COMMENTARY
(i) A rise in output ceteris paribus in-
Some Macro-theoretical
Foundations of Jobless Growth
C Saratchand
An alternative heterodox
explanation of the phenomenon
of jobless growth is advanced,
involving an interaction between
demand and technical change.
A mathematical condition is
derived whose satisfaction
ensures that both a high and low
rate of growth of output results
in a fall in the rate of growth of
organised sector employment.
During an output boom, the
high rate of growth of labour
productivity overwhelms the high
rate of output growth, while in
a period of slowdown the low or
negative rate of growth of output
more than compensates for the
reduction in the rate of growth of
labour productivity, resulting in
persistent jobless growth.
An earlier version of this article was presented
at the XII Global Labour University Conference
on “Reincarnation or Death of Neoliberalism?
The Rise of Market Authoritarianism and Its
Challenges for Labour,” 4 to 6 October 2017,
Jawaharlal Nehru University, New Delhi.
Non-incriminating thanks are due to the
anonymous referee.
C Saratchand (chandcsarat@gmail.com)
teaches at Satyawati College, University of
Delhi.
Economic & Political Weekly EPW march 30, 2019
T
he neo-liberal era has been charac-
terised by jobless growth (Patnaik
2007b). In countries at the capi-
talist periphery, such as India, a period of
high economic growth since the 1980s
has not been accompanied by an increase
in organised sector employment after 1991
(Tejani 2016). Instead, there has been a
creation of jobs in the unorganised sector.
Unorganised sector jobs are characterised
by lower wages, longer working hours,
limited social security, more adverse
work conditions when compared to jobs
in the organised sector (Chandrasekhar
2016). In what follows, jobless growth
refers to a process of growth of output
where organised sector jobs do not
increase significantly.
A neoclassical argument about jobless
growth would emphasise that labour
market rigidities result in the adoption of
techniques that employ more non-labour
means of production and less labour.
However, this argument is theoretically
untenable (Sraffa 1975). Even if other
postulates of neoclassical economics are
admitted, there need not exist an inverse
relation between relative input propor-
tions and relative input prices. Besides,
those labour laws that make firing diffi-
cult stabilise aggregate demand, out-
put, investment and employment by
reducing fluctuations in the wage bill
of the economy. In other words, wages
are a component of both cost and
demand in the economy (Bhaduri and
Marglin 1990). Neoclassical arguments
in this respect are also contradicted by
empirical evidence (Unni and Rani
2008; Kannan and Raveendran 2009;
Tejani 2016).
A heterodox explanation of jobless
growth would draw on the work of
Kalecki (2013). A directly proportional
relation between output and organised
sector employment is readily compre-
hended within the framework of Kaleckian
macroeconomics (Lavoie 2014) since:
vol lIV no 13
creases the demand for labour.
(ii) A rise in the rate of (organised sec-
tor) employment increases the bargain-
ing power of workers and therefore the
wage rate. If the real wage rate rises
then the corresponding rise in aggregate
demand increases the degree of capacity
utilisation and therefore investment and
(organised sector) employment.
Let the rate of growth of labour produc-
tivity (‫ܩ‬௧௟௣) be an increasing linear func-
tion of the rate of growth of output (gt):
୪୮
G୲ = dg ୲ + c ... (1)
c ‫ ظ‬0; d ‫ ظ‬0
The rate of growth of organised sector
employment (‫ܩ‬௧௘) may be expressed as:
G୲ୣ = g ୲ െ dg ୲ െ c ... (2)
The rate of organised sector unemploy-
ment will be constant if organised sector
employment grows at the same rate as
the labour force (n)1 which implies that
the rate of growth of output will also be
a constant (denoted by g):
g – dg – c = n ... (3)
A necessary condition for a positive g
is that:
d ‫ط‬1 ... (4)
By inspection of equation (3) it is evi-
dent that for a sufficiently high rate of
growth of output (gt ‫ܿ ظ‬Τ(1 െ ݀) ), or-
ganised sector employment will rise.
But, the experience of countries like
India is that there is jobless growth dur-
ing all phases of the business cycle (Pat-
naik 2011a). An explanation of this phe-
nomenon requires the Kaleckian macro-
economic framework to be modified.
Patnaik (2011a) proposes one such modi-
fication where the peripheral capitalist
economy is divided into an agricultural
and a non-agricultural sector. The for-
mer is peopled by peasants, part of
whose land is bought by capitalists each
year. Even if aggregate demand problems
are assumed away, the faster rate of
growth of labour productivity in the
non-agricultural sector relative to that
in peasant agriculture will result in an
increase in the rate of unemployment.
This would be so even if it is assumed
that the peasants who sell land obtain
a rate of return on these funds which
equals that obtained by capitalists.
Patnaik (2011a) does not consider the
dichotomy between the organised and
17
COMMENTARY

