Persisting despite remedies

Unemployment has been an intractable problem ever since the first plan was launched in 1950-51. In fact, the magnitude of the problem has only grown through the plan period. Even today, there are many commentaries that have pointed out the persistence of the problem because of various reasons, such as changing technology being more capital-intensive and the low level of education and skill levels leading to the unemployability of a large proportion of the working force. In this two-part article we will look at the magnitude of unemployment, types of unemployment and how it has been addressed in various plans.

Unemployment through the plans

The problem of unemployment is not limited to India; it is universal. Economists have dedicated hundreds of research papers and doctoral dissertations to this issue. Lord Keynes, one of the most influential thought leaders in the 20th century, had postulated that unemployment in developed economies was a result of lack of effective demand. If there is no demand for products, factories making those products will shut down, leading to lay-offs of workers and unemployment. Keynes’ solution was to raise effective demand through government expenditure. However, in developing countries like India, such a theory doesn’t work because there is disguised unemployment in rural areas and educated unemployed in urban areas.

It is not that our planners and policymakers have not tried various remedies and solutions, but the problem seems to have persisted. In the first plan, as we saw in earlier articles, India was faced with the problem of influx of refugees, food scarcity and rising inflation. Unemployment was not mentioned even in the primary objectives statement of the first plan, and was discussed in Chapter 39 (the last chapter) of the plan document. It recognised the problem as being one of under-employment and unemployment of the educated in urban areas. It also suggested that employment generation would happen through the irrigation works and rural industries. As for the urban areas, there was a suggestion to become self-employed or set up small scale industries with a small capital. As for numbers, it seems that people seeking employment and registering with employment exchanges increased from 3.37 lakhs in March, 1951, to 5.22 lakhs in December, 1953, and further to 7.05 lakhs in March 1956. A survey in 1951 put the rural unemployment number at 2.8 million. Furthermore, the National Sample Survey suggested that the magnitude of urban unemployment in 1954 was 2.24 million.

The second plan (1956-61) stated expanding employment opportunities as one of the major objectives. It recognised that the rural and urban unemployed need to be given jobs, the natural increase in labor force needs to be factored in, and the problem of disguised unemployment in agriculture and educated urban unemployed needed to be addressed. The natural increase in the labor force was estimated at about 2 million persons a year over the next five years starting 1956: a total of 10 million in the second plan. Out of this, 6.2 million were estimated to arise in the rural areas and 3.8 million in urban areas. The plan document admitted that generating so many jobs may not be possible during the plan. It also suggested that choice of techniques would have to be such that the needs of expanding employment are balanced with increasing productivity. The sectors where maximum jobs would be generated were: construction, industries (both large and small), railways and government. It was estimated that about 8 million jobs were generated in the 2nd Plan, but still there was a backlog of 9 million jobs at the end of the 2nd Plan.

In the third plan (1961-66), the objective of expanding employment opportunities was again stated explicitly. There was an urgency among the planners on the issue of unemployment simply because the problem was growing and no solution seemed to be in sight. It was estimated, based on the 1961 census figures, that there would be an addition of 17 million to the labor force during the third plan. Out of this, it was estimated that 14 million jobs would be generated during the third plan: 10.5 million in non-agriculture sectors such as construction, transport & communications, industry and minerals, small scale industry, forestry, fisheries & allied services, education, health etc.; and 3.5 million jobs in agriculture. That would still leave a backlog of 3 million jobs. Accordingly, the third plan took a view that employment expansion should be treated as a long-term goal with a target of 70 million in the third, fourth and fifth plans. As it turned out, there was a 28 per cent growth in employment in the third plan: a rise from 12 million employed in 1961 to 15.46 million employed in 1966 (this was as per data from Employment Market Information Programme of the Directorate General of Employment and Training). However, in the annual plans from 1966-69, there was very little growth in employment, and those employed stood at 16.63 million at the end of 1969.

