Urban Employments in the 1990s
Suddenly, employment concerns
are back on the political and policy agenda. For more than a decade
now, economic policy discussion in India had relegated employment generation
to a subsidiary position, instead emphasising "efficiency"
and "productivity growth" as the primary aims of government
economic policy. In the process, neglect by official policy combined
with the other side-effects of the economic strategy to create a situation
of relative stagnation of employment, which has now once again become
a matter of public concern.
Thus, recently Prime Minister Vajpayee
has expressed concern at the inadequate generation of productive employment
in the country. Of course, he then ascribed the high levels of underemployment
as reflective of the combination of technological change and population
explosion, an explanation which is weak at best in terms of explaining
recent trends in employment and unemployment. But in general this is
reflective of a new attention in policy-making circles being granted
to the issue of employment. At one level this is no more than a belated
recognition that this area is not simply one which can be left to "just
grow" on its own, which was the official attitude of the past decade.
The 1990s - the decade of "economic
reforms" - was heralded by neo-liberal economists as a period which
not just produce higher growth rates, but also involve a more general
unleashing of productive forces leading to faster employment generation.
Since there is no question that inadequate employment growth has been
one of the major lacunae in the entire post-Independence development
experience, this was obviously seen as a very desirable outcome, although
the links were never really very carefully developed in the argument.
Thus, the basic assumptions were as
follows : in the rural areas, higher prices for agricultural goods through
the provision of export markets would act as incentives to more private
investment and production, generating more employment in agriculture.
Such agricultural expansion in turn would act as a stimulant for rural
non-agricultural activities in a virtuous circle. In the urban areas,
industrial deregulation along with export orientation would encourage
more investment and new activity in labour-intensive manufacturing in
keeping with perceived static comparative advantage, and therefore increase
employment here as well.
These assumptions were not validated
in the rural context, where (as discussed in Macroscan, Businessline,
January 2000) employment growth in agriculture appears to have become
more of a residual as non-agricultural job opportunities have slumped.
In this article we consider the evidence on urban employment, and assess
the validity of these neo-liberal assumptions which have become almost
axiomatic in Indian policy debate.
Chart 1 and Chart 2 plot the pattern
of work participation of urban men and women respectively over the 1990s.
Male work participation rates show a fair amount of fluctuation around
a fairly narrow band of between 50 and 53 per cent, and no clear trend
is discernible, which in itself suggests that not much has changed in
terms of dramatic increases in perceived employment opportunities.
For women, the picture is rather different.
Here too there is fluctuation, but the overall trend appears to be one
of decline. Indeed, the decline, on a point-to-point basis, is a very
significant one for just a decade, by more than 4 percentage points
from 15.6 per cent to 11.4 per cent. This is extremely interesting,
for it suggests that the picture that was being painted in the early
1990s, of a process of "feminisation" of employment, especially
export-oriented manufacturing at the margin, has not been substantial
enough to counteract other forces which have made for downward pressure
on work participation rates.
This point, and the related implications
for the nature of economic participation by women in urban India over
the 1990s, deserve some greater elaboration. Feminisation of employment
had become one of the economic buzzwords of the 1990s, as the role played
by female labour in the east Asian export boom became more widely recognised,
and as many export-oriented producers even in India chose to employ
more women. This preference for women was typically a reflection of
their inferior status, because of lower reservation wages, acceptance
of worse working conditions and willingness to work under much more
fragile casual contracts whereby they could be hired and fired at will.
But in turn the very process of such employment generation often played
a role in changing gender equations and relative power in society, so
that market-based economic participation by women began to be seen as
an important means to their economic empowerment.
This was very much the received wisdom
not only in India, but through Southeast Asia where the process was
far more advanced, until the mid-to late 1990s. However, data relating
to the latter part of the 1990s that have recently become available,
suggest that the process of feminisation of work may have decelerated
or even begun to reverse, even before the crisis of 1997. Thus, female
shares of manufacturing employment began to decline in most of these
countries by 1994 or even earlier, as the increased employment of women
led to upward pressure on their wages, reducing the gender gap in wages,
and also involved louder social demands for better working conditions
for women workers. These pressures actually made them less attractive
for employers, and the impetus to feminisation became less marked.
Such a reverse process naturally raises
the uncomfortable question of how the market participation of women
workers can be encouraged without inevitably relying on worse conditions
of work and greater fragility of such employment. In India, the question
is even more pressing, because formal feminisation of work is still
relatively less developed, although there is evidence that it is on
the increase.
