Oikonomica: I (2) Page|1

From the Editor’s desk

In January 2019, a few months before the general Lok Sabha elections in India, there was a
debate on the motives of the government in not releasing the leaked data from the five yearly
employment survey of NSSO that might perhaps showcase the failure of its two major reforms
— demonetisation and GST. India’s unemployment rate stood at 6.1% in FY2018; rural
unemployment at 7% and urban unemployment at 5.3%. This revealed a huge jump over the 2.2
per cent unemployment registered in 2011-12, highlighting the challenge that confronts the
Narendra Modi-led government. Overall unemployment was at a 45-year high, with youth
between the ages of 15 and 29 facing higher rates of joblessness than others, despite the claimed
10 million annual addition to the workforce of 760 million. The informal sector employs more
than 90% of the country’s workforce and has witnessed a decline in available work and wages in
the last two years. Sustained high economic growth since the early 1990s has brought significant
change to the lives of Indian women, and yet female labour force participation has stagnated at
under 30%. A staggering GDP growth of 7.2% backs the employment data and a little backing
from our side with the topic for May 2019 being “Employment”.

Growth sans employment, and employment sans quality is the reality of present Indian economy
despite all the humdrum around skill development. The very dissociation of employment from
GDP shows how important it is to address it separately. Participation of women in the workforce
improves their status in the household by giving them the decision-making power, apart from
adding value to the economy. Employment of women alone has the potential of providing a GDP
growth of 27%. Poverty alleviation schemes like MGNREGA provide a minimum of 100 days of
employment. Generation of employment in the formal sector or even modern informal sector
fails to absorb the traditional informal sector sufficiently, boosting inequality. Industry oriented
growth and employment causes massive agrarian distress in a economy that subsists on
agriculture. Increase in Workforce participation rate (WPR) in slums, the curse of urbanisation,
fosters a growth in infrastructure of slums besides an improvement in literacy rate with its spill
over effects benefitting the city prime as well. Employment created may still increase only the
number of marginal workers or casual workers employed who may be thrown out of the
workforce any second. It is vital to direct employment growth in a sector that has experienced an
increase in production to alleviate poverty.

Employment is not just growth, it is development. And Oikonomica, in its second issue tries to
explore that.
 Oikonomica: I (2) Page|2

Guest Column
On the declining female labor force participation rate in India
Dr. Punarjit Roychowdhury
Assistant Professor, Indian Institute of Management, Indore

The female labor force participation rate in India is currently one of the lowest among all
countries in the world. In 2017, only 27 percent of adult Indian women had a job (formal or
informal), or were actively looking for one, compared to 50 percent in rest of the world. In fact,
almost 25 million women had dropped out of the workforce between 2008 and 2018. As per the
estimates of the International Labor Organization (ILO), India now stands at 121st out of 131
countries ranked for female participation in the workforce. Among the G20 countries, only Saudi
Arabia has a labor force participation rate of women that is lower than that of India. Recently,
the issue of low and falling female labor force participation rate of women has received
substantial attention in two important economic documents. The first of these is titled “An
Economic Strategy for India” which has been authored by thirteen senior economists, including
Raghuram Rajan, Gita Gopinath, Abhijit Banerjee and Maitreesh Ghatak, and the second is the
NITI Ayog report titled “Strategy for New India@75”. Both these reports unabashedly stress on
the immediate need for arresting the declining female labor force participation rate of women in
India.

Why India needs women to work? From an individual woman’s perspective, wage employment
increases her decision-making and bargaining power in the household: according to the National
Family Health Survey (NFHS), women who work, regardless of education level, have
significantly more say in household decisions. These in turn are likely to make women less
susceptible to domestic violence and improve their economic lives. Additionally, women who
work are likelier to invest more in their children’s upbringing. Women’s work also has positive
spillovers: research shows that sisters of women with longer work tenures marry later, and
villages that are exposed to more female leaders show lower rates of sex selection. In addition to
these human benefits, the economic benefits of benefits of women’s participation in labor force
are also massive. According to the IMF estimates, if the labor force in India were to gender
balanced (i.e., if the percentage of women in the labor force were equal to the percentage of
 Oikonomica: I (2) Page|3

men), the world’s biggest democracy would be 27% richer and we would be well on our way to
middle-income status.

The first step in raising women’s labor force participation rate is understanding its causes. Indian
households often require that women prioritize housework and may even explicitly constrain
work by married women. Societal expectation of women’s role as caregivers and caretakers of
the household often mean that women who seek work encounter opposition from their peers and
families, leading to lower participation. In a country where more than 72% women need
permission of their husbands to visit friends or relatives and 60% need permission to visit the
local grocery store, this is not at all surprising. In fact, the view that married women ‘should’ not
work outside is also frequently internalized by women themselves and may therefore suppress
labor supply even in the absence of such constraints. For example, data from the World Values
Survey indicates that approximately 4 out of 10 Indian women believe that working women do
not have as good relationships with children compared to stay home mothers. There is also
evidence these norms are typically more binding among wealthier, upper caste households,
suggesting that economic growth alone may not alter their influence. In this context, it is worth
noting that research shows that social norms has not changed significantly during the period
when female labor force participation rate has fallen in India. Consequently, the drop in female
employment in the last two decades can only be partially be attributed to prevailing social norms
and customs that affect supply of female labor.

