The Scourge of Unemployment

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Prabhat Patnaik

  • January 29, 2024

The unemployment situation is worse today than it has ever been in post-independence India. There are two distinct elements that have contributed to this situation. One is the fact that the output recovery from the fall caused by the pandemic-linked lockdown has not been accompanied by a comparable employment recovery. In fact, even though the gross domestic product in 2023-24 is estimated to be larger than in 2019-20 by about 18 per cent, employment has shown zero growth over the last five years according to the Centre for Monitoring the Indian Economy. This fall in the employment-intensity of GDP is because the recovery in output has been much less pronounced in the small and medium scale enterprises than in large-scale ones and the former are much more employment-intensive than the latter.

There is however an additional factor. Even by 2019 the unemployment situation had become serious; in fact the unemployment rate in 2019 was higher than at any time since the inflationary recession that followed in the wake of the first oil-price hike in 1973. This second factor has nothing to do with the pandemic and the uneven recovery from it across sectors; it is associated instead with the immanent tendencies of a neoliberal regime. What is striking is the fact that even though official statistics show a near-doubling of the average growth rate of GDP between the earlier dirigiste regime and the neoliberal one, the rate of growth of the number of jobs has halved between the two regimes.

The reason for this decline in the rate of growth of employment which has made this rate even lower than the average rate of growth of the labour force over the neoliberal period, lies in the much faster growth in labour productivity which has occurred as a result of the greater openness of the economy. Greater openness has increased competition among producers across countries for the Indian market leading to the introduction of faster technical change; and that typically entails a faster rise in labour productivity. Added to this has been the unleashing of an agrarian crisis owing to the withdrawal of government support from peasant agriculture; and that in turn has uprooted large numbers of peasants from their traditional calling, forcing them to migrate to cities where they have swollen the number of frustrated job-seekers.

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