THE GIST of Editorial for UPSC Exams : 22 FEBRUARY 2019 (The employment test (The Hindu)

The employment test (The Hindu)

Mains Paper 2: Economy
Prelims level: Centre for Monitoring Indian Economy
Mains level: Indian economy, growth and employment

Context

•  The emergence over the past few months of data on employment, speaking precisely the lack of it, cannot but have an influence on our assessment.
•  They paint a picture of an economy that is widely out of line with the government’s pronouncements on its performance.
•  These have generally avoided any reference to employment, except to say that there is a lack of reliable data on it, for the rectification of which the government itself has done very little.

Silence on jobs

•  Employment does not usually figure in the public discourse orchestrated by political parties, either at the Centre or in the States.
•  This must change, for steady employment is the citizen’s aspiration, to realise which she elects representatives.
•  Governments in India must therefore be routinely subjected to an employment test which gauges their success in generating and sustaining high employment.
•  Employment data from government sources for about half a decade up to 2015 and from the independent agency Centre for Monitoring Indian Economy (CMIE) for the period since give us a reasonably good idea of the progress made with respect to employment.
•  When supplemented with other information, these sources also suggest to us the proximate factors responsible for that history.
•  The evidence they provide tell two stories.
•  The Modi government has had next to no success in generating employment, notwithstanding its promises at election time.
•  A development that may require some effort to understand fully, but which nevertheless it is important for the citizen to do, is that the labour force may actually have shrunk while it has been in office.
•  The labour force is the sum of the employed and those unemployed who are seeking employment.
•  A shrinking of the labour force is most unusual in an economy with a growing population, and thus a growing working age cohort.

The demonetisation effect

•  This decline had already emerged in 2015, it became pronounced after demonetisation in 2016.
•  A section of those hitherto willing to work may have simply dropped out of an already challenged labour market.
•  This possibility is recognised in macroeconomics as the ‘discouraged-worker effect’ and has been observed in Western economies.
•  The loss of skill that can accompany being unemployed even temporarily, and the consequent loss of long-run output for the economy, is the basis of the argument that public policy must respond with alacrity to growing unemployment.
•  No such sensibility has infused the government, which appears not to have noticed the decline in the labour force itself, a development that occurred very early in its tenure.
•  It has instead congratulated itself on having delivered macroeconomic stability.
•  We are now able to see that whatever may have been the acclaimed beneficial impact of demonetisation in terms of raising direct tax compliance, it has caused demoralisation among a section of the already unemployed who may have given up all hope of finding employment.

Way forward

•  In a democracy, it is left to elected representatives whether to pursue macroeconomic policies conducive to the generation of employment.
•  India’s political parties have for close to a decade now failed to so, either wilfully or out of neglect.
•  However, when elected to govern, they are given a chance to create the conditions that enable Indians to lead flourishing lives, which includes being meaningfully employed during their working age.
•  India’s political parties must pass ‘the employment test’. When they fail they must vacate the stage.

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Prelims Questions:

Q.1) According to ‘World Economic Outlook’ report, which of the following statements is/are correct?
1. India is the second fastest growing country among major economies.
2. Higher oil prices have almost negligible impact on the domestic demand in India.

Which of the statements given above is/are correct?
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer: D

Mains Questions:
Q.1) The labour force may have actually shrunk while the Modi government has been in office. Critically analyse the statement.