That points to the other problem: the lack of employment opportunities. The workforce has
shifted from jobs more often done by women—especially farming, where most Indian women
work but are being displaced by mechanization. At the same time women face legal, normative,
and economic constraints to work. Indian women are still subject to laws governing when (i.e.
which shifts) and in which industries they can work. These rules can disproportionately affect
women even as the economy grows: for example, female participation in export-oriented
manufacturing jobs fell despite increased trade and reduced trade barriers during the 1990s,
likely due to legal constraints on women’s working hours through the factory laws. In
neighboring Bangladesh, whose customs are not so different from India’s, a boom in garment
manufacturing has increased the number of working women by 50% since 2005. In Vietnam
 Oikonomica: I (2) Page|4

three-quarters of women work. But the mega-factories that boosted female employment there are
largely absent in India.

What can be done? The government has already put in place several programs and policies to
increase women’s access to labor market opportunities; namely, increased funding to skills and
vocational training programs and gender-based employment quotas. There is some diagnostic
evidence and literature that supports the implementation of these policies. However, these
projects and interventions alone are insufficient. Research shows that even women that have
completed skills programs and get jobs tend to drop out in response to family pressures.
Changing social norms around marriage, work and household duties will have to be part of the
agenda. Additionally, it is also important to reform outdated legislation and policies that act as
deterrents to women entering or staying in the labor market. Fostering the creation of better jobs,
providing support for child and elder care, and ensuring mobility to and from work can remove
significant structural barriers for women to access employment.

The Bengali version of this article appeared in the Anandabazar Patrika on February 7, 2019.
 Oikonomica: I (2) Page|5

Labour market engagement of the aged in india

Zakir Husain
Professor, Economics Department, Presidency University

Populations around the world are ageing rapidly. Projections indicate that the number of persons
aged 60 years or more will increase from 737 million in 2009 to 2 billion by 2050 (UN, 2009).
The trend was first observed in developed countries of Europe and North America, but soon
manifested itself in Asian and Latin American countries. An UN study reported that the share of
aged in total population was 8.2 per cent in 2005 but could rise to 20 per cent in 2050 (UN,
2005). In India, the number of aged is expected to increase from 77 million in 2001 to 179
million in 2031, and to 301 million in 2051 (Rajan and Mathew, 2008).

Conceptual framework
The Life Cycle Hypothesis (Ando & Modigliani, 1963) states that individuals pass through three
phases.

Income

Consumption

Time

First transition Retirement Death

Figure 1: Life cycle hypothesis in ageing societies

In the initial phase, they are supported by their parents. Subsequently, they join the labour force
and start to earn. In this period, income exceeds expenditure, generating savings. This amount is
dissaved by the aged to maintain themselves in the post-retirement period. As life expectancy
increases, however, the post-retirement period will increase, and the aged will require more
funds to support themselves in this phase of their lives. To generate sufficient resources for
 Oikonomica: I (2) Page|6

financing the increased dissaving, a tendency to postpone retirement and prolong the working
period has been observed in developed countries (Husain, forthcoming).

Research objective and questions

In this context, a study of the labour market engagement of the aged in India comprises an
interesting study. Using unit level data from the 55th round (1990-00) and 68th round (2011-12)
National Sample Survey Office (NSSO) surveys on “Employment and unemployment situation
in India” we have examined the following questions:
1. Has participation of male and female elderly in economic activities (WFPR) increased over
time?
2. What has happened to the quality of employment?
3. Is there any change in the pattern of earnings of the elderly?
4. What is the magnitude of the financial contribution of the elderly to household economic
status?

Labour market engagement of the aged in India

WFPR of the elderly has declined from 35.40 percent in 1999-00 to 34.40 percent in 2011-12.
Econometric results confirm a statistically significant decline in rural WFPR among aged. It is
possible that government policies like loan waiver scheme, Mid-Day Meal scheme, MNREGA
and public distribution system have protected the Indian economy from the adverse effect of the
global economic crisis and the 2009 drought. So, the results may reflect the success of the above-
mentioned government programmes.