the unorganised sectors but highlights
the important point that in a neo-liberal
setting land acquisition by capitalists
could increase unemployment. In this
paper, this phenomenon is assumed away
for the sake of simplicity.2
Model of Jobless Growth
In countries at the capitalist periphery, it
has been argued that in the neo-liberal
era, the incorporation of formerly diri-
giste economies in the ambit of imperialist
globalisation where international finance
capital predominates, results in a number
of changes:
(i) Due to the dislike of fiscal deficits by
international finance capital (except
when it benefits the latter) in a setting
where there are no capital controls, the
capitalist state seeks to maintain a low
or zero fiscal deficit as a proportion of
output (Patnaik 2011b; Chandrasekhar
2016). Thus, the neo-liberal state in
peripheral capitalist economies is unable
to employ fiscal policy to influence the
rate of unemployment.
(ii) Monetary policy in the form of interest
rate adjustments is ostensibly used to
target inflation (Chandrasekhar 2016).3
This policy involves many problems even
in a closed peripheral capitalist economy
(Azad and Saratchand 2015). When there
are no capital controls, the central bank’s
interest rate must be set at a level that en-
sures that the rate of return that accrues to
international rentiers induces a certain
magnitude of capital inflows (Patnaik 1994).
High real interest rates tend to decrease in-
vestment and therefore, ceteris paribus,
increase the rate of unemployment.
(iii) Technical change that originates in
the capitalist metropolis is labour-saving
(Duménil and Lévy 2003; Marquetti
2003).4 A peripheral capitalist economy
that is incorporated into the ambit of
imperialist globalisation witnesses a
faster adoption of this labour-saving
technology. For a given real wage rate, an
increase in labour productivity reduces
the share of wages in output resulting in
a ceteris paribus fall in output, invest-
ment and organised sector employment.
Alternatively, a higher import intensity of
domestic production will also reduce
ceteris paribus output, investment and
organised sector employment. Most of
the incomes that are generated in such
a setting, namely profits and salaries
of organised sector workers are spent
either on imported means of production
or consumption or domestically produced
means of production or consumption,
which are both labour-saving and have
a higher import intensity. Patnaik (2007a)
therefore postulates that the rate of
growth of labour productivity (‫ܩ‬௧௟௣ ) in
such a peripheral capitalist economy is an
increasing quadratic function of the rate
of growth of output (g), that is, the tech-
nical progress function5 is non-linear:
୪୮
G୲ = fg ଶ୲ + dg ୲ + c
... (5)
f ‫ ظ‬0; d ‫ ظ‬0; c ‫ ظ‬0

Appeal for Donations to the Corpus of the Sameeksha Trust

This is an appeal to the subscribers, contributors, advertisers and well-wishers of Economic and Political Weekly (EPW), published by
Sameeksha Trust, a public charitable trust registered with the office of the Charity Commissioner, Mumbai, India. EPW has completed
50 years of publications. We have become what we are at present because of your support and goodwill. Week after week, EPW publishes
at least 80,000 words by a wide range of writers: veteran and young scholars, senior journalists and public commentators, political and
social activists; elected representatives of the people, policy practitioners, and concerned citizens.

In order to meet new editorial challenges, confront technological changes, provide adequate remuneration to our employees and contributors,
enhance our reputation and grow in stature and scale while zealously maintaining our editorial independence and autonomy, we seek
your support. Given the growing uncertainty in flows of advertising income and the fast-changing nature of publishing, it is our endeavour
to increase interest income by enlarging the corpus of the Sameeksha Trust. We seek active support from both institutions and individuals
in this endeavour.

Do donate to the corpus of the Sameeksha Trust. The Sameeksha Trust, which owns EPW and the EPW Research Foundation,
is a public charitable trust registered under the Bombay Public Trusts Act, 1950. Donations to Sameeksha Trust enjoy tax exemption under
Section 80G of the Income Tax Act, 1961. We welcome donations to the corpus not less than Rs 1,000 per individual. Donations in foreign
currency and donations from political parties are not accepted. We welcome donations from non-resident Indians (NRIs) and persons of
Indian origin (PIOs), but only in Indian currency and through regular banking channels. All donors must provide details of their Permanent
Account Number (PAN) and a covering letter, stating that this donation is to the corpus of the Sameeksha Trust. Please note that a covering
letter and photocopy of the PAN card is mandatory.