Thus, one of the more important forms
of women's work has become in home-based work as part of subcontracting
networks that can extend all the way from large (often multinational)
companies down through various subcontracted units to women working
on a piece-rate basis at wages that are often below the breadline. This
is possible because women are still seen as subsidiary earners in households
and the widespread extent of underemployment makes any remuneration,
however little and unfair, seem attractive as part of the material survival
strategy of poor urban households.
Open unemployment rates are shown in
Chart 3 and Chart 4. In countries like India, as is well known, open
unemployment rates are very poor indicators of the actual levels of
job availability, because the material circumstances and absence of
public social security systems mean that most workers have little choice
but to find some employment, however unremunerative. Underemployment
or disguised unemployment, which is far more difficult to estimate and
measure, is therefore the most common tendency.
It is true that there is more likely
to be recognition of open unemployment in urban areas where surplus
labour is less easily disguised as work in the fields. However, even
here, the proliferation of informal activities, mostly in the service
sector, can serve as a way of camouflaging the actual extent of underemployment.
This is of course another reason why data on service sector employment
in countries like India need to be viewed with some degree of caution.
Even given these caveats, the evidence
from the NSS thin samples shows that rates of unemployment for both
men and women have been rather high over the 1990s. Already at the start
of the decade, the rates were relatively high, indeed 50 per cent more
than the average rates of the previous decade. After dipping a little
in the mid-90, by 1998 the male rates were even higher (at 5.3 per cent)
than in 1990-91, while the female rates were as high (at 8.1 per cent).
It should be noted that these higher
unemployment rates in the latter part of the period are still not enough
to explain the overall decline in work force participation of women,
because the period when unemployment rates were lowest (1995-96) was
also one when work force participation was low.
In terms of employment by sector, there
is no clear evidence of any systematic pattern for urban males over
the while period from the mid-1970s to the late 1990s (Chart 5 and 6).
Indeed, what is surprising is that despite a brief period of falling
share between 1995 and 1997, by the end of the period the impression
is that of the stubborn persistence of the primary sector (at between
9 and 10 per cent of employment).
Nor is there much evidence of any increase
or major trend in the share of the secondary sector in male employment
- over the entire period it has remained broadly between 32 and 34 per
cent of total male employment. The only evident shift is that of an
increase in the share of the tertiary sector, from around 55 per cent
to more than 58 per cent, but this is a shift that is essentially established
by the beginning of the 1990s, and the last decade does not show any
further tendency in this direction.
For women workers, there are more evident
changes in terms of sectoral shifts. At the start of the period, in
the late 1970s, all three sectors commanded roughly equal shares of
female employment at around one-third each. Over the entire period there
is a continuous pattern of decline in the proportion of primary sector
employment, although this tendency itself decelerates over the 1990s.
Secondary sector employment shares remain approximately stable, with
if anything a slight decrease over the 1990s, belying the expectation
of feminisation of manufacturing employment. The significant shift is
in terms of increased employment in the tertiary sector, whose share
goes up by more than 14 percentage points over the entire period. This
trend is one that carries into the 1990s.
For male workers, while the sectoral
shifts in employment may not be very marked, there is a much sharper
tendency that emerges with respect to type of employment. In context
like that of urban India, there is a general perception that regular
employment is the most desirable, not only because of the security of
contract that it offers, but also because it is typically associated
with better wages and working conditions.
While it is true that some kinds of
self-employment at the upper ends of the value added spectrum and in
certain of the newer "sunrise" service sector areas do offer
attractive work opportunities for skilled professionals, in general
most self-employed workers in the service sector are those in low-remuneration
informal sector activities with very insecure work conditions. This
being the case, the decline in regular employment, and the relative
increase in both self-employment and casual work, that are shown in
Chart 7, are generally indicative of greater insecurity of working conditions.
While self-employment does show a fluctuating
trend, the increase in the share of male casual employment is much more
marked. This is not a new tendency - it has been noted in India, in
both rural and urban areas, for several decades now, but the 1990s average
is especially high in this regard. Such a tendency would probably be
welcomed by those who see in this an indication of greater "flexibility"
in the labour market, but in the context of the other trends already
identified, what it tells us is that male workers are increasingly working
in more fragile and vulnerable conditions, and despite this urban employment
generation remains inadequate at best and even less dynamic than in
earlier periods.