As expected, we find that there is a positive relationship between age and informal sector
participation in both the rounds. About 75 percent of workers aged 60-64 years work in the
informal sector; it is 83 percent for workers aged 65-69 years. There has been a marginal
increase of about two percentage points in the proportion of aged workers working in the
informal sector. If we consider the traditional view of informal sector, then increasing
informalisation may be a sign of concern. But the informal sector has also been shown to evolve
over time, so that it now has greater linkage with the formal sector. What is more likely,
therefore, is that the increasing integration of the formal and informal sectors, along with the pro-
 Oikonomica: I (2) Page|7

cyclical nature of this relationship, economic growth in the first part of the current millennium
has led to the creation of job opportunities and an increase in real earnings in the latter. Given the
easy nature of entry into the informal sector labour force, this has led to aged workers from low-
income households flowing to this sector to augment household income.

Analysis of segregation indices indicates that aged workers continue to use their skills and
experience by remaining in the same occupation after ‘retirement’. They only shift from the
formal to the informal sector. Given that the latter is typically an unregulated sector, this would
allow employers to exploit the skill and experience of elderly workers by offering them wages
below the market rate. Not surprisingly, therefore, we found that the concentration of elderly
workers is very low in high-earning occupations. Statistical analysis also revealed the presence
of high levels of discrimination against aged workers, though it has decreased over time.

In 1999-2000, average real earnings of aged workers aged 60-64 years was estimated to be
Rs.85; for workers in the age group 65-69 years it was Rs.55. Over the study period, real earning
increased but the change was not statistically significant. Average earnings of aged workers are
found to be lower than that of workers in the 55-59 years age group. Moreover, about 20 percent
of the wage gap cannot be explained in terms of education, or experience, or other factors
determining wage levels. This figure indicates discrimination against aged workers (Oaxaca,
1973). Over the study period, although real earnings of elderly workers have declined, there has
also been a marginal decline in discrimination in terms of pay.

Conclusion
We have seen that the total number of elderly persons and their work participation has increased
in developed countries. This contrasts with demographic changes in India in two respects —
firstly, although the process of aging started later in India, it is accelerating at a faster rate than in
developed countries (as a result of the population momentum and faster growth rate of
population in earlier years); secondly, despite an increase in their numbers, the workforce
participation of the aged has not increased over the years. This has important implications for the
social and economic security of the aged, particularly as the state is still not capable of providing
an effective social security net to vulnerable sections of the population.
 Oikonomica: I (2) Page|8

It is therefore necessary to analyze the reasons underlying the stable elderly WFPR in India. In
particular, it is necessary to identify the socio-economic and demographic correlates of the
decision to work at a micro level and analyze the impact of globalization on elderly workforce
participation in different expenditure classes. This will help us to conceptualize the relationship
between poverty and WFPR of the elderly. Among other related issues worth examining are —
rural-urban differences in WFPR among the aged, the nature of economic activities undertaken
by the elderly and factors that shape such occupational choices. Unfortunately, research on
elderly has tended to focus mostly on issues relating to their health and residential arrangements.
The few studies of WFPR has been descriptive, essentially describing trends in employment,
rather than analytical. Hence these issues may comprise the genesis of a future research study.

References
Ando, A. and F. Modigliani (1963) “The "Life Cycle" Hypothesis of Saving: Aggregate
Implications and Tests”. The American Economic Review, 53(1): 55-84.
Husain, Z. (forthcoming) Active Ageing and Labour Market Engagement: Evidence from Eastern
India. Springer, New Delhi.
Oaxaca, R. (1973) “Male-Female Wage Differentials in Urban Labor Markets”. International
Economic Review, 14(3): 693-709.
Rajan, S.I. and Mathew, E.T. (2008) “India”. In Rajan S.I. (eds.): Social security for the elderly:
Experiences from South Asia, New Delhi: Routledge, 39-106.
United Nations Population Division (2005) “Population challenges and development goals”,
New York: UN Population Division.
United Nations Population Division, (2009) “Population ageing and development 2009”, New
York: UN Population Division.
 Oikonomica: I (2) Page|9

Unemployment: A phenomenon intrinsic to capitalism

Ahan Karmakar
Undergraduate, First year: Economics Department, Presidency University

My personal endeavor to investigate the problem of ‘Unemployment’, germinates from my

social and economic standing as an individual. I am in my second semester in college, and within
the next two to four years, I will be competing in the job market, seeking “a steady job with a
good pay”, which very much represents the middle-class aspirations of Young and Modern India.
So, what do I see ahead of myself?

The time when I’m writing this article is particularly important. India is set to decide its “future”
through the 2019 General Elections. While it is quite debatable as to how much citizens can
decide their future through this form of non-participatory democracy, it is quite evident that
Unemployment has been a key issue for all political parties ahead of the Lok Sabha elections.

