Budget: Job seekers are now becoming job creators, says Piyush Goyal
The interim budget, presented a day after a heated debate on unemployment, attempted to reassure the nation on Friday that the economy was creating and is poised to create more jobs for a bulging workforce, but didn’t provide any new data to back these claims.
“With job seekers becoming job creators, India has become the world’s second largest start-up hub,” finance minister Piyush Goyal said in his interim budget speech.
On Thursday, the NITI Aayog, the government think tank, defended the government’s job-creation efforts after the Business Standard newspaper published a report by the National Sample Survey Organisation that showed the joblessness rate at a four-decade high of 6.1%.
A country’s unemployment rate is the number of unemployed people divided by the labour force (people with jobs plus the unemployed) multiplied by 100. Unemployed people not looking for work are not counted as part of the labour force.
“High growth and formalisation of the economy has led to the expansion of employment opportunities…” Goyal said.
Economists refer to the quantity of jobs created by each percentage increase in growth as the “employment elasticity of growth”.
A high share of growth from highly automated sectors may not result in much job creation. On the other hand, a principle called Okun’s law states that a 2% fall in gross domestic product (GDP) cuts employment by one percentage point. “So, growth remains key to jobs,” said economist YK Alagh.
The finance minister cited an increase in membership of the Employees’ Provident Fund Organisation (EPFO), a social security entity, to assert that job creation was taking place. It had “increased by nearly 2 crore (20 million) in two years reflecting formalisation of the economy and job creation”.
This argument – increase in EPFO membership – has been contested. Under legal requirements, if an organization has 20 or more employees, it immediately gets registered in the EPFO and such a firm is considered as part of the formal sector. So, if a firm initially had 18 workers and adds two more, then the entire 20 are counted as new workers joining the EPFO. This, therefore, presents a misleading employment generation picture, according to a paper by Radhicka Kapoor, a fellow at the Indian Council for Research on International Economic Relations.
The finance minister’s speech offers insights into how the government viewed the nature of the jobs economy. “The concept of employment is changing all over the world, now the employment generation is not confined merely to government services or factories.” He was referring to newer modes of job creation led by digital services.
The budget also referred to the MUDRA Yojana, an entrepreneurship credit scheme, which has advanced loans amounting to ₹7.2 lakh crore since its launch in 2015. “Given what we know about unemployment, the budget doesn’t really go in addressing those issues. That jobs have been created is partly true, but there is a question of sufficiency and quality,” said Amit Basole, a labour economist with Azim Premji University.
Quality jobs are said to be those that come with social-security benefits, stability and progression in salary. Basole said the issue of quality of jobs was “sought to be addressed by this budget partly through the new pensions announced.” “So that’s a bit of an intervention in the quality. In terms of number of jobs, I haven’t seen anything particularly exciting,” he said.
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- The meeting will be held virtually this year due to the ongoing Covid-19 pandemic.
- The rule is to ensure that high net worth individuals who post huge sums of money per month in their EPF accounts do not get to misuse the provision of assured high interest.
- Pandey said the move is aimed at ensuring that government presence is not required in the private sector and foreign investments.