Our Economy and Unemployment ratesnergalscott
Our Economy and Unemployment rates
IT IS GENERALLY ASSUMED IN DEVELOPED ECONOMIES THAT A THREE PER CENT UNEMPLOYMENT RATE IS SOMETHING THAT A COUNTRY CAN LIVE WITH, AND ANYTHING MORE WOULD BE STRESSFUL.
What we get by way of reports on the economy are trends, which are important, but which do not really present an accurate picture of the economy. There have been two such reports that had come out recently. The first was the Fifth Annual Employment-Unemployment Report for 2015 carried out by the labour bureau in the ministry of labour, which shows that unemployment has touched five per cent, the highest in the last five years. A five per cent unemployment rate should not be reason for ringing the alarm bells. But in the absence of social security cushion and without any unemployment dole, this five per cent of unemployment in absolute terms translates into a few millions, whose livelihood deprivation would cause social stress. But it would be wrong to jump to the conclusion that no new jobs are being created. Experts all round have agreed that the survey does not represent an accurate picture of the situation because the survey had not taken into account the situation in the states. The other crucial finding of the survey is that the unemployment of women is higher at 8.7 per cent. Here too it would be wrong to draw hasty conclusions. There is need for supplementary data to make sense of the higher rate of unemployed women. It would be tempting to build an argument based on gender disparity, and turn it into a contentious ideological issue. This would be a diversion, however sharp the arguments may be, from the real issues of the nature of female unemployment. Greater detailing will be needed to understand fully the sociological and economic reasons behind this higher figure. These figures do not indicate that the economy has a good enough distance to cover. The argument that it is possible to have a higher economic growth despite a high figure of unemployment is not fully convincing. In the long term, higher growth and higher unemployment cannot go together. There is a simple reason behind this. Higher employment ensures higher consumption, which, in turn, enables the economy to clock a better rate of growth. Neither the government nor the private sector can pretend not to care about unemployment rates.
The other report is from Geneva-based World Economic Forum where India is shown to have jumped 16 places to end at 39 in the Global Competitiveness Index for 2016-17. The report indicates that the reason for improvement in the ranking is due to goods market efficiency, business sophistication and innovation. But the report notes that tax regulations, corruption, tax rates and poor public health remain issues of concern, which could hinder the competitiveness of the Indian economy in the long term. There is apparently no connection between the two reports but standing back it is possible to see the big picture of the Indian economy through the perspective provided by the surveys. The economic growth rate can only improve if the state of employment and the economy’s competitiveness improve. Policymakers in the government and in business will have to place the two reports together while planning for the future. There is a temptation for the government and the private sector to derive solace and satisfaction from the WEF report and India’s improved status on the competitiveness index, and downplay or even ignore the survey about unemployment. It would be short-sighted to do so. It cannot be forgotten that better economic growth is only possible through near full employment. It is generally assumed in developed economies that a three per cent unemployment rate is something that a country can live with, and anything more would be stressful. So, government will have to decide as to what it would want to do to keep unemployment as low as it is possible to do so.