Unemployment Statistics for India

According to the National Sample Survey Organization (NSSO), the unemployment rate was at
an all-time high of 6.1 percent in 2017-18, the highest in 45 years. Male youth had an
unemployment rate of 17.4% in urban areas and 18.7% in rural areas, while female youth had
rates of 13.6% and 27.2% respectively. These reports were accessed by the Business Standard,
but the NITI Aayog said these reports were unofficial and unverified. However, the resignation
of the acting chairman and a member of the National Statistical Commission (NSC), alleging that
the government withheld the data even after the commission’s approval, questions the credibility
of the NITI Aayog’s statement regarding the report. This incident reaffirms the culture of post
truth politics practiced by India’s ruling party2, and India’s long history of data manipulation.3 It
is not unprecedented that a government agency would disassociate itself with a survey that
implies failure of the economic policies of a government, just a couple of months prior to the
elections.

Going back to statistics preceding this report, the Union Ministry for Labour and Employment
claimed national unemployment of 3.7 percent in 2015-16. However, anyone with only 30 days
 Oikonomica: I (2) Page|10

of work was considered “employed”. 77% of the families had no regular wage earner.4 As per the
National Skill Development Mission Document, as much as 97% of the workforce in India had
not undergone formal skill training and about 76% households did not benefit from employment
generating schemes like MGNREGA, PMEGP, SGSY, SJSRY, etc.5 This, at least statistically,
narrates the parlous state of Employment in India.

Unemployment and Neoliberalism

Unemployment, as a phenomenon, has become so persistent in recent times, that it seems to have
conformed to the general view of the “normal order of things”, so much so, that the anger of the
unemployed are often directed towards the reservation system6 or a demand to include one’s
“caste” within the reserved categories,7 rather than the demand for employment for all, even
when the responsibility to provide gainful employment constitutionally lies with the state.8

Unemployment as a “natural” phenomenon has been a characteristic of neo-liberal economies.

The neo-liberal period, which coincided with the rise of Ronald Reagan in US and Margaret
Thatcher in the UK, instituted a shift from the post-WWII Keynesian consensus which lasted
from 1945 to 1980. The normalization of Unemployment as an ever-existing economic
phenomenon can be credited to the next three to four decades of neo-liberal economic policies
globally.9 It is this bitter truth that have forced governments across the world, from India to the
US, to significantly manipulate data and to introduce the concept of “labour flexibility”. The
unemployment rate of the United States in January 2018 – 4.1% -- is historically low (with
unemployment reaching 10% during the Great Depression), this rate refers to any kind of job as
“employed”, including people who could find job for only 10hours a week. Similarly, India
considers anyone with 30 days of work a year to be employed. Economists consider people who
do not get as many days of work as they want as “under employed”, but official statistics count
them as “employed”. Similarly, the “marginally attached” and the “discouraged” worker are not
part of unemployed in the official measure, although, the discouraged worker effect is induced
by long term unemployment itself.10
 Oikonomica: I (2) Page|11

Unemployment and Keynesianism

According to the Keynesians, full employment and rise in wages with productivity were
characteristic designs of pre-1980 economic policy. Rising wages implied increased aggregate
demand, which ensured full employment. Full employment provided an incentive to invest,
which raised productivity, thereby supporting higher wages. Following 1980, with neoliberal
policy changes, Keynesians allege, full employment was abandoned as inflationary, and
governments were expected to maintain “fiscal responsibility”, tailor expenditure to revenue and
run only a small fiscal deficit, acceptable to global finance. Controlling inflation and reducing
fiscal deficit became prime concerns of neo-liberal orthodoxy, and this made it vehemently
attack worker’s unions, minimum wage laws and other worker’s protections.11

This account of criticism of neo-liberal economic policies is shared by most Keynesians.

However, these arguments have certain weaknesses. Keynesian strategies were not abandoned by
ideological preferences of the Reagan or Thatcher regimes, but because of structural changes in
market conditions. Policies pursued in response to the Great Depression and immediate
aftermath of WWII rendered those policies effective. However, this period was characterized by
nearly unlimited demand for US and UK Manufacturers, which allowed their workers to demand
wages and benefits while enjoying higher rates of employment. But, since the 1960s, they are no
longer unrivalled in global markets. Producers, during the post-war expansion, had invested so
much in fixed capital, that by 1960s, profit rates had begun to decline as the capital-labour ratio.
It was the overwhelming change in the global economy that necessitated the gradual rejection of
Keynesian policies.

This global economic scenario had and continues to have its implication on India. Increasing
aggregate demand, as we have seen before, could have been a way to reduce unemployment.
Among the components of aggregate demand, are consumption, investment, government
expenditure and net exports.13 Let us initially look at net exports. The other three components
shall be discussed immediately after.

