Millennium Post

Dissecting Unemployment

Gimmicks with numbers cannot create real jobs.

Dissecting Unemployment

At the height of Dubai's property boom, one of the developers commissioned a private study on the likely impact of the emirate opening up the freehold property sector to expatriate ownership. The conclusion painted a picture of all-round economic boom as the demand for property triggered demand for everything else.

That was the time when developers were announcing new projects at break-neck speed so that they could make the most of the unprecedented boom. The study assumed a certain number of occupants for each new property coming into the market. This, in turn, would create demand for retail and other services, necessitating a huge number of jobs and new jobs meant more people, leading to a multiplier effect for each activity in the economic value chain. That would be economic boom unlimited.

Unfortunately, two years down the line half the properties entering the market did not have any occupants and that disrupted the chain even before it set off. And unfortunately for Dubai, it coincided with the global financial crisis of 2008 and the property market suffered a cardiac arrest, which it has not fully recovered from ever since, although it managed to come out of the coma condition off and on. Suddenly Dubai looked like a ghost city, with abandoned cranes and half-constructed towers dotting the skyline, creating an eerie effect.

PM Narendra Modi's spirited reply to Rahul Gandhi's hug and wink performance during the debate on the no-confidence motion, which some described as brilliant and some others as boring due to its excessive length, devoted much time to 'unearthing' of new jobs created during his government, hidden all these years due to lack of data. He then reeled off statistics to prove his claim. The only problem with Modi's claim was it assumed a certain multiplier effect similar to what the Dubai property developers had anticipated, which unfortunately for them did not quite happen.

Apart from the claimed 70 lakh jobs created in the formal sector, going by EPF and NPS, but excluding ESIC due to account linking issues, he spoke in detail about how the doctors, engineers, architects, lawyers, chartered accountants, cost accountants, company secretaries and other professional categories passing out of various institutes every year create jobs for others. He even cited a study to show that out about 17,000 new chartered accountants entering the profession in 2016-17, more than 5,000 started new companies.

"If a chartered account company employs 20 people, then more than one lakh people have got employment in these institutions. Over 80,000 postgraduate doctors, dental surgeons and Ayush doctors come out of college every year. If 60 per cent of them practice themselves, five others will get employment for each doctor and this works out to 2.4 lakh jobs.

"Nearly 80,000 undergraduate and postgraduate lawyers entered the profession in 2017. If 60 per cent of them started their practice and gave employment to two to three people, about two lakh jobs were created through those lawyers. In these three professions, more than 6 lakh people would have received employment opportunities in 2017.

"Now, if you talk about the informal sector, a lot of people get jobs in the transport sector. Last year, 7.6 lakh commercial vehicles were sold. If 25 per cent of these vehicles are considered to replace old ones, then 5.7 lakh vehicles have landed on the road. If two people get employment on such vehicles, then the number of people getting employment is 11.4 lakh.

"In the same way, if we look at sales of passenger cars, the number was 25.4 lakh. Of these, if 20 per cent is considered as replacement, about 2 million vehicles have landed on the roads. If only 25 per cent of these new cars are deemed to employ a driver each, then more than five lakh people would get employment.

"In the same way we have sold 2.5 lakh autorickshaws last year. If 10 per cent of these sales are considered to be replaced by old autos, then about 2.3 lakh new autos have landed on the road last year. Because auto runs in two shifts, then three people get employment from two autos. In this way, 3.4 lakh people get employment through new autos. Twenty lakh people have got new jobs in the last one year with these three types of vehicles alone to the transport sector."

It is gratifying that the officials who worked out these figures for the PM allowed for 25 per cent replacement so as to sound credible. But they have forgotten that a large percentage of these sales are institutional and the employment through them is already included in the figures for the formal sector. They have also ignored the fact that every year more than 8 million people are added to the army of unemployed in India. Similar sales have been happening every year, so there is nothing that the Modi government can claim credit for. But then these are just numbers; so it does not matter.

If the government wants to show even higher job creation, it can do that by adding housewives to the employed category, like Modi did with pakoda sellers and others. After all, when India's reigning Miss World Manushi Chiller was asked during the pageantry competition which job deserved the highest salary, she had said 'mother'. Once included in the informal job sector, the mothers can also be assigned a notional salary. So in one stroke, Modi could have raised employment generation by multiple times and also bettered the country's GDP by at least half!

(The views expressed are strictly personal)

K. Raveendran

K. Raveendran

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