Unemployment: The seven sins of perception

P. V. Indiresan

Listing the seven problems of perception vis-à-vis the unemployment scene in the country,
and suggesting a seven-point solution, P. V. Indiresan says that the aim must be to create
employment over a wide range of the economy and for all person s, not merely in rural
crafts and for the poor alone. Policy-makers need to take tough decisions for dramatic
changes.

A FEW days ago, the problem of unemployment made headlines. Public attention has
now shifted elsewhere, but the vexed problem of unemployment remains, and will remain
a chronic illness. Unemployment is not like appendicitis: one operation and the problem
is over. It is like asthma; you may mitigate it only but have to live with it forever.
Unemployment in India has flared up because of seven basic misconceptions. Naïve faith
in the power of printed money is one. Some influential economists have suggested as a
remedy for rural unemployment that the government should print more notes and
distribute it among the rural poor. In their view, the Indian economy is suffering from
insufficient demand; once the poor get more money to spend, it will help the poor
directly, and the entire economy indirectly.

The Soviet Union adopted this technique to ensure full employment. It worked for a time
and ultimately ended in disaster. Distributing paper money to the poor will help only
when they produce something saleable in return. If what they produce is not saleable, it
will only increase prices, not jobs. Ultimately, as it happened in the Soviet Union, the
economy will collapse. Unfortunately, nobody knows what the poor can, or should
produce, to make their products saleable. Why blame the poor? We have an army of quite
well to do government servants who are surviving on printed money. Nobody knows how
to make them produce anything useful either.
Two, we have great faith in labour-intensive, low-productivity technology, and believe
that is the best way to halt jobless growth. On the face of it, that is reasonable and is the
direct way of increasing employment: If labour productivity is reduced, everyone will get
work to do. Unfortunately, when productivity decreases, national income too will, and the
remedy becomes worse than the disease.

Three, our unemployment has become as bad as it is because our investment policy is
grossly inefficient. The purchasing power of the rupee is much lower in large cities than
in villages. Yet, we concentrate our investment in expensive cities to the neglect of rural
areas where money fetches much more. Once again, the problem has to do with
ignorance: Our people do not know how to put capital to good use in rural areas where
money is more valuable.

Four, everyone knows that in the Indian economy services are growing fastest; industry
too is growing but it is jobless. As for agriculture, its share in the economy is actually
shrinking. Yet, from Naxalites to sophisticated analysts, the excitement is all about
redistributing more land to the poor; creating more jobs in agriculture. Logic demands
that we concentrate on employment generation in the services, and find ways of weaning
farm labour away from agriculture towards services. Unfortunately, for our activists and
politicians, land is like mother's milk. It requires firm steps to wean babies; that is what
we have to do with our netas too because their addiction to land is no different from that
of babies for mother's milk.

Five, we have accepted a notion, which is popular all over the world, that education is a
permanent remedy. Prof Marvin Minsky forcefully argued against this belief years ago;
his ideas are getting a re-look. He argues that education takes so much time to deliver that
it can never be a cure for joblessness. In his view, for the unemployed, jobs should be
found to fit the jobless the way they are; they cannot wait to be re-educated. That is,
education is only for those who will enter the job market several years hence.

Prof Minsky's ideas are way off the mainstream. In our country, conventional ideas
prevail. We hold to the popular view that education, any education, will make a person
employable. Most education, particularly college education, makes our youth
unemployable; makes their situation worse.

Unfortunately, higher education has become an ideological issue: Educators want total
freedom to enlarge higher education without limits and accept no responsibility for the
consequences with the argument education is an end in itself, and is not for employment
at all.

Six, political concern is for the rural poor only. Their condition is undoubtedly serious.
Psychologically, the state of the educated unemployed is worse. It is probable that our
politicians are concentrating their attention on the rural poor only because they have most
votes.
Undoubtedly, dissatisfied rural poor can vote out any legislator. Neglecting the semi-
educated jobless poses a greater risk: having enough skills to take to modern arms, the
educated unemployed often take to Naxalism. The risk of neglecting educated
unemployment is not mere electoral defeat to a political colleague but one of losing
control entirely.

Seven, we have blind faith in doles. Although doles have never delivered results, we
return to "targeted subsidies" again and again. We even have ministries for poverty
alleviation for the purpose but not one for employment. We are trying to stem the disease;
we are not trying to promote good health.

In short, the unemployment scene in India suffers from seven sins of perception: (a) jobs
without marketable output; (b) wasteful investment in expensive locations; (c) blind faith
that agriculture will fill the employment gap; (d) neglect of services as prime job creators;
(e) unemployable education; (f) indifference to educated jobless, and (g) wasteful
subsidies.

We can overcome these complex failures only by introducing new ideas, and by
surrendering old ones even if we are sentimental about them. We are in trouble because
we are unwilling to change. Every new remedy will have its own faults. It is easy to pick
on them. It is also comfortable to accept the faults of old habits. Yet, the question is not
that of finding a perfect alternative, but a better one: we should not fear to try a better
solution only because it is not as good as we want it to be.

Let me suggest a few steps, even if they are found to be a bit drastic: One, invest
massively in rural connectivity on the lines the President, Mr A. P. J. Abdul Kalam, has
been crying hoarse. Two, reverse rural-urban migration the way Western countries did
some decades ago. Three, bring educational institutions under the purview of consumer
courts; make them accountable for the quality and content of what they teach. Four,
promote multiplication of employment in services as distinct from creation of
employment in production. Five, as a corollary of the above, ensure that all workers get
residences properly equipped with all municipal services and with access to social
services like education, public health and recreation (and punish employers who fail to
ensure such amenities to their workers). Six, offer employers attractive incentives to
maximise direct (and indirect) employment.

Seven, replace targeted subsidies by investment in public goods. In the process, combine
the rural and urban development ministries that are now operating in watertight
compartments into a single ministry of habitat development. Likewise, change from
ministry of poverty alleviation to one for the promotion of productive employment.

Then, we are looking at an entirely new scenario: Housing and services (and not food)
will be the prime source of employment. Most investment will be in low-cost rural areas
and not in high-cost cities. Higher education will not be aimless: Consumers of education
will have a right to know what they will get out of their investment of money and time.
Investors will not get low cost capital for capital-intensive projects but only for creating
employment. Rural and urban development will be treated as complementary to each
other and not in mutual isolation. There will be no targeted subsidies but overall
development of the environment. The aim will be to create employment over a wide
range of the economy and for all persons and not merely in rural crafts and for the poor
alone.

In general, there will be no compartmentalised thinking — no rural-urban; rich-poor;

agriculture-non-agriculture. These are substantial reversals of accepted practice.
Undoubtedly, all these changes will have a cost, and deserve critical appraisal.
Implementing them will not be easy; they will pose new problems, will create new
challenges. Those who criticise have two options: Check what is wrong, or seek what
benefits can be extracted from these changes. Choose the former, we will sink deeper into
the unemployment cess pit; opt for the latter, you may find a way out.

Thirteen years ago, our political establishment got a scare. Fearing for survival, it
permitted the then Finance Minister, Dr Manmohan Singh, to introduce drastic reforms.
Once, the danger passed, it reverted to form, and blocked further progress.

As yet, in spite of the spreading Naxalite menace, in spite of unsettled electoral scene,
there is as yet no great apprehension that unemployment can lead to disaster. Even then,
it is time to think of reforms. They need not be exactly what has been suggested here, but
substantial reversals of policy all the same. What we do not want is status quo, nor more
of the same. Policy-makers should accept even drastic changes if only to expiate the
seven deadly sins of misperception that they have committed and are committing.