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Number theory: Shrinking public sector employment and its costs

ByPabitra Chowdhury and Rosa Abraham
Sep 01, 2022 10:48 AM IST

As the public sector has contracted, there has been no other good employer that has emerged to take its place despite the economic expansion of manufacturing and services sectors.

Despite several decades of rapid growth of the private sector in India, the allure of a public sector job, historically associated with security, steady pay, and multiple benefits, continues to remain strong for most Indians. The protests following the announcement of the Agnipath scheme for the armed forces, and the uproar around the Bihar railways recruitment issue prior to that have to be seen in this larger context of the aspirations and hopes that have been traditionally placed on public sector employment. This piece highlights how, as the public sector has contracted, there has been no other good employer that has emerged to take its place despite the economic expansion of manufacturing and services sectors. Moreover, public sector employment is an important vehicle for social justice in the labour market (through affirmative action), and the weakening of this sector has consequences for the economic mobility of historically marginalised communities.

Number theory: Shrinking public sector employment and its costs (Sanchit Khanna/HT PHOTO)

Declining share of public sector in salaried employment

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In 1999, the major public employers were railways, public administration, and defence -- together accounting for nearly a third of all salaried jobs. However, this share has steadily declined, and by 2019-20, it nearly halved to only 11% of salaried jobs in the economy. Naturally, given the high tide of economic liberalisation that India has experienced in the last few decades, much of the salaried work in the public sector has been displaced by manufacturing and services industries. Indeed, as of 2020, more than half the salaried employment comes from the services sector. Another third of salaried jobs are created in the manufacturing sector. Despite the increasing prominence of the private sector in creating salaried jobs, a public sector salaried job brings with it far more in terms of security and benefits.

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Public sector continues to be the main source of “good jobs”

In 2020, three out of four salaried workers in the public sector were eligible for at least one kind of social security benefit including provident fund contributions, gratuity and health insurance. In fact, around 66% and 42% of railways and public sector employees received all three benefits. Contrast this with the access to benefits for salaried workers in the private sector. In manufacturing and services, only 14-18% of salaried workers received all three benefits and only 40% received at least one of them. It is no wonder, then, that such jobs continue to remain aspirational endpoints for most workers in the country.

Public sector is a major employer of marginalised communities

Another less appreciated role of public employment is its role in furthering social equality. Affirmative action policies in the form of reservation for historically marginalised communities has been a continuing feature of public employment in post-Independence India. While reservation for Scheduled Castes (SC) and Scheduled Tribes (ST) were in provision right after independence, after recommendations from the Mandal Commission, other backwards classes (OBCs) were also extended reservation in the public sector.

The impact of this affirmative action policy is evident when we contrast the representation of SC/ST groups in these public sectors against their representation in the overall workforce. So, for instance, in 1999, SCs comprised about 11% of the workforce. In the same year, they constituted only 6% of salaried workers in public administration. This implies a “representation index“of 0.56 (6/11) for SCs -- an under-representation of SCs in the public administration salaried workforce by nearly half. In contrast, the representation index for the general category is 1.5, indicating that their share in this sector is more than their share in the overall workforce, an over-representation. However, over time, there has been a steady increase in the representation of workers from marginalised communities in the public sector. As of 2020-21, STs were represented in public services in proportion to their share in the workforce. In fact, SCs have come to be over-represented in public services with their share in the sector being 1.2 times their share in the workforce, a testimony to the role of affirmative action policies.

Contrast this with the representation of these communities in the private manufacturing and services sectors. The share of SCs and STs in these sectors is below their share in the workforce. While it has marginally increased over the years, these groups are still very much underrepresented in these sectors. On the other hand, general category individuals are over-represented in these sectors, with their shares remaining relatively unchanged over time.

The public sector, therefore continues to be a provider of “good jobs”, and importantly, a crucial employer of marginalised communities. Given that the private sector has not created enough or good jobs, this has led to both increasing informalisation of the labour market as well as marginalisation of underprivileged communities from the labour market. In this context, further attempts to erode job creation in the public sector are likely to have both economic and social consequences for the Indian economy.

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