Notwithstanding No Naukri

Why did rising unemployment not hurt Prime Minister Narendra Modi?

The latest National Sample Survey Office (NSSO) report shows that unemployment has risen to a record 6.1% in 2017-18, almost triple the 2.2% in 2011-12. NSSO claims this is partly due to a change in methodology giving more weight to educated people, who have always had higher unemployment rates than illiterates.

Separately, Centre for Monitoring Indian Economy (CMIE) surveys have, for two years, shown high unemployment rates, the latest being 7% for April 2019. An Azim Premji University ‘State of Working India 2018’ study (bit. do/eUbjw) estimates unemployment in 2018 at 5%, with youth (15-29 years) unemployment three times as high. Youth unemployment (15-29 years) is most acute in urban areas. NSSO data for October-December 2018 show a whopping 23.7%.

Whose Job is This?

No wonder Congress and other Opposition parties harped constantly on Narendra Modi’s employment failure in the election campaign. Despite this, why did Modi sweep the general election? Even more mysterious, why did Modi get an especially high share of youth votes?

Let me offer four possible reasons. First, employment is a worry, but rarely affects electoral outcomes. Second, prized formal sector jobs may be improving fast. Third, many people counted as unemployed are actually investing time in searching for the best jobs. Fourth, Modi’s political masterstroke has been the announcement of a 10% quota for weaker economic sections of all castes.

While unemployment has always been an issue, no party has offered a credible solution for decades. Not being a policy differentiator, employment has historically shown no correlation with election outcomes. When Atal Bihari Vajpayee was prime minister, jobs grew at a respectable 2.3% per year. Yet, he lost the 2004 election.

Then, in UPA-1, under Manmohan Singh, job growth dropped to just 0.8% per year. Yet, UPA won the 2009 election hands down. Under UPA-2 in 2009-14, job growth rose a bit to 1% per year. Yet, UPA was thrashed in the 2014 election. And now, despite NSSO data showing the worst unemployment levels in 45 years, Modi has won a landslide victory. No correlation!

Second, formal sector growth is good. Enrolments by formal sector employees in the Employees Provident Fund Organisation (EPFO) are rising fast. The Central Statistical Organisation (CSO) claims, based on EPFO data, that a whopping 13.7 million formal sector jobs were created in 2018-19. Is it possible that an island of good jobs is rising in the sea of employment?

EPFO data are often revised down sharply. Sometimes, a rise in EPFO rolls merely means some informal sector employees have moved to the formal sector, representing improved job quality rather than numbers. Even so, the formal sector data look very good.

Third, note that illiterates take whatever job is available, and so have the lowest unemployment rate. The rates are higher for school-leavers, still higher for college graduates, and highest for PhDs. Why? As education levels rise, youths take time searching for really good jobs, ignoring immediately available but low-class jobs. The period of their job search is recorded as unemployment.

Waiting for the Right One

But economist George Psacharopoulos posited that the time spent on job search should not be called unemployment but be called an investment that yielded a return by eventually yielding a betterpaid job. He estimated that the return on this investment could be a high 14%. This may partly explain why the unemployed young still vote for Modi.

Fourth, ‘naukri’ for most people means government jobs. Last year, over 25 million applied for 90,000 railway posts. When Amroha municipality advertised 114 posts for safai karamchari (sweeper), it got 19,000 applications, including some from engineers and MBAs. India’s labour laws have prevented the rise of factories with tens of thousands of workers, as in China or Bangladesh. So, government jobs are seen as the best chance. Government staff are well-paid and unsackable.

Fiscal stringency at the Centre and states implies little scope for rapid expansion of government jobs, no matter which political party is in power. Because of this, voters have low expectations of government job expansion. So, the big political debate has shifted to the distribution of government jobs between various castes.

The last five years have witnessed major agitations by Patels in Gujarat, Jats in Haryana, Marathas in Maharashtra and Ahoms in Assam demanding a quota in government jobs. Historically, these were the dominant rural castes with high social status. But rapid economic growth and job quotas for other backward classes (OBCs), scheduled castes (SCs) and scheduled tribes (STs) have raised the status of these groups. So, many urban OBCs are now better off than the rural elite.

The dominant rural castes feel left out, and are demanding a slice of government jobs. Ironically, the latest data show that, despite Hardik Patel’s popularity, youth unemployment is the lowest among all states in Gujarat at 9.6%. Clearly, the size of agitations is a poor measure of distress.

The upper castes feel unfairly left out of the race for job quotas. Modi has announced a 10% quota for economically weaker sections regardless of caste or religion. For the first time, Muslims and Christians, as well as upper castes, will benefit from quotas. That really makes Modi seem different. This ploy will create no new jobs. Yet, it may have replaced despair with hope in many.

What do you think?