No significant change in Unemployment

CONTRARY to fears expressed in 1991 that the economic reforms would create massive unemployment, there was little change in unemployment in the first 18 months of reform, while more detailed research may show an actual decline in person-days of unemployment.

Employment data are now\’ available from the National Sample Surveys for 1991 (July-December) and 1992 (January-December). These show a mixed picture for different categories, but the overall picture suggests little change.

This is an extremely favourable result, since countries which go bust and then reform typically suffer high unemployment for a few years before recovering. India seems to have managed a virtually costless transition in terms of unemployment.

The main impact of reforms is typically on\’urban employment. India did not change its rigid labour laws, and some believe this prevented unemployment. But in fact the organised sector is so small (only 8 per cent of the workforce)\’that even if 2 lakh public sector workers lost their jobs, it would have made very little difference to the overall picture.

As it happens, the data show that urban unemployment for males (who account for the overwhelming share of urban jobs) actually declined.

There are two measures of unemployment. \’Usual adjusted status\’ refers to persons unemployed most of the year. \’Weekly status\’ refers to people unemployed in the week preceding the survey, and is a measure of shorter-term unemployment. To calculate person-days of unemployment, the weekly status is a better indicator than the usual status.

The data show that usual status unemployment for urban .males declined from 4.5 per cent in 1990-91 (the year before the reforms) to 4.1 per cent in 1991 (July-Dec), and was 4.3 per cent in 1992. Weekly status unemployment declined from 5.1 per cent in 1990-91 to 4.8 per cent in 1991, and was 4.6 per cent in 1992.

For rural males, the picture was less clear-cut.

Usual status unemployment worsened from 1.1 per cent in 1990-91 to 1.6 per cent in 1991 (July-Dec) before improving to 1.2 per cent in 1992. Weekly status unemployment stayed unchanged at 2.2 per cent before and after the reforms.

Female urban unemployment (usual status) fell from 4.7 per cent in 1990-91 to 4.3 per cent in 1991 before climbing to 5.8 per cent in 1992. Weekly status unemployment rose from 5.3 per cent in 1990-91 to 5.6 per cent in 1991 and was 6.2 per cent in 1992. This was a clear deterioration. But, as the survey says: \”The size of the female urban labour force is very small and the unemployment rate is susceptible to changes in the labour force.\”

As for rural areas, where female participation is twice as high as in urban areas, usual status unemployment rose from 0.3 per cent in 1990-91 to 0.7 per cent in 1991, and was 0.6 per cent in 1992. Weekly status unemployment declined, from 2.1 per cent in 990-91 to 1.2 per cent in the two post-reform periods.

Rural employment is affected much more by weather than reforms (which have barely touched rural India). Rural unemployment was high in the drought year of 1987-88, fell in subsequent years of good rains, and rose again in the sub-normal monsoon period of 1991.

Dr Suresh Tendulkar of the Delhi School of Economics is associated with the National Sample Survey. He says the latest data should be interpreted as showing no significant change in employment.

He points out that poor people cannot afford to be unemployed, so unemployment has never been a particularly good measure of distress. He thinks it is too early to begin to assess the impact of reforms on employment.

The Left has no such reservations, and has been shouting about massive unemployment with no evidence whatsoever. It has tomtomed estimates which now turn out to be bogus.

The Left points out that real outlays for rural employment were cut in the first two years of reforms because of fiscal austerity, and assumed that this would translate into greater unemployment. The data show this is not so.

Allocations for rural employment went up sharply in the third and fourth years of reform to an all-time record, and the effects of this will be disclosed by the large-scale survey of 1993-94, whose results are expected this summer.