Net exports depend on the world economy. When the world economy is growing, individual
economies can export more and hence, increase output and employment. However, world
 Oikonomica: I (2) Page|12

economic booms are possible when a single large economy like the US start booming. Except the
“dotcom bubble” in the nineties and the “housing bubble” in the early 2000s, there hasn’t been a
boom in the world economy. Neither are there any significant prospects of “bubbles” in the
foreseeable future. The world economy, therefore, continues to be in crisis, unemployment
continues to increase sharply in our own economy.14

Consumption demand, for a given income distribution, depends on the level of output and
employment. However, to increase consumption demand, income distribution needs to be
materialized in an egalitarian manner, but this is to meet obvious opposition from capitalists.15

Investment, too, depends upon expected growth of markets. Euphoric expectations germinate
rarely and therefore, this, as a method to reduce unemployment, isn’t foreseeable.16

Keynes did consider fiscal action through Government expenditure to be the most effective tool
to increase aggregate demand, and with it, output and employment. He had predicted that high
levels of employment would push capitalism to its doom and to “save the system”, prescribed
“demand management” by the state. However, as mentioned above, neo-liberalism is already
paralyzed by “fiscal responsibility”. Therefore, fiscal action doesn’t remain the autonomous
instrument for State intervention in a neo-liberal economy.17

We may now conclude that analysis from the neoclassical level has been, so far, quite enriching.
But to look for a possible solution to unemployment through these practices, shall prove
insufficient.

Then, what?
Karl Marx wrote “It is the very nature of the capitalist mode of production to overwork some
workers while keeping the rest as reserve army of unemployed workers.”18

Marxists look at unemployment as an inherent phenomenon within the unstable capitalist system.
Marx divided capitalists’ investments into two parts: the part that hire workers, i.e., variable
 Oikonomica: I (2) Page|13

capital and the part that buys (or rents) the means of production, i.e., constant capital.19 As
capitalism grows, variable capital is reduced. This happens in two ways.

Competition within the capitalist economy generates concentration. Either a bigger company
acquires a smaller company, or two medium or large companies merge. The merged companies
secure greater “economies of scale”, i.e., enjoy proportionate saving in costs due to increased
scale of production. This means one worker can operate a larger amount of the company’s
capital. This leads to layoffs, drives companies to terminate workers from employment.20
Greater productivity can also be ensured by reducing wages or increasing working hours. But
there are limits to that. The more lasting way to increasing productivity is through introducing
more efficient machines. This “labour-saving technology” destroys jobs of some workers.21

However, this doesn’t mean continuous reduction in the number of jobs. Industries expand, new
industries develop, and the demand for labour rises. But capitalism has this inbuilt tendency with
itself to drive workers out of production.22

This is the condition necessary for survival of the capitalist system. Marx pointed out that
capitalists require an “industrial reserve army” – who can be employed and subsequently be
thrown out of the production process as per the capitalists’ requirements.23

Irrespective of the situation of the economy, this reserve army ensures that there is always an
adequate supply of labour in the market. This pool of unemployed keeps workers’ wages and
other demands down, allowing exploitation of labour to conveniently continue.24

Quoting Marx,
“The industrial reserve army, during the periods of stagnation and average prosperity,
weighs down the active labor army; during the periods of over-production and paroxysm,
it holds its pretensions in check. [The industrial reserve army] is therefore the pivot upon
which the law of demand and supply of labor works. It confines…this law within the
limits absolutely convenient to…exploitation and the domination of capital.”25
 Oikonomica: I (2) Page|14

This alternate explanation of unemployment deduces that unemployment is intrinsic to the

capitalist system. Knowing that fiscal methods cannot ever be a solution to the fundamental
problem, we must continue to demand employment within the system. However, the dream of an
alternate must sustain, and persistent struggle towards it should parallelly be built up along with
the struggle for employment within the system.

