Arvind Panagariya, the former vice-chairman of NITI Aayog, wrote in an opinion piece a few days ago in The Times of India: “The approximate number of jobs seekers… (is) a good 4.2 to 4.5 million smaller than the 12 million figure that is defining the current debate and policy formulation.”
In the jobs debate that is currently going on, it is often stated that one million Indians are entering the workforce (i.e. employment-seekers) every month. Panagariya’s contention is that this is wrong. He shows through data that the actual number of job-seekers is around 7.5 and 7.8 million, per year. This is significantly lower than the stated 12 million a year or a million a month.
The key data points used to arrive at this conclusion (population projections of 2016 and 2021) have been taken from a 2006 report by the technical group on population projections, constituted by the National Commission on Population (NCP).
As per the 2006 report, the population of individuals 15 years and older would have been at 929 million in 2016 and 1,003 million in 2021. This means that 74 million individuals (1,003 million minus 929 million) would be added to the workforce between 2016 and 2021.
This meant an addition of 15 million per year to the workforce. Of course, the entire addition to the workforce does not look for an employment opportunity. Some continue to study, some get married and are expected to stay and manage their homes. And so, the story goes.
Given that labour force participation rate is around 50 per cent, Panagariya puts the actual number of employment-seekers at 7.5 million (or half of 15 million per year) and not 12 million per year.
The question is why take a projection made in 2006, in 2018. One answer could be that no population projections were made since 2006 by the Indian government. But that’s incorrect. The answer to why Panagariya used a 2006 projection, and not a more recent one, will become clear by the end of this piece.
In fact, more recent population projections are available.
A report titled Youth in India, published in March 2017 by the Central Statistics Office of the ministry of statistics and programme implementation, does make population projections, for the years 2021 and 2031. Given that this report is only a year old, the projections are likely to be more reliable than the 2006 report that Panagariya referred to in his piece.
We use the same method as Panagariya does, on data taken from a more recent report.
According to the 2017 report, in 2011, the population of individuals 15 years and older stood at around 838 million. By 2021, this is expected to go up to 1031 million. These figures basically tell us that 193 million individuals will be added to the working age population, over a 10-year period between 2011 and 2021.
This works out to 19.3 million individuals in a year. This figure is larger than the 12 million individuals entering the workforce every year, which is currently being bandied around.
Of course, not everyone turning 15 is looking for an employment opportunity. To arrive at that number, we need to multiply 19.3 million by the labour force participation rate or the proportion of the workforce looking for an employment opportunity.
As per the UPS approach under the Fifth Employment-Unemployment Survey of 2015-16, the labour force participation rate was 50.3 per cent. This basically means that only 9.71 million (19.3 million multiplied by 50.3 per cent) of the 19.3 million entering the workforce are actually looking for employment opportunities.
While this is lower than that 12 million per year number that is mentioned more often than not, it is significantly higher than Pangariya’s calculation of 7.5 to 7.8 million individuals per year.
The labour force participation rate as per the UPSS method under the Fifth Employment-Unemployment Survey is 52.4 per cent. As per this method, 10.11 million of the 19.3 million entering the workforce are actually seeking employment.
Basically, if Panagariya had used the 2017 projection instead of the 2006 one, the number of employment-seekers would have been significantly higher at 9.71 million to 10.11 million, instead of the 7.5 to 7.8 million number he came up with. These figures are closer to the 12 million figure.
Also, it is important to understand why the labour force participation rate in India is unusually low. This is primarily because of low female participation rate. As per the UPS method, the female participation rate was just 23.7 per cent and as per the UPSS method, it was 27.4 per cent.
Nevertheless, it has been observed the world over, as fertility rates continue to fall (i.e., fewer babies born per woman), more and more women are entering the workforce. As per the National Health Survey of 2015-2016, the fertility rate in India stood at 2.2. This basically means that on an average 1,000 women have 2,200 children during their child-bearing years. In 1981, it was at 4.5. In 2001, it was 3.1. Slowly but steadily, things have improved on this front.
If India moves along how other countries like China and South Korea have in the past, the female labour participation rate is likely to go up in the years to come. This will push up the total number of job-seekers.
To conclude, it is worth asking why Panagariya referred to a calculation based on a projection made in a 2006 report, when similar projections made by the Central Statistics Office are available in a 2017 report.
The only answer lies in the fact that Panagariya basically resorted to cherry-picking data in order to arrive at a low number of employment-seekers. This plugs into the narrative that the Modi government is trying to promote on India’s massive jobs problems, the narrative being that the problem is not as big as it is being made out to be.
The funny part is that Panagariya is no longer a part of this government; given that, one fails to understand why he has to cherry-pick data and manage optics for the Modi government.