If you need more information on how to support us, please email us at edit@epw.in and we shall be happy to provide you with details.

— From the Trustees of Sameeksha Trust and the Editor of EPW

18 march 30, 2019 vol lIV no 13 EPW Economic & Political Weekly
 COMMENTARY

The rate of growth of organised sector By inspection of equation (11) it is evi- including investment, consumption,
employment (‫ܩ‬௧௘ ) by definition equals the dent that since the RHS is negative it government, trade and capital flows.
difference between the rate of growth of follows that: (iii) A consideration of embodied techni-
output and the rate of growth of labour ɋ୲ାଵ ‫ ط‬ɋ୲ ... (12) cal change whereby technical change is
productivity: Any macrodynamic model that contains incorporated into the new elements of
Ԗ୲ାଵ െ Ԗ୲ ୪୮ ... (6) equation (11) cannot have a non-zero the capital stock (or means of labour).
G୲ୣ = = g ୲ െ G୲
Ԗ୲ steady state with a constant ratio of or- (iv) A more explicit consideration of the
Here ϵt is the magnitude of organised ganised sector employment to the total distinction between unorganised sector
sector employment. labour force as is evident from an inspec- employment and unemployment which
Equation (6) may be expressed as tion of equation (11). If in equation (11) will also require a reckoning with the
follows: one sets νt+1 = νt = ν it is clear that the impact of capitalist acquisition of peasant
dെ1 ଶ (d െ 1)ଶ LHS of the equation would be positive land on unemployment.
G୲ୣ = െf ൬g ୲ + ൰ +ቆ െ cቇ ... (7)
2f 4f while the RHS would be negative. The
The rate of growth of organised sector two sides of the equation would be equal Conclusions
employment will be negative for any only if it is the case that νt+1 = νt = 0. This article presents the argument that
rate of growth of output if: A positive steady state would be pos- the problem of jobless growth is not
sible only if the role of unorganised related to the magnitude of the growth
f‫ظ‬0
(d െ 1)ଶ ... (8) sector workers is incorporated into the rate of output. As long as the peripheral
cെ ‫ظ‬0 discussion. Though this is outside the capitalist economy is incorporated into
4f
Clearly the second of the inequalities scope of this article, a few remarks in the ambit of imperialist globalisation
set out in equation (8) is the decisive this regard are offered here. If the ratio wherein international finance capital
one. This inequality is likely to be valid for of unorganised sector workers to the predominates, an alternative to the path
high values of c f. A high value of f repre- labour force rises over time it is possible of jobless growth cannot be established.
sents a situation where the cumulative that the ratio of total (organised and When there are no capital controls, any
process of diffusion of imported inputs and unorganised) employment to the labour policy move by the state that is not
labour-saving technology is significant. force could be a constant under certain acceptable to international rentiers will
A value of d that is close to unity is also circumstances. result in rapid capital flow and a signifi-
conducive to the maintenance of the sec- If there is a cyclical trajectory, then cant economic setback (Grabel 2011).
ond inequality set out in equation (8).6 the ratio of unorganised sector workers After the institution of a system of
Unlike in the case of a linear technical to the labour force could also vary capital controls, an employment guarantee
progress function, in the case of a quad- cyclically. The existence of a cycle would programme needs to be set up. The case
ratic technical progress function which require other macrodynamic processes for an employment guarantee programme
satisfies the inequalities set out in equa- to be taken into account. The recovery has been advanced by many (Flaschel
tion (8), no rate of growth can ensure an from a downturn could be the result of and Greiner 2012; Murray and Forstater
increase in the rate of growth of organised monetary or fiscal policy if such policies 2013). In terms of the model of this arti-
sector employment. are not constrained by other factors.7 cle an employment guarantee scheme
If the rate of growth of organised sector The end of an upturn could be on would reduce the value of f, c, and possi-
employment is negative, then for a non- account of balance of payments difficul- bly d to an extent that the inequalities
negative rate of growth of the labour force ties in peripheral capitalist economies, mentioned in equation (8) are reversed.
