Can Government Jobs Move The Needle For India's Weak Job Market?

The recent protests are indicative of a weak job market but can government jobs move the needle?

Can Government Jobs Move The Needle For India's Weak Job Market?

The Indian government, at all levels, employs only a small share of India's workforce. Yet, a weak job market for an extended period of time has meant that the premium on government jobs has risen.

Over the past few days, two separate announcements have drawn attention to the government's role in job creation. One, the government's plan to recruit 10 lakh people in the next eighteen months to fill up vacancies. Second, a proposed change in the nature of military employment, where 46,000 people are recruited for a limited four-year period.

While the former, if concluded as planned, will add to the job market, the latter has raised fears of a decline in the available pool of long term government employment.

Do these steps really move the needle for the job market?

Jobs In The Government Sector

The percentage of non-agricultural workers in the government sector has held steady for the past few years, according to data collated by BQ Prime from the annual Periodic Labour Force Surveys.

The percentage share of usually working persons employed in the government or public sector enterprises remains at about 12.6% in the non-agricultural sector, according to the the PLFS for July 2020-June 2021. This share was at 12.9% the previous year and 12.6% the year before.

The figures are estimated by computing the number of workers in government enterprises, local bodies, public sector undertakings, and autonomous bodies as a share of the number of workers engaged across enterprises in the non-agriculture sector.

On an aggregate, the percentage of persons under public employment is less than 5%, according to Santosh Mehrotra, visiting professor at the Centre for Development Studies, University of Bath, and former director general at the Institute of Applied Manpower Research for the Planning Commission.

"Direct employment offered by the government is next to nothing compared to India's 500 million workforce," Mehrotra said. "The private sector remains the job creator, while government policies are meant to enable job creation."

For instance, when GDP growth was strong in the years after the global financial crisis, a large number of jobs were created in construction and real estate (doubling between 2004-05 and 2011-12), led by a booming economy, he said.

"All the government is doing now, is filling up vacancies and the sections where they want to fill up positions does not sound inspiring," Mehrotra said.

Grade-A government jobs are the highest paid, followed by Grade-B. However, only about 11% of all government jobs are either Grade-A or Grade-B; the remaining 89% are Grades-C-or-D and are largely clerks/messengers/drivers, he said. "This is precisely why the government has not filled a lot of vacancies in recent years."

The total number of regular central government civilian employees was at 31.43 lakh as on March 1, 2019, as against the sanctioned strength of 40.66 lakh, according to the annual report on pay and allowances by the government for 2018-19, published last year. The percentage of vacant posts rose to 22.69% in 2019 compared to 17.97% in 2018. More recent data is not available.

Even if government jobs were the solution, these jobs need to be in education, public health, police, judiciary and other such areas, which can potentially improve human capital or governance in India. The government needs to be strategic about where it chooses to employ more people.
Santosh Mehrotra, Visiting Professor, Centre for Development Studies

Amit Basole, head of the Centre for Sustainable Employment at Azim Premji University shares that view.

By way of direct job creation, the government is not of significance. "Even if the government were two-three times its current size, its contribution to job creation would not be substantial," Basole said.

That said, the number of government employees per capita in India remains well below most comparable countries. Consequently, education, health and other public services have taken a hit. However, jobs being generated by the government do not seem to be in these areas, said Basole.

While the jobs the government is offering will help stimulate the economy, the timing of recruitment and other such factors will determine the extent of the benefit to the economy.
Amit Basole, Azim Premji University

Madan Sabnavis, chief economist at the Bank of Baroda sees it differently.

Hiring for 10 lakh government jobs in a short time could be a game changer, he said. To be sure, the government's hiring process can be long and tedious so it remains to be seen if it will be able to meet its timeline, Sabnavis said.

Government Giveth; Government Taketh Away

While the plan to fill government job vacancies could have some benefit, the intention to experiment with less permanent hiring for the military is being seen as a step that could reduce the availability of the long-term, pensioned employment.

This, at a time when the share of workers employed in agriculture and those self-employed has risen due to the pandemic.

"The ongoing protests reflect a weak job market and, as such, the premium on assured jobs," Mehrotra said. Even before the pandemic, open unemployment had reached a 48-year high in India and has since worsened, he added.

The Centre for Monitoring the Indian Economy pegs unemployment rate at 7.8% up to June 21, 2022. The official Periodic Labour Force Survey pegs it at a lower at 4.2%. Measurement of unemployment across these two surveys is not comparable.

Basole also said that even if the pandemic is set aside, the formal economy was not expanding fast enough to provide the kind of jobs needed, particularly in the formal sector.

"Formal jobs and wage work was on a slow rise, and offered a regular salary, with or without social security, pension, and other benefits. The pandemic resulted in a significant loss in these jobs, forcing a rise in agriculture and self employment and that might normalise only over time," said Basole.

More Workers Rely On Agriculture, Informal Jobs Post Pandemic

The Question Of Cost

In any decision on government jobs, the question of cost comes into play.

The central government's fiscal deficit has risen in the aftermath of the Covid crisis to a budgeted 6.4% of GDP in FY23. The revenue deficit, which reflects the gap in earnings and spending on current expenditure, is 60% of the fiscal deficit.

The plan to fill existing vacancies will take a fiscal toll of at least Rs 65,000-70,000 crore per annum on government finances, said Sabnavis. Schemes such as the Agnipath are fiscally prudent and intend to cut down on future costs the government incurs by way of pensions, he added. By such a scheme, the government is adopting a private sector ethic, he said.

The protests have to be seen more in a socio-economic context, but may lack economic merit, Sabnavis added.