‘Jobless growth’ no more - The Hindu

17th April 2014 - Link

Between 2009-10 and 2011-12, non-agricultural employment grew rapidly:

Non-agricultural employment increased between 1999-2000 and 2004-05 (which coincides with the time the National Democratic Alliance was in power) by 37.5 million over the five-year period

Fall in unemployment rate:
Since 2004-05 fewer people joined the labor force. This meant that fewer people were looking for work, but the number of non-agricultural jobs created was as many as before so the open unemployment rate fell.

Growth of non agricultural jobs

A.Development:

• Development implies that workers leave agriculture for more productive work in industry and services, and total factor productivity increases in the entire economy. Every developing country is supposed to undergo this structural transformation.Since 2004-05, this transformation has been happening for the first time in the history of India.
• During the 11th Plan, agricultural output grew at 3.2 per cent per annum (2007-12) on average, despite crippling drought in 2009-10.
• The share of agriculture in the workforce has been in decline for decades (falling to 49 per cent in 2001-12) --> fewer workers were producing more output in agriculture, farm mechanization increased, and productivity grew.

B.Where did the agricultural-workers go?

1.Construction Employment:

• Unskilled workers who left agriculture flocked to construction employment.
• It was infrastructure (roads, bridges, airports, ports, energy projects) investment which drove most of the employment growth.

2.Rural non-farm construction related employment:

• Rural areas also saw significant growth in non-farm construction-related employment
• Government investment in rural housing for the poor (Indira Awas Yojana) grew, as did rural roads and other rural construction investment (Pradhan Mantri Gram Sadak Yojana and the Mahatma Gandhi National Rural Employment Guarantee Act).

C.Rising Wages:

The wages rose between 2004-2005 mainly because of two reasons:

1. MGNREGA and rising minimum support prices for government procured cereals, a floor wage was created in the rural areas. This along with an increasing demand for labor in construction led to a tightening of the labor market, both rural and urban.

2. Demand for labor in construction — which is treated as non-manufacturing industry.

Growth in service jobs

Services jobs grew by 11 million, and manufacturing employment increased by a remarkable nine million in two years alone (2009-10 and 2011-12).

Why?

• After 2004-05, demand for a number of consumer goods has grown sharply, which is reflected in the rise in consumption expenditure to 2011-12. This rise of consumption expenditure shows that the numbers of poor fell(For the first time in the history of India, there was a decline in the absolute numbers of the poor after 2004-05)
• This has driven demand for goods to the bottom of the pyramid, as poor people have emerged out of poverty.
• The new non-poor demand simple manufactured consumer goods: processed food (biscuits, milk), leather goods (shoes, sandals), furniture (plastic chairs/tables, wooden furniture), textiles, garments and mobiles. All these product areas and services saw a dramatic increase in employment.
• Because these simple, low-end products (at least those consumed by the new non-poor) are produced in the unorganized sector, using labor-intensive methods.

Conclusion:

A new inclusive dynamic is in place in the Indian economy, which is difficult to reverse. There is a feedback loop between increasing demand, and production to meet that demand, that generates employment among those who will consume the products that are produced.