Welfare, even with vastly improved targeting, cannot be a substitute for jobs and job creation, and increasing welfare does not sit well with declining labour force participation. Growth has to – to use an unfashionable term – trickle down. Jobless growth is unsustainable.
The second wave of the coronavirus pandemic had a less intense effect on joblessness than the first. Yet, the urban unemployment rate climbed to 12.6% in April-June 2021 on account of localised lockdowns from 9.3% in the prior three months. The number for the same quarter a year before was a staggering 20.8%, as a nationwide lockdown led to mass layoffs and a reverse migration of the urban workforce. The 11th round of the government’s periodic employment survey finds the labour force participation rate declined sequentially to 46.8% in April-June 2021 from 47.5% in the previous quarter, and it was not much of an improvement over the 45.9% during the first three months of the Covid outbreak in 2020.
The narrative of a resurgent Indian economy falters over these numbers. A big chunk of the population pays an inordinately high price through loss of income as a fragile recovery sets in. These vulnerabilities are showing up in high-frequency indicators as a decline in demand, particularly for items of mass consumption. A public investment-led growth push must work its way to ailing consumption at the bottom of the pyramid through jobs. This segment of the workforce has been through two years of income insecurity. They now face the prospects of inflation with no immediately significant improvements in their employment prospects.
The government is relying on improved welfare delivery to address this vulnerability, as it tries to ramp up local manufacturing through various schemes. It is also on a declared course of privatisation that reduces the capacity to absorb surplus labour. These structural changes in the economy have been exacerbated by the pandemic as the onus of job creation moves from the visible hand of the state to the invisible one of the market. Welfare, even with vastly improved targeting, cannot be a substitute for jobs and job creation, and increasing welfare does not sit well with declining labour force participation. Growth has to – to use an unfashionable term – trickle down. Jobless growth is unsustainable.