Notes
1. Periodic Labour Force Survey 2017-18 (National Sample Survey Organisation)
a. These reports were accessed by the Business Standard on January 31, 2019, but the NITI Aayog
said these reports were unofficial and unverified.
2. Prashant Jha, How the BJP Wins: Inside India’s Greatest Election Machine (New Delhi: Juggernaut Books,
2017), pp. 93-131
3. Salman Soz, Under Narendra Modi, India is in danger of joining the ranks of Data Manipulators (The Print,
29 November 2018)
4. Fifth Annual Employment-Unemployment Survey (Ministry for Labour and Employment, Government of
India)
5. National Skill Development Mission Booklet (Ministry of Skill Development and Entrepreneurship, 2016)
6. The 1990 anti-Mandal Commission protests and the 2006 anti-reservation protests against the UPA
Government’s decision to implement OBC reservation are two major anti-reservation protests in India.
7. The Patidars of Gujarat, the Marathas, the Jats of Haryana and many other communities have taken to the
streets in recent years, for inclusion of their castes within the reserved categories.
8. The Universal Declaration of Human Rights and the International Covenant on Economic, Social and
Cultural Rights, both of which were acceded by India, in Article 23 and Article 6 respectively, recognise
the right to work in an employment of one’s choice and the State’s responsibility to safeguard this right.
The Indian Constitution does not explicitly recognise the ‘right to work’ as a fundamental right. It is placed
in Part IV (Directive Principles of State Policy) of the Constitution under Article 41, which hence makes it
unenforceable in the court of law. Despite the absence of an express wording of the ‘right to work’ in Part
III (Fundamental Rights) of the Constitution, it became a ‘fundamental right’ through a judicial
interpretation. Wider interpretation of Article 21 made by the Honourable Supreme Court through its
judgement in Olga Tellis & Ors. v Bombay Municipal Corporation & Ors. - ‘right to work’ was recognised
as a fundamental right inherent in the ‘right to life’.
9. Prabhat Patnaik, “Why do we have Unemployment?”, Peoples Democracy Vol XLIII No. 16 2019)
10. C.J. Polychroniou, Misleading Unemployment Numbers and the Neoliberal Ruse of “Labour Flexibility”
(TruthOut.org, June 6, 2018)
11. David M. Kotz, “The Financial and Economic Crisis of 2008: A Systemic Crisis of Neoliberal Capitalism”,
Review of Radical Political Economics, Vol. 41, No. 3(2009), pp. 305-317
Oikonomica: I (2) Page|15

12. IsmaelHossein-Zadeh, Keynesian Myths and Illusions http://www.counterpunch.org/2011/11/04/keynesian-

myths-and-illusions
13. Prabhat Patnaik, “Why do we have Unemployment?”, Peoples Democracy Vol XLIII No. 16 2019)
14. Prabhat Patnaik, “Why do we have Unemployment?”
15. Ibid
16. Ibid
17. Ibid
18. Karl Marx, Theories of Surplus Value
19. Karl Marx, Capital, Vol 1 (Moscow, 1887) pp. 142-149
20. Allen Myers, How Marxism Explains Employment, http://redflag.org/au/article/how-marxism-explains-
unemployment
21. Allen Myers, How Marxism Explains Employment
22. Ibid
23. Karl Marx, Capital, Vol 1 (Moscow, 1887) pp. 434-504
24. Karl Marx, Capital, Vol 1 (Moscow, 1887) pp. 434-504
25. Ibid
 Oikonomica: I (2) Page|16

Employed, and in India?

Shayri Bhattacharya
Undergraduate, Second Year: Economics Department, Presidency University

As the largest democracy in the world goes on to elect its 75th Lok Sabha members, this spring,
one can unambiguously conclude that the widespread unemployment amongst the youth across
the various strata of the society, raises too many eyebrows. A developing economy that’s en
route to economic and social progress is deemed to be less vulnerable to technological
advancements and automation challenges as opposed to a developed economy with a stabilized
growth rate. In such a scenario the present statistical indicators of employment in India have
been, worrying to say the least.

A review of the suppressed National Sample Survey Office (NSSO) report seems to provide a
wealth of information about the employment crisis in India which quite famously now is said to
be at a worst of 45 years. 11 major states have unemployment rates higher than the national
average of 6.1 percent in 2017-18. The states worst hit by unemployment are Kerala, Haryana
and Assam at 11.4 percent, 8.6 percent and 8.1 percent respectively. The states which have
somehow managed to save themselves from the wrath of the unemployment fire are
Chhattisgarh, Madhya Pradesh and West Bengal. The urban sector has seen a greater rise in
unemployment as opposed to the rural sector, although both the sectors have seen widespread
conditioning of the same in recent years.

According to the Centre for Monitoring Indian Economy (CMIE), unemployment among
graduates was 13.2 percent in the last quarter of 2018. If reports are to be believed then, out of
the 93,000 applicants for Class V jobs in government offices, 37,000 have been Ph.D. holders.
The implications of this vast array of statistics are of consequence. One realizes that almost all
factions of the youth, including the educated skilled ones and the uneducated skilled or unskilled
ones have been subjected to the effects of the crisis. The primary reason for it is that the rate of
loss of low-skilled jobs is more than that of the creation of new jobs which require a specific set
of skills.
 Oikonomica: I (2) Page|17

The crisis has been both structural and technological. The growth in unemployment has
increased in direct proportion to the known Gross Domestic Product.

Moreover, the recently imposed Goods and Services Tax has increased the regulatory burden on
small businesses. The lower thresholds under which only companies with annual revenue below
Rs. 20 lakh are exempt from GST have hurt innumerable companies. This hurt, quite predictably
has quickly translated itself into a major contributing factor of the unemployment crisis.
Another often neglected factor about the crisis is the increasing unemployment of women in the
various labor forces. Around 30 percent of graduate women in India are trying to grapple with
the problem of unemployment (CMIE, 2018).

