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Why using principal status to conclude formal jobs are rising is erroneous

In fact, both usual principal and usual subsidiary status of employment are equally important, and both are primary for employment estimation.

By Santosh Mehrotra & Jajati K Parida

Principal status of employment (working for more than 182 days in a year) is an important component to explore employment trends in India. However, it is insufficient in a highly informalised economy, where many workers work in different occupations and casually, at different sites, over a year, even though they may or may not have a principal occupation. It is a mistake, thus, to ignore the subsidiary status of employment (as some scholars do).

In fact, both usual principal and usual subsidiary status of employment are equally important, and both are primary for employment estimation. Neither should be considered as secondary, and, hence, neither should be ignored. It is also important to throw light on the quality of employment generated in India, and its links with the recent rise in the incidence of poverty.

The increase of employment based on only principal status is not a new trend, rather, it is the usual employment trend. For example, total employment (based on only on principal status) increased from 33.4 crore (1993-94) to 36.8 crore (1999-2000), then to 41.5 crore (2004-05). It increased again to 42.8 crore (2009-10), 43.5 crore (2011-12), and further to 45.1 crore by 2017-18. But, when we compute employment considering both the principal and the subsidiary status together, it gives the actual picture. This is the method used by many developing and developed countries, including the International Labour Organisation for employment projections.

Although absolute number of jobs by principal status increased consistently over 25 years, the growth rate of jobs has suffered a tremendous decline in recent years. Annual job growth by principal status was 1.7% during 1999-2000, and 2.5% during 2000-2005. It declined to 0.7% during 2005-2012, and further to an even lower level of 0.6% during 2012-2018. This is a matter of grave concern. This means that educated youth, who enrolled in secondary and higher education during 2005-2012, are joining the labour force with lesser number of jobs on offer.

The claim that workers who have reported employment by subsidiary status (worked less than 6 months) are disguisedly unemployed is wrong. The accompanying graph explores subsidiary employment of the workforce for 2017-18. Out of 1.4 crore workers (in subsidiary status alone), only half were unpaid family members (unlike what some scholars think). For the rest, the fall in subsidiary employment undermines livelihoods. Thus, 40 lakh were self-employed by their own account, running their own business. Another 1 lakh were employers, who hired other workers as employees. This might be due to adverse economic conditions and other reasons. Furthermore, about 4 lakh subsidiary workers were engaged in regular wage/salaried jobs, while about 25 lakh were engaged in casual wage employment; it will be a disaster if their jobs were to disappear post-2018.

This disaster befell millions post-2012. Of the total 2.5 crore decline (subsidiary status only) between 2012 and 2018, the majority (1.35 crore) was ‘other than unpaid family labour’. Of this, about 60 lakh were own-account (self-employed), 1 lakh were employers, 4 lakh were regular workers, and 70 lakh were casual wage workers. Hence, ignoring the subsidiary status underestimates the scale of workforce losses, at the cost of human well-being.

While the growth of jobs in agriculture had become negative (-2% pa), for the first time during 2005-2012, and continued to be negative (-1.9 %) since 2012 (a welcome development), growth in non-farm jobs, which is crucial for sustaining the economy’s structural transformation (based on UPSS), was about 4.9% and 3.9% per annum during 2000-2005 and 2005-2012, respectively. Unfortunately, it fell to a low 1.2% pa post-2012 (see graph). While falling employment in agriculture is good for the economy, we need to recognise the falling growth of non-farm jobs.

We know that a significant source of decline in subsidiary work is because unpaid family workers (underemployed), mostly from agriculture, stopped working. But partial estimation, as carried out by others, completely missed out on the workers who had lost jobs in manufacturing (about 30 lakh in mere six years).

Moreover, a focus on principal status jobs alone leads to the erroneous conclusion of rising formal jobs; while in fact, the number of contract jobs (with less than a year’s contract) is rising in both government and private enterprises. In manufacturing, jobs with less than one year contract increased from 2 lakh to 7 lakh; while in service sector, they increased from 65 lakh to 1.05 crore during 2011-12 and 2017-18.

While declining underemployment in agriculture is a good sign of structural transformation, an upsurge in educated youth unemployment and rising discouraged labour force (who are neither in jobs nor in education and training) is actually alarming.

Given the fact that government or public sector enterprises contribute only about 13% of total non-farm sector jobs in India, policies should focus on creating jobs in the government sector (health, education, police, judiciary) along with an appropriate policy for boosting private sector jobs.

Furthermore, policies for boosting the growth of real wages is also equally important, as stagnant real wages have already pushed many non-farm workers (those belonging to the lower end of the income distribution) below the poverty line again.

The incidence of poverty among non-farm sector workers increased from 27.2% to 32.6% during 2011-12 and 2017-18. This should worry policy-makers.

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Source: Financial Express