The jobs push

News: The Centre recently announced plans to recruit 10 lakh people in ministries and departments over the next one-and-a-half years.

This might not be enough considering the scale of the unemployment problem that India is facing. Private sector’s contribution will be needed.

The underlying structure of India’s economy

The jobs problem in India is worsened by the underlying structure of the Indian economy.

The rapidly growing services sector tends not only to be less employment intensive, but is also more geared towards absorbing the skilled sections of the labour force.

And the gig economy, which does employ the unskilled, simply doesn’t create enough jobs for the millions entering the labour force each year.

What is the key challenge?

The challenge has been, and continues to be, the inability to facilitate the creation of a labour intensive manufacturing sector that is able to absorb the low and semi-skilled sections of the labour force.

Issues with the recruitment drive

The Centre recently announced plans to recruit 10 lakh people in ministries and departments over the next one-and-a-half years. This move suffers from some fundamental constraints —

the size of government. According to the report of the 7th Pay Commission, the total sanctioned strength of the central government fell from 41.76 lakh in 1994 to 38.9 lakh in 2014. In 2021, the strength of the central government stood at 34.5 lakh as per the Union budget. Moreover, between 2006 and 2014, the average recruitment in the central government was a little over one lakh each year.

– These numbers not only raise questions over the absorptive capacity of the state, but also imply that government employment actually forms a small proportion of the formal labour force, and an even smaller part of the total labour force.

In fact, the Pay Commission report had noted that “the central government is at best a marginal source for employment generation.” Thus, considering the scale of the challenge, this recruitment drive will not be enough.

Further, this expansion in public sector jobs pose a challenge to the promise and goal of minimum government.

Moreover, implicit in this move is also the acknowledgment that not enough jobs are being created by the private sector, which should be the principal driver of employment generation.

The government does not have the wherewithal to recruit on this scale. Taken together, the various recruiting agencies, such as the UPSC and the Railway Recruitment Board, hire just about 100,000 people a year. A National Recruitment Agency set up in 2020 was expected to subsume the role of multiple government recruiting agencies but is not yet functional.

Budgetary constraints: The real danger of this mega-recruitment drive is that capital expenditure may be curtailed to make way for higher salary budgets.

Way forward

Making the government the employer of first resort and the move towards Big Government marks a significant step back in terms of economic policymaking, and indirectly reflects the government’s failure to meaningfully tackle the employment crisis.

With rising protectionism in trade policy and the great leap back to semi-autarky in industrial policy, India faces the danger of losing the gains of the past three decades.

Source: This post is based on the article “The jobs push” published in The Indian Express on 16th June 22, and the article “A unique jobs conundrum” published in Business Standard on 15th Jun 22.