Jobs crisis: Dividend to disaster

There is a popular belief that ‘demographic dividend’ is a term closely associated with our country. Such beliefs are not baseless as the Economic survey 2018-19 estimate revealed that India's demographic dividend would peak around 2041, when the share of the working age population is likely to hit 65%. At present, India has 62.5% of its population in the age group of 15-59 years, which when translated to absolute figures implies that a whopping 862 million people are available as workers out of a total population of 1.38 billion.

In 2020, the median age of the population in India was 28, compared to 37 in the US and China, and 49 in Japan. These are the figures that bring comfort to our countrymen and cause envy in others for reasons deeply rooted in economics. Looking back in time, it is well documented that Japan reaped a demographic dividend that lasted from 1964 to 2004.

With such a large labour force and judicious government policies, there is a huge potential for India to emerge as one of the fastest growing nations. But alas, India may have missed the bus! Unfortunately, this huge working-age unemployed population seems to be a liability for the present government as the current unemployment rate is at an all-time high of 7.6%, as per the CMIE report of March 2022. Against this backdrop, it would be prudent to examine the series of events in the last few years that led to this present-day jobs crisis. “Aap chronology samjiye”, as someone said.

In 2016, our economy was growing at close to 8%, which by any standard was commendable. Then came the infamous policy announcement to ban 500- and 1000-rupee currency notes that took everyone by surprise. Supporters of the currency ban rejoiced for the stated objectives of curbing terrorist activities, halting the parallel black economy among others, while a majority of the population stood in long queues days and nights to save or access their hard-earned money.

Six years have passed, none of the stated objectives of ‘demonetisation’ were met. But it has left a lasting imprint on our economy by whipping the crucial informal sectors of the economy. It is known that informal sector activities are by and large cash-driven; they contribute around half of our GDP and employ 90% of the total working population. Commentators opine that the policy-induced shock of the currency ban was the first blow to the working population, resulting in the phenomenally high unemployment rate and concomitant gradual decline of GDP growth rate to 6.6% by the end of 2020-21.

The second blow to the working-age population came through the government’s mis-aligned priorities coupled with budgetary provisions for unproductive projects like building statues, the Central Vista project, unplanned expenditures toward advertisement-cum-marketing of government policies and schemes. The reduction in real budgetary provisions for MGNREGS, education and health sectors in successive budgets, along with corporate tax concessions, bear testimony to the government’s priorities.

There has been a 1% reduction in the allocation of budgetary provisions for the education sector from 2018-19 to 2022-23 and a mere 0.02% increase for the health sector, which in reality would go down into negative zone when inflation is accounted for. Eventually these reduced investments in human capital formation will prove to be detrimental to job-seekers. Effectively, it has squeezed out the job opportunities in public sectors -- be that public educational institutes, public health care institutions, banks, or government offices. There seems to be a deliberate attempt to divert job-seekers away from the formal sector and towards the informal sectors of the economy.

This is even more true of the lack of job opportunities in public sector manufacturing enterprises, the golden ducks, many of which have been sold off to the private sector or are in the pipeline for privatisation. On the other hand, corporate tax was reduced -- from 35% to 26% -- in September 2019. The absence of a well-designed policy of wealth tax, along with tax concessions for the corporates, resulted in the collective wealth of India’s 100 richest people reaching a record high of Rs 57.3 lakh crore in 2021, as per the Oxfam report.

The proverbial last nail in the jobs coffin was the outbreak of the Covid pandemic and the sudden, complete lockdown on March 24, 2020. Needless to say, none of us were prepared for it. All through the pandemic, there was a trial-and-error method to combating the virus. The need of the hour therefore was more thrust on the health sectors, extra-budgetary provisions toward R&D in pharmaceutical industries, etc., to combat urgent situations.

The pandemic lockdown was a huge blow to the working-age population in general, and in particular the informal sector, the latter having the potential to absorb a huge amount of labour. The cost to society has been massive. More than 10 million people lost jobs due to the lockdown, the wounds of which are still afresh. The informal sector, which was already under stress due to the government’s previous policies, could not withstand the Covid-19 blow. Millions more jobs were lost or are under risk.

As of now, stagflation looms large and the chances of economic revival rest on adequate thrust being given to setting up large-scale manufacturing units and stimulus for the informal sectors as these sectors have the capacity to absorb the ever-increasing labour force.

Critics will raise their concern regarding the avalability of funds for such needs. As a reminder, auctions of the properties and wealth of wilful defaulters of public bank loans and bringing back home the black money of business tycoons, as has been repeatedly promised, can be considered.

(The writer is a Professor, Department of Economics, University of Burdwan)