(Lt) the share of organised sector employ- such as India, which are chronic cur- Further public investment, financed in
ment in the labour force (vt) will tend to rent account deficit economies through the main by direct taxation of profits,
fall. The share of organised sector employ- changes in exchange rates either through would be required to overcome supply-
ment in the labour force may be defined as: policy design or the activities of inter- side bottlenecks which if unresolved may
Ԗ୲ ... (9) national rentiers. give rise to inflation that is unrelated to
ɋ୲ =
L୲ The empirical evidence presented in wage increases (Chandrasekhar 2016).
The rate of growth of the labour force Tejani (2016) and Chandrasekhar (2016) If the employment guarantee scheme
(n) may be defined as follows: is consistent with the results of the mod- is comprehensive and effective then
Lt+1 = Lt(1 + n) ... (10) el presented here. Further work on the the bargaining power of workers would
lines of the model of the current paper increase resulting in a rise in inflation if
The relation between vt and gt may be could try and incorporate the following the price-making power of capitalists
expressed as follows: aspects: is not restrained even if there are no
(i) An explicit representation of the role supply-side bottlenecks. Moreover, this
(1 + n)ɋ୲ାଵ െ ɋ୲
of the unorganised sector and its workers alternative process of development will
ɋ୲ which has been briefly mentioned above. require changes in the trajectory of labour-
dെ1 ଶ (d െ 1)ଶ (ii) A more detailed specification of the saving technical change in the capitalist
= െf ൬g ୲ + ൰ +ቆ െ cቇ... (11)
2f 4f different components of aggregate demand, periphery.8 These measures are not
Economic & Political Weekly EPW march 30, 2019 vol lIV no 13 19
COMMENTARY
attainable by a bourgeois state and will
require to be instituted by a participa-
tive social movement of which a state led
by the workers and peasants must be a
constituent part.
Notes
1 Patnaik (1997) has argued that in the capitalist
metropolis the rate of growth of the labour
force is an increasing function of the rate of
employment due to migration from the capitalist
periphery.
2 For the purposes of this article, the agricultur-
al sector is assumed to be part of the unorgan-
ised sector.
3 Inflation targeting monetary policy, if it works,
requires changes in the rate of employment
and capacity utilisation in response to changes
in the policy interest rate as determined by the
central bank.
4 Though there is some debate about whether
the non-labour means of production required
per unit of output increased secularly over time
there is no doubt that the productivity of
labour has risen over time under capitalism.
Since both labour and non-labour means of
production are heterogeneous, propositions
about the changes in the ratio of means of
production per unit of input require a proce-
dure to aggregate these non-homogeneous
entities. According to Fine and Saad-Filho
(2016), Marx (2010a, 2010b) developed the
concepts of the technical, organic and value
compositions of capital to deal with this issue.
The technical composition of capital is a relation
between the heterogeneous vectors of labour and
non-labour means of production. The organic
composition of capital expresses this relation
as a ratio in terms of magnitudes of value that
existed prior to the onset of a round of techni-
cal change. The value composition of capital
expresses this relation as a ratio in terms of
magnitudes of value that come into being after
the onset of a round of technical change.
5 Kaldor (1957) introduced the concept of the tech-
nical progress function into macroeconomics.
6 The first inequality in equation (8) could be
satisfied even if the value of c is zero.
7 As mentioned above, one such constraint on
monetary policy could be a rise in the world (or
United States) interest rate. In that case the do-
mestic rate of interest would have to rise in or-
der to bring about a certain alignment between
both rates (Patnaik 1994).
8 Marglin (1974) points out that the trajectory of
technical change under capitalism is deter-
mined by the requirement of capitalist control
of the labour process. An alternative to this
process would involve a decisive role for
participation of workers in the organisation of
the labour process.
References
Azad, Rohit and C Saratchand (2015): “A Macro-
theoretic Survey of Monetary Policy in a
Closed Economy,” ICSSR Research Surveys and
Explorations: Economics, Volume 3: Macroeco-
nomics, Prabhat Patnaik (ed), Oxford University
Press, pp 75–116.
Bhaduri, Amit and Stephen Marglin (1990): “Un-