In the fourth plan (1969-74), the emphasis was on labor-intensive programmes in agriculture and rural development programmes such as infrastructure, village industries, irrigation, rural electrification etc. The plan document shied away from putting any numbers on jobs created but was relying on faster agricultural growth and major, medium and minor irrigation works through the green revolution to generate jobs in the rural areas. The Dantwala committee on unemployment estimates, set up in 1968, also submitted its report in 1970, and laid out a framework for estimating and analysing unemployment rates. Three measures of unemployment were suggested: chronic unemployment or ‘usual status’ denoting those who remain unemployed for most of the year; weekly status denoting those who did not find even an hour of work during the survey week; and ‘daily status’ denoting those who did not find work during the survey week. This framework has been followed in various rounds of NSS data. The data sources suggested were: employment exchange for urban unemployment, NSS data for rural areas and employment market and the census. Later, another Committee of Experts on Employment, formed in 1973 under the chairmanship of B Bhagwati, estimated that there were 18.7 million unemployed people in 1971: including 9 million without a job and 9.7 million who work for less than14 hours per week. Out of this, 16.1 million were estimated to be in rural areas and 2.6 million in urban areas. This worked out to be 10.4 per cent of the total labor force of 180.4 million. Another study by Dandekar, based on the 27th round, estimated that unemployment had risen to 9.5 million (‘usual status’ or chronic type) in 1972-73 from the earlier 7.3 million estimated in the 19th round. During this period, the ‘Crash Plan’ for generating rural employment was undertaken, which sought to provide continuous work for 10 months to 100 persons in each Block in a year. These persons would work on creating durable assets in the rural areas, such as irrigation canals, soil conservation, land reclamation and flood protection. This ‘Crash Plan’, though innovative, couldn’t address unemployment and under-employment. A similar programme was Maharashtra’s successful Employment Guarantee Scheme. It was also launched on a pilot basis, which involved providing assured employment in rural areas through rural works. Such rural works would also produce physical community assets like rural roads, wells, bunds and canals.

In the fifth plan (1974-79), the planners were acutely aware of the persisting problem of unemployment and under-employment. The plan suggested that the employment policy should be woven into the development strategy and programmes. Three aspects were flagged: the centrality of irrigation, agriculture and use of high-yielding varieties in agriculture in development strategy; weaving employment into this development strategy; and tenancy reform leading to more productivity of small farmers. The importance of area planning was also highlighted. Employment generation in industry and manufacturing was also expected to be higher than in the fourth plan. Such opportunities were to arise in the sectors of mining, quarrying, construction industry, electricity, railways and other transport, and other services. During this period, unemployment figures were available from the 32nd round of 1977-78, which said that the unemployment rate had settled at 4.23 per cent (the chronic type), which translates to about 10 million in number.

When the sixth plan began in 1980, the rate of unemployment was 4.48 per cent, and about 12.02 million were unemployed (usual status). The numbers were 12.28 million for ‘weekly status’ and 20.74 million for ‘daily status’. During the sixth plan, it was also estimated that there would be a net addition to the labour force of the order of 34 million in the age-group of 5-plus during 1980-85. The backlog of usual status unemployment at the beginning of March, 1980, was estimated at around 12 million. These two together, or 42 million jobs, were therefore needed.

The sixth plan (1980-85) saw a lot of activity on the unemployment front with a flurry of programmes launched. The food for work programme was restructured, and launched as the National Rural Employment programme, with the objective of generating 300-400 million mandays additional employment. The jobs undertaken were to create community assets such as wells, canals, tanks, roads and schools. The NREP did manage to achieve its target and generated 1,775 million man days during the sixth plan. The Rural Landless Employment Guarantee Programme (RLEGP) was launched in 1983 with similar objectives. Wage component in this programme had to be at least 50 per cent of the total expenditure. Similar programmes launched were Indira Awas Yojana for rural housing, and Million Wells Scheme for minor irrigation and social forestry. Another important programme launched in 1980 was the Integrated Rural Development Programme that combined all similar programmes under one umbrella.

Conclusion

Even though a number of programmes were launched to address the problem of unemployment, the problem persisted even at the end of the sixth plan with 28 million people still unemployed. We will continue this discussion in the next article and see how unemployment was tackled in the next six plans.

To be continued next Sunday…

The writer is Addl. Chief Secretary, Dept of Mass Extension, Education and Library Services, Govt of West Bengal.