Conventional wisdom states that unemployment rate in a poor country like India is bound to remain low because people cannot afford to remain unemployed. People may be willing to work even at very low wages rather than stay unemployed.
Perhaps, it is time to correct this understanding. India is not a poor country as it was in the past. It is a developing country with a large middle class, often described as a young, impatient and aspirational middle class. This aspirational middle class youth is not willing to work for a pittance. It’d rather sit out of the labour force than run after jobs that do not meet its, well, aspirations.
This aspirational neo-middle class is caricatured, not very inaccurately, as a smartphone weilding shopping mall inhabitant with dreams fuelled by the information superhighway and a devil-may-care attitude. In reality, this attitude is fuelled by the recent prosperity of their families. India has progressed from being a largely poor economy to being a largely middle-class society. And, it has produced a generation with an attitude but, without sufficient jobs and without sufficient hunger to work hard.
What are the preferences the middle classes have about jobs? Here is one piece of data to understand this. 73 per cent of the respondents in a survey said their first preference of a job is a government job. Only 13 per cent said that a private sector job was their first choice. Even self-employment is preferred to a private sector job.
This is one of the results from a survey conducted by CMIE on the Consumer Pyramids sample for Lok Foundation. The survey was conducted during the current aspirational age - September - December 2015 over an all-India sample of 158,624 respondents.
Interestingly, a follow-up question regarding the choice of a job for children (the next gen) did not change the views much: 68 per cent preferred a government job for their children. The share of private sector went up to 20 per cent. But, it was still a far cry from the predominant preference for a government job.
Anecdotally, we know that intermediate castes (most prominently Jats, Patels and Marathas) have been agitating to seek reservations in government jobs. Clearly, government jobs command a premium.
We also know that government jobs are the least meritocratic and the most corrupt. It is revealing that it is these low-meritocracy and high-corruption jobs that the Indian new middle classes aspire for themselves and also for their children.
Part of the problem is that private investments have slowed down and correspondingly, private jobs have shrunk. It is revealing again that 25 years after liberalisation, the private sector is still not able to provide the jobs necessary to absorb the new work force.
It is also true that private jobs are less secure and more demanding. It is therefore further revealing that labour has not come to terms with volatility of private jobs in a market economy. Most importantly, labour is unwilling to labour. Even within the private sector, office (air-conditioned) jobs are preferred to factory jobs or to field jobs.
But, does this preference indicate that labour can afford to be choosy? Maybe, yes. The BSE-CMIE partnership at estimating and understanding unemployment provides a pointer in this direction. A relevant observation from this survey is that households are well-off enough to be run with only one person earning.
Only about a third of the total households have more than one working person. This is a low proportion for a population of young workforce. About six per cent of the households have no employed members. These include households that earn entirely from rent, dividends or transfers. Over 60 per cent of the households are run essentially on the income of just one working member.
The standard of living of the households has improved sufficiently that it is no longer imperative that an additional person be sent out to work. Researchers have argued that this is the reason why female labour participation rate is falling. The same argument seems to be applicable to the youth.
Households earn well to support the family such that it is not necessary anymore to add a hand to the till. In the face of no government jobs or equally comfortable private sector jobs, an able-bodied workforce sits outside the labour force.
It is the recent increase in incomes that supports this luxury. But, this obviously cannot last for long without it beginning to hurt economic growth. Aspirations (as in desires) need to translate into ambition (as in a drive to grow).
First Published in Business Standard Link