriculture, working poverty persists at very high levels. Based on the US$2 a day international poverty line, South Asia has globally the highest proportion of working poor at 67.3 per cent (estimate for 2011). It is down from 86.0 per cent in 1991 (in absolute terms, the number of working poor according to the US$2 a day definition has gone up from 361 million in 1991 to 422 million in 2011). The fall was due in part to a rise in real wages over the past decades. For example, real wages in India have increased between 2004/05 and 2009/10 for males and females in both rural and urban areas in India; moreover, wages have improved not only for regular wage and salaried workers but also for casual ones. However, due to the unprecedented drop in poverty in East Asia over the past decades (the share of working poor decreased from 83.4 per cent to 18.0 per cent over this period), South Asia now accounts for almost half of the world’s working poor (estimated to be 46.2 per cent in 2011).

- South Asia has the highest rate of vulnerable employment (own-account workers plus contributing family workers) of any region. The share of wage and salaried employment has barely changed in the region during this era of strong economic growth. Moreover, gender disparities continue as the vulnerable employment rate reaches 83.8 per cent for South Asian women versus 75.5 per cent for men (2011 estimates).

Employment status patterns vary considerably within the South Asian region.

- Vulnerable employment, especially own-account workers, dominates in Bangladesh and India (63.3 and 62.9 per cent of total employment, respectively).

- In Bhutan, contributing family workers are in a majority, representing 51.8 per cent of workers

- In Pakistan, the shares of wage and salaried workers, own-account workers and contributing family workers all account for around one-third of employment.

- The proportion of wage and salaried workers is higher (55.2 and 57.6 per cent, respectively), and thus the vulnerable employment rate lower, in the Maldives and Sri Lanka. This situation is due to the dominance of such sectors as tourism in the Maldives and the public sector in Sri Lanka.

Prospects for 2012 are clouded by global uncertainties.

The global uncertainty stemming from the euro area sovereign debt crisis and the continuing weakness of the United States’ economy has negative implications for all countries, including those in the South Asia region, particularly those dependent on remittances and tourism (such as the Maldives, Nepal and Sri Lanka).

Afghanistan is facing the prospect of further NATO troop withdrawals, which may undermine security and so hamper economic activity and job creation.

Similarly, Pakistan continues to address a range of complex challenges, including political and macroeconomic instability and the impact of the devastating floods.

With its large domestic economy, India is likely to weather the latest global slowdown better than most, but it is struggling with stubborn levels of inflation despite monetary tightening. Overall, the worsening economic conditions will make it more challenging for the South Asia region to promote the creation of productive jobs in the non-farm sector and continue the battle against the persistence of informality, vulnerable employment and specific barriers for women and youth in the labour market.
 

Further readings:

Global Employment Trends2012, ILO, http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/
@publ/documents/publication/wcms_171571.pdf

http://www.im4change.org/law-justice/disaster-relief-30.ht
ml?pgno=2

The Challenge of ensuringfull employment in the twenty-first century by Jayati Ghosh, Indian Journal ofLabour Economics, Vol. 54, No. 1, 2011, http://www.networkideas.org/featart/oct2011/Jayati_Ghosh.pdf

Economic Reforms andJobless Growth in India in the 1990s by BB Bhattacharya & S Sakthivel, http://iegindia.org/workpap/wp245.pdf

Impact of Trade Liberalizationon Employment: The Experience of India'a Manufacturing Industries by UmaSankaran, Vinoj Abraham and KJ Joseph, http://www.mse.ac.in/Frontier/i9%20uma.pdf

Is India seeing joblessgrowth? Money Mantra, 7 February, 2012, http://www.ndtv.com/video/player/money-mantra/money-mantra
-is-india-seeing-jobless-growth/223248

Indian Labour Market Report2008, TISS, http://www.macroscan.org/anl/may09/pdf/Indian_Labour.pdf

Jobless growth continues inIndia by Ashoak Upadhyay, The Hindu Business Line, 21 February, 2012,

http://www.thehindubusinessline.com/opinion/article2916682
.ece?homepage=true

India’s jobless growthproblem by Amitendu Palit, The Financial Express, 12 April, 2012,

http://www.financialexpress.com/news/column-indias-jobless
-growth-problem/935769/0

Jobless growth looms byPriya Kansara Pandya, The Business Standard, 9 April, 2012, http://www.business-standard.com/india/news/web-analysis-j
obless-growth-looms/162552/on

India has seen joblessgrowth, says top adviser, DNA, 13 November, 2011,

http://www.dnaindia.com/india/report_india-has-seen-jobles
s-growth-says-top-adviser_1611870