employment and the Real Wage: The Economic
20
Basis for Contesting Political Ideologies,” Cam- Marx, Karl (2010a): “Capital: A Critique of Political
bridge Journal of Economics, Vol 14, No 4, Economy Volume 1,” Collected Works of Karl
pp 375–93. Marx and Fredrick Engels, Fredrick Engels (ed),
Chandrasekhar, C P (2016): “Macroeconomic Policy, Vols 35, Karl Marx – Capital Volume I, Law-
Employment and Decent Work in India,” rence and Wishart.
Employment Working Paper No 205, Interna- — (2010b): “Capital: A Critique of Political Econo-
tional Labour Organization. my Volume 3,” Collected Works of Karl Marx
Duménil, Gérard and Dominique Lévy (2003): and Fredrick Engels, Fredrick Engels (ed),
“Technology and Distribution: Historical Trajec- Vols 37, Karl Marx – Capital Volume III, Law-
tories à La Marx,” Journal of Economic Behavior rence and Wishart.
and Organization, 52(2), pp 201–33. Murray, M and Mathew Forstater (eds) (2013): Em-
Fine, Ben and Alfredo Saad-Filho (2016): Marx’s ployment Guarantee Schemes: Job Creation and
‘Capital’, 6th ed, Pluto Press. Policy in Developing Countries and Emerging
Flaschel, Peter and Alfred Greiner (2012): Flexicu- Markets, Palgrave.
rity Capitalism: Foundations, Problems, and Patnaik, Prabhat (1994): “Macro-economic Policy in
Perspectives, Oxford University Press. Times of ‘Globalisation’,” Economic & Political
Grabel, Ilene (2011): “Unsurprising to Keynes, Weekly, pp 917–21.
Shocking to Economists: The Normalisation of — (1997): Accumulation and Stability under Capi-
Capital Controls in the Global Financial Crisis,” talism, Oxford University Press.
Microeconomics, Macroeconomics and Economic
— (2007a): “A Model of Growth of the Contempo-
Policy: Essays in Honour of Malcolm Sawyer,
rary Indian Economy,” Economic & Political
Philip Arestis (ed), London, UK: Palgrave
Weekly, Vol 42, No 22, pp 2077–81.
Macmillan, pp 251–67.
— (2007b): “Contemporary Imperialism and the
Kaldor, Nicholas (1957): “A Model of Economic
Growth,” The Economic Journal, 67(268), World’s Labour Reserves,” Social Scientist,
pp 591–624. Vol 35, No 5/6, pp 3–18.
Kalecki, Michał (2013): Theory of Economic Dynamics, — (2011a): “Economic Growth and Employment,”
Routledge. First published in 1954. Economic & Political Weekly, Vol 46, Nos 26/27,
Kannan, K P and G Raveendran (2009): “Growth Sans pp 172–76.
Employment: A Quarter Century of Jobless — (2011b): “Finance Capital, Fiscal Deficits and
Growth in India’s Organised Manufacturing,” the Current Global Crisis,” Progressive Fiscal
Economic & Political Weekly, pp 80–91. Policy in India, Praveen K Jha (ed), Sage Publi-
Lavoie, Marc (2014): Post-Keynesian Economics: cations, pp 3–20.
New Foundations, Edward Elgar Publishing. Sraffa, Piero (1975): Production of Commodities by
Marglin, Stephen A (1974): “What Do Bosses Do? Means of Commodities: Prelude to a Critique of
The Origins and Functions of Hierarchy in Cap- Economic Theory, Cambridge University Press.
italist Production,” Review of Radical Political First published in 1960.
Economics, 6(2), pp 60–112. Tejani, Sheba (2016): “Jobless Growth in India: An
Marquetti, Adalmir A (2003): “Analyzing Histori- Investigation,” Cambridge Journal of Economics,
cal and Regional Patterns of Technical Change 40(3), pp 843–70.
from a Classical-Marxian Perspective,” Journal Unni, Jeemol and Uma Rani (2008): Flexibility of
of Economic Behavior and Organization, 52(2), Labour in Globalizing India: The Challenge of
pp 191–200. Skills and Technology, Tulika Books.
Review of Environment and Development
October 13, 2018
Situating Agroecology in the Environment–Development Matrix —Nandan Nawn,
Sudha Vasan, Ashish Kothari
Global Status of Agroecology: A Perspective on Current Practices,
Potential and Challenges —Michel P Pimbert
Maximum Sustainable Yield: A Myth and Its Manifold Effects —Madhuri Ramesh, Naveen Namboothri
State, Community and the Agrarian Transition in Arunachal Pradesh —Deepak K Mishra
Urbanisation and New Agroecologies: The Story of —Sheetal Patil, Dhanya B,
Bengaluru’s Peripheries Raghvendra S Vanjari, Seema Purushothaman
Agroecological Farming in Water-deficient Tamil Nadu —C Saratchand
Indian Agriculture: Redefining Strategies and Priorities —Raj Gupta, Mamta Mehra, Rabi Narayan
Sahoo, Inder Abrol
Bovine Politics and Climate Justice —Sagari R Ramdas
For copies write to:
Circulation Manager,
Economic & Political Weekly,
320–322, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel,
Mumbai 400 013.
email: circulation@epw.in
march 30, 2019 vol lIV no 13 EPW Economic & Political Weekly