The graveness of the statistic is worrying when one looks at the already diminishing ratio of
women in the Indian workforce. The scarcity of jobs in India for women who have graduated
acts as a strong negative incentive in the social message of education and empowerment of
women that is sent across a country that until not many years back had its majority being
arrogantly indifferent to educating girls and took their financial independence only as an answer
to various societal rites.

The reaction of the government has mostly been lackluster and more importantly on the verge of
severe obscurantism in this regard with meek reports of attempted increase in private and public
investments. The contradiction to such promises is often offered by its own policies of increased
government purchases and thereby rendering the promises rusted.

If India is to increase its growth rates and climb up the global ladders in terms of stability, it has
to do more than just merely fight wars and discover its nuclear supremacy. And, if India wishes
to have food in the bellies of its youth and dignity in the lives of its women it surely needs to
look beyond meek investment promises and launch full-fledged policies that increase its focus
unquestionably on the creation of jobs and maintaining them for all sections of the society in
equal proportions.
 Oikonomica: I (2) Page|18

A NEET issue: Incidence, Correlates and Costs in India

Somtirtha Sinha
Post-graduate, Second year: Economics Department, Presidency University

1. Introduction
Standing in 2018, when the unemployment rates in India are at a historical high, a more pertinent
question inherently comes to mind. Is unemployment rate still a good indicator when measuring
labor market vulnerabilities, especially among the youth? Enter the concept of NEET. NEET
stands for, not in education, employment or training. This group consists not only the currently
unemployed, but also those, who are not engaged in any sort of productive, skill building
activity, like education or vocational training. As per the ILO definition of NEET, to be
considered non-NEET, an individual must be receiving some sort of institutionalized education.
Also, NEET is a youth specific indicator. Hence, the age limit for the NEET population varies
from 15 to 34 in the literature. The NEET consists of a heterogeneous mix of individuals. To
illustrate, it might be possible that a person is simply physically challenged, because of which, it
becomes physically impossible for him to be engaged in any sort of productive work. On the
other hand, being a NEET might be a conscious choice of the individual. When NEET as a
concept emerged in Japan, it was hypothesized that the NEET are essentially spoiled children of
rich parents, who feed off their parents’ income and spend their time in front of television
screens playing online games (possibly PUBG). However, it might very well be the case that,
various socio-economic factors are at play which forces the individual to be NEET. In contrast to
the simple unemployment rate, NEET is a measure of complete disengagement from the labor
market. Since, not only are the individuals currently unemployed, but also, they are doing
absolutely nothing to increase their chances for future unemployment. Thus, the NEET in a sense
gives us some idea regarding the stock of future unemployed.

The importance of NEET as a concept can be grasped by going over the current literature. The
primary way the NEET can survive is through family support. This is a significant cost to bear
for the family members. It has been pointed out that, the NEET are more likely to be engaged in
criminal activities. This implies, the more the proportion of NEET, higher is the cost to the
government in terms of law enforcement. Thus, scarce resources which could have been
 Oikonomica: I (2) Page|19

allocated in developing some public infrastructure is getting engaged something unproductive.

Also, there exists evidence to show that, the NEET have a higher likelihood of suffering from
mental health issues in the long run, which again means a cost to the family members. In fact,
NEET has been proposed as the sole youth-specific target for the post-2015 Sustainable
Development Goals (SDGs) 8 to “Promote sustained, inclusive and sustainable economic
growth, full and productive employment and decent work for all”.

NEET as a concept emerged first in the UK during the 1980s when the official recognition to the
youth unemployment rate was withdrawn. The concept of NEET emerged at this juncture. As a
result of this, most studies concerning NEET are based either in the UK, Europe or the developed
world in general. There have been very few studies in the developing countries and none in
India. In the next section, we look at the incidence correlates and earning loss of the NEET
population in India. I have used the employment, unemployment survey of the NSSO for the
years 2004-05 and 2011-12 for my analysis.

2. The NEET situation in India

2.1 The incidence of NEET
The proportion of NEET in India turned out to be 34.07% in 2004-05. It fell to 31.02% in 2011-
12. These figures turn out to be around 11 crores. Guess what’s the population of an entire
continent, namely Australia is? It is around 2.46 crores. The sheer scale of the problem makes it
an issue of utmost importance for the researchers and the government alike.

2.2 Correlates of NEET

In this section, we look at the proportion of NEET across various socio-economic variables for
both the survey years.