For women workers, however, the picture
is more mixed and there are some positive signs as well. The tendencies
are shown in Chart 8. Thus, while self-employment has been coming down
fairly systematically over the entire period, there are increases in
the share of both casual employment and regular employment. While the
increased significance of casual employment has all the problematic
implications that it has for male workers, the increase in the importance
of regular employment should be welcomed. The inference could be made
that most of this has occurred in service sectors, in both public and
private sector employment, since as we have seen above, this is the
sector whose share has been growing fastest for women workers as well.
To some extent, this pattern is mirrored
in what is happening to organised sector employment. The deceleration
and even decline in organised sector employment is one of the more disconcerting
features of the 1990s, especially given that industrial output has increased
manifold and the service sector in which much of the organised employment
is based has been the most dynamic element in national income growth.
Despite this, not only has organised
sector employment expansion slowed down considerably compared to the
earlier decade, it has actually fallen in absolute terms for male workers.
Chart 9 describes the pattern of male organised employment across public
and private sectors. It is evident that the fall is due to the collapse
in public sector employment, a denouement which has been greatly welcomed
by economic liberalisers who see in this tendency a reduction of the
large-scale overmanning still present in government and the public sector
generally.
While public sector employment has fallen especially in the latter part of the period under consideration, private organised sector employment has continued to increase, albeit slowly. But this increase has simply not been enough to compensate for the decline in public employment, so that total male organised sectors employment has fallen slightly over the decade, as shown in Chart 11. Since organised sector work is still the most desired form of employment for male workers, this is an unfortunate tendency which adds to the other variables suggesting that overall employment conditions facing Indian men have worsened over the decade.
For women workers, by contrast, there
has been a slight increase in aggregate organised sector employment
evident in Chart 11. Chart 10 indicates that this has been due to increases
in both public and private employment, although the increase is slightly
sharper for private organised employment. Nevertheless, while such employment
has increased, the numbers are nowhere near large enough in relation
to the sizeable increase in terms of absolute numbers of female labour
force over the same period. Also, this increase is still not enough
to prevent a substantial deceleration in aggregate organised sector
employment over the 1990s.
What all this suggests is that the pattern
of growth over the 1990s has not been one which has generated sufficient
employment even in the urban areas. This belies the expectations of
those who had pushed for the economic strategy of the 1990s, that deregulation
and trade liberalisation would be adequate incentives to more employment-intensive
economic activity.
There are several reasons for this outcome,
which is in because of rather than in spite of, the types of
economic policies that have been pursued. Thus, these policies have
systematically worked against the interests of most small producers,
who account for not only e most labour-intensive forms of urban production
but also the dominant part of urban manufacturing employment. Thus,
the reduction of priority sector credit allocation, the shift in emphasis
in terms of financing investment from banks to the stock market (where
most small players simply cannot enter) the removal of various export
subsidies from which small-scale exporters benefited, have all militated
against the interests and viability of such enterprises.
Meanwhile, public investment in vital
urban infrastructure has declined considerably, and public "cost-cutting"
and other practices have also reduced the efficiency and accessibility
of the infrastructure that currently exists because of inadequate maintenance.
These not only create important bottlenecks for all producers, they
also add to costs in general.
On top of all this, there is the pressure
coming from newly freed imports becoming available at ever lower average
rates of tariff. Such import competition is particularly difficult for
small scale producers to meet, not only because of the greater control
of many large companies over distributive networks, but also because
they are unable to match the huge advertising budgets of larger companies
and multinationals in particular. The role played by such import competition
in reducing the viability of small enterprises and therefore in exerting
downward pressure on urban employment in particular, should not be underestimated.
Meanwhile, as exporters strive to become
or remain competitive in an increasingly difficult international environment,
they are forced not only to find various ways of making labour more
"flexible" than ever (through lower wages and more insecure
working conditions), but also to adopt relatively capital-intensive
new technologies that can ensure the quality and consistency that are
required in world markets. This means that employment elasticities of
production in such sectors tend to decline consistently, and so they
also cannot be looked upon as large sources of potential employment
generation.
If these patterns are to be halted or
reversed, then the entire economic strategy obviously needs to be reworked.
This is likely to become a more pressing concern as the social and political
tensions that are released by such open or disguised unemployment become
more obvious. As these exacerbate, it will no longer be enough for the
rulers of the day to blame it all on technology and population, and
they may be forced to consider alternative paths of industrialisation
and development that actually put productive employment generation and
poverty reduction at the forefront of the aims of public policy.