The latest employment data show that worker participation (the ratio of workers to population ) fell to just 39.2% in 2009-10 from 42% in 2004-05. This implies that only two million new jobs were created in five years. Leftists are screaming, “Jobless growth.”
However, officials say proudly that unemployment on all three standard measures–annual, weekly and daily — has fallen in this five-year period. Long-term unemployment is down from 2.3% to 2%.
Readers will be puzzled by these contradictory data. If so few jobs are being created, how can unemployment fall?
Answer: there is a huge, unanticipated decline in people willing to work. The decline is marginal for men (from 55.9% to 55%) but huge for women (29.4% to just 23.3%, or around 35 million ). So, the big problem is not lack of jobs but lack of workers, especially females.
In response, farmers are mechanizing (more harvester combines and tractors) and so are construction contractors. Some builders are doubling the size of bricks to overcome the bricklayer shortage. Fast growth has created big job potential, but the labour shortage has prevented that from becoming a job boom. Jobless growth, implying excess labour, should depress wages. But “workerless growth”should send wages booming. The latter is the case.
Between January 2008 and December 2010, agricultural wages skyrocketed 106.3% in AP, 84.1% in Punjab, 73.6% in Tamil Nadu and 62.9% in Maharashtra. In poor states, wages rose 62.8% in Orissa, 62.3% in UP, 58.5% in Bihar, and 56.3% in MP. Even allowing for 30% inflation over three years, poor workers gained hugely.
The wage differential between male and female labour fell 4% in rural areas and 7% in urban areas, says academic Sonalde Desai. Declining fertility and NREGA (which specifically targets women) increased new job potential for females. In such good conditions, why did 35 million females withdraw from work?
More research is needed, but two explanations are plausible. One, young females are shifting from employment to higher education. Two, as incomes and female education improve, families pull females out of the workforce for status reasons.
The working age is defined as 15-60 years, but as demand for higher education rises, the proportion of students aged 15-25 rises. This aids skill creation, but reduces worker participation, and so offsets the demographic dividend created by falling fertility.
However, rising higher education is not a new trend. It has been there for decades, yet rural female participation remained around 33% from 1983 till 2004-05, and has only now crashed to 26.1%. Rising higher education is more marked for males, yet their work participation has not fallen. So, this factor cannot fully explain the withdrawal of 35 million females from the workforce.
The social status argument is more compelling. It operates at both the income and educational level. Poor illiterates have the work highest work participation since they can’t afford to be out of work, and both males and females work. But as incomes increase, work participation drops, especially for females. Economists Tendulkar and Mukhopadhyay have shown that female participation drops 10 % or more as women move from the bottom onetenth of incomes to the second and third one-tenth.
This may puzzle readers: surely two good incomes are better than one. But social mores, especially in the lower middle class, give superior social status to households where women don’t work. When a family with rising income decides to keep females at home, it literally buys social status with the income foregone. Illiterate women will do any job. But as education improves, females demand better jobs for status reasons, and these are not so widely available. So female participation drops with rising education till women become college graduates, at which point participation increases again.
Surveys show that when incomes rise, poor and undernourished people do not increase calorie consumption much, but shift to superior foods with higher social status. A study of dalits in UP by Devesh Kapur and others illustrates the importance dalits attach to adopting life-styles once reserved for upper castes. This includes using toothpaste, cosmetics, shampoo, superior foods, and cars in wedding baraats. Even undernourished households, buying higher status can be far more important than buying a few more calories.
Research may throw up other reasons for female withdrawal. But the recent wage boom is clearly important. It is a big success, yet has created a problem of female withdrawal because it bestows higher social status. This, alas, suppresses the demographic dividend and living standards, and creates “workerless growth.”
We need changed social attitudes to promote female workers. More female college graduates will also help. Finally, we need less gender discrimination and improved work conditions for women.