2.2.1 Across education levels:

The first thing we note here, is the gigantic difference in the proportion of NEET between the
males and the females across all education levels and across the two years. Thus, the gender bias
is very much prominent even in terms of NEET.
 Oikonomica: I (2) Page|20

Figure 1: Percentage NEET by education level, 2004-05 and 2011-12

90.0
79.5 79.8
80.0 75.9 75.6 73.5 74.2
70.0 64.6
59.2 59.3
60.0 52.2
51.6 51.2
50.0
41.2 40.6
40.0
30.0
20.0 14.4 12.1
9.6 9.7 7.9 10.3 6.5 6.1 8.1 6.6 5.9 6.0
10.0 4.4 3.4
0.0
Illiterate Below Primary Primary Middle Secondary HS Above HS

2004-05 2004-05 2011-12 2011-12

The next thing to note is that, the percentage of NEET is highest for the illiterate population and
falls continuously for each successive education level, until we reach the highest education level.
This counter-intuitive result has been called the “reservation wage effect” in the literature. At the
lower education levels, it is likely that individuals will be engaged in any job they find.
However, when a person is a graduate or has a master’s degree or even a PhD, his expectations
regarding what job he deserves is quite high. Hence, it is unlikely that the person will be engaged
in any work he finds. He would rather stay unemployed and hence by extension a NEET. The
overall picture remains the same across the two rounds (Figure 1).

2.2.2 By Marital Status

The gender bias is still very much visible across marital status. However, interestingly, for the
males, the proportion of NEET is highest in the never married group, but for the females the
proportion is highest for the currently married group.
 Oikonomica: I (2) Page|21

Figure 2: Percentage NEET by Marital Status, 2004-05 and 2011-12

90.0 85.5 85.2

80.0
70.0
60.0
50.0 43.3
38.4
40.0 33.1
30.0 25.4

20.0
10.6 8.7
10.0 3.0 3.2 2.6
2.0
0.0
Never Married Currently Married Widowed/Divorced/Seperated

2004-05 2004-05 2011-12 2011-12

This clearly points to the fact that when women are getting married, they are not only getting
withdrawn from the labor market, but also, being disallowed from improving their human capital
in any form. However, the males are dictated to be the bread earners for the family by the
stereotypical gender roles assigned to them by the society. Hence, it is more likely, that they will
be engaged in some sort of employment, and hence the lower NEET proportion (Figure 2).

2.3 Changes in the probability of being a NEET

I ran a logistic regression model using various socio-economic variables namely, age, household
affluence (measured by the log of monthly household per-capita expenditure), socio-religious
community, marital status and education level. The dependent variable was binary which took
the value 1 if the respondent was NEET and 0 otherwise.
 Oikonomica: I (2) Page|22

Figure 3: Change in probability of being NEET, 2004-05

Adjusted Predictions

.8
.6
Pr(Neet)

.4
.2
0

9 10 11 12 13
lmpce

HFC HSC
HST HOBC
Muslims Others

Figures1and 2 plot the probabilities of being a NEET for the various socio-religious communities
with increasing family affluence for the two years. The first thing we note here is that, all curves
are upward sloping, implying that with increasing family affluence, the chances of being NEET
rises. This has been called the “income effect” in the literature. Thus, richer the parents, it is
more likely that the individuals are not engaged in any productive activity. In both the rounds,
the Muslims have the highest probability of being NEET for all income levels and the Hindu STs
have the lowest probability. The Hindu forward caste has the second-best position after the
Hindu STs.
Figure 4: Change in probability of being NEET, 2011-12

Adjusted Predictions
.8
.6
Pr(Neet)

.4
.2

9 10 11 12 13
lmpce

HFC HSC
HST HOBC
Muslims Others
 Oikonomica: I (2) Page|23

The overall ordering among the socio-religious communities remains unchanged across the two
rounds.

2.4 Loss in earnings to the NEET

Here, I first calculated the mean earnings for the non-NEET individuals with similar education
levels as the NEET individuals. Then, I multiplied the number of NEET in each education level
with this earning to calculate the earning loss to the NEET in each category. Finally, I summed
over all the educational categories to generate the total earnings loss to the NEET.
Table 1: Earning loss to the NEET

Year Loss in Rs. Crores Loss in USD (billions) Percentage of GDP

2004-05 33216.08 7.38 1.38

2011-12 354470.55 66.86 6.76

The income loss to the individuals because of being a NEET in both the years exceeds the entire
GDP of many smaller countries. Also, even though we noted earlier that the proportion and the
absolute number has fallen from 2004-05 to 2011-12, we see the cost of being NEET has risen
significantly as a proportion of GDP (Table 1).

3. Conclusion
In a developing nation like India, where despite significant growth, the employment situation
refuses to show any form of improvement, it was expected that the problem of NEET will be
significant. The numbers indicating the number of NEET in India is mind-boggling to, in 2011-
12. The situation must have gotten worse now in 2018 (42-year high unemployment rate). The
NEET problem also acts as a sad reminder of the many discriminations faced by the women in
the labor market. Finally, the costs, in terms of loss in earnings of the individuals is enough to
ring the alarm bells. Further research into this area is required, to focus the attention of the
government on the NEET problem so that it can take some decisive actions to solve it.
Oikonomica: I (2) Page|24

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