Jobs, not loan melas : Bibek Debroy
July 04, 2008. Indian Express
I have an acquaintance in the construction business in Delhi. Forget skilled labour, he claims even unskilled labour is impossible to obtain, despite market wages being considerably above minimum wages. Apparently, traditional sources from eastern Uttar Pradesh and Bihar have dried up and supply is now predominantly from northern Bengal. He claims migrant workers from northern Bengal have a work ethic problem, thanks to Left influence. But let’s ignore that. Notwithstanding NSS (National Sample Survey) data from 2004-05, there is a prevalent mindset that there is an enormous employment problem.
Agricultural employment and self-employment belong to a slightly different category. Let’s talk about non-agricultural wage employment. Here is a quote from the Approach Paper to the 11th Five Year Plan, written in December 2006, that is, after NSS 2004-05. “Growth without jobs can neither be inclusive nor can it bridge divides… Employment is an area which shows up where our growth process is failing on inclusiveness. The number of workers is growing, particularly in non-agricultural employment, but weaknesses appear in unemployment, the quality of employment, and in large and increasing differentials in productivity and wages.¶ Pointing to the quality of employment (informal, low productivity, low wages, lack of protection) is one thing (as National Commission for Enterprises in the Unorganised Sector did in August 2007). Saying that there is an overall non-agricultural employment problem is another.
The industry perception is unambiguous. Workers aren’t available. This is often a comment on lack of requisite skills, but is also increasingly a comment on non-availability, regardless of skills. Spatially, we therefore have a mismatch problem, something the Approach Paper dismisses in half a sentence and Economic Survey 2007-08 doesn’t even mention as an issue. There are geographical areas and segments where there is excess demand and ones where there is excess supply. Unorganised sector male wage employment is primarily in manufacturing, construction, trading and transport. For women, trading and transport can be replaced by domestic services. Depending on how we count, the total is between 53 and 75 million. These figures are from 2004-05. They must have increased since then and it’s a considerable number. Hence, we should ask the question: How do these workers find out jobs are available and decide on temporary or permanent migration? The answer is simple. Barring limited instances of job offers at factory gates, there are only two channels: informal (family, caste, community) networks and labour contractors. This kind of information dissemination can’t be efficient, apart from commissions paid to agents.
Clearly, we need efficient clearing houses. Isn’t that what employment exchanges are supposed to do? Not quite. First, the system started (in 1945) because of the need to resettle demobilised defence service personnel and later (1948) displaced persons from Pakistan. Second, the mandatory Employment Exchanges (Compulsory Notification of Vacancies) Act of 1959, applicable to public sector and private sector units that employ more than 25 people, isn’t as compulsory as you might think. For the private sector, court judgments allow appointments other than through employment exchanges and, for the public sector too, there are alternate recruitment channels. The labour ministry’s website tells us: “Therefore Employment Exchanges are left with only stray cases that too at the lower levels of employment. Therefore in the placement side (regular wage employment) the role of Employment Exchanges is definitely going to be not very significant.¶
You can’t be more honest than that. In August 2007, the National Commission’s report stated: “A few workers said they had registered at the Employment Exchange where they received unemployment allowance of Rs 50 per day. But they stopped going to the Exchange since it costs them Rs 80 each day to reach there.¶ The apparent attraction of employment exchanges is that they are free. Private placement agencies charge and the labour ministry’s website also tells us that these private ones may be fraudulent, besides being city-centric.
We will come back to that point. But what do the 947 employment exchanges (82 are physically located in universities) do? There will be a song and dance about the training services they provide. That deserves a separate column. However, as of December 31, 2007, 39.97 million were registered with employment exchanges to seek jobs. As far as employment exchange performance is concerned, in 2006, 177,000 got jobs through employment exchanges and 7.3 million registered with employment exchanges. To reinforce the spatial point made earlier, most placements were in Gujarat and most new registrations in UP (with most of the backlog in West Bengal). Administration and expenditure on employment exchanges is now a state subject, an earlier matching grant from the Centre having run its course. Hence, it is difficult to get data on expenditure on employment exchanges, though it must be floating around somewhere in state government budgets. A back-of-the-envelope computation with budgets from four states suggests that, each job through an employment exchange, costs the government (and therefore, citizens) Rs 3 lakh. Is this efficient usage of scarce public funds and equally scarce infrastructure in those 947 exchanges? Isn’t it better to close them down and hand over management to the private sector, including for training? If this is accepted for ITIs, why not for employment exchanges as well?
If one sets up a regulatory structure, fraudulent ones will be eliminated and informal networks (family, caste, community, contractors) become large and formalised, ensuring economies of scale and scope in information processing, dissemination and intermediation. The labour ministry’s website mentions a list of 800 such private agencies. As mentioned earlier, these are accused of being city-centric. On June 6, 2004, M.K. Pandhe wrote in People’s Democracy: “However, they collect data only for the organised sector while the vast area of unorganised sector is out of the purview of these exchanges. Moreover, these employment exchanges are only operating in the urban areas and have no centres in the rural areas.¶ An audit report for People’s Democracy’s favourite state said, “Computerisation of 40 employment exchanges in the state was taken up along with network connectivity and the work was entrusted to the ET & TDC on turn-key basis. However, even after spending Rs 6.52 crore, the computerised system installed in the employment exchanges has been lying inoperative for last 30 to 46 months.¶
Contrast this with privately-triggered job melas (or livelihood melas) that have now been happening in several states, Rajasthan being a recent instance. These aren’t city-centric and, as far as one can make out, the government didn’t spend any money. Now that Rajasthan has decided to hand over tourist spots to private management, employment exchanges should follow. Since “R¶ has gone out of BIMARU, perhaps Rajasthan will teach the remaining ones how to exit too.
The writer is a noted economist
