Cities and their names

We, the people of India, have been in a flux over the recent proposals being made to change the name of our beloved cities based on their historical or religious past. There are various sides and nuances to the conversation. In the past decades, the names of the cities were changed either to reclaim the names they had before the colonial rule or based on the linguistic preference of the local community. The argument against the recent change of names is that it has religious connotations and is biased towards one majority community’s preference. Although an interesting conversation, as someone who has been studying urban governance for half a decade now, I wonder how does it help the cities.

I have a proposal. Let’s allow the person who grants the largest amount to the city municipal corporation to name the city. This would not only make the process immune to the religious and linguistic impositions but would help the cash-strapped urban local bodies raise money to provide better public service. For instance, if a rich businessperson can afford to pay for it, she should have the option to rename one of our metropolises to her parent’s name. This would be a classic win-win situation.  

The municipal corporations that have been highly reliant on union and state governments to make the ends meet would gain significantly from the grants for a small price of changing the city’s name. The grants would have a provision for the grantor to provide a pre-defined amount to cover for the administrative costs that may be incurred in the process of changing the name. While the city would make financial gains, the grantor would be able to give one of the most significant forms of homage to an individual or an institution of their choice. This won’t be very different from the schools and institutions being renamed based on the wishes of the grantors.

To keep the cost of the transactions to a minimal, cities can restrict bidding to once every 25 years. This way the cities can plan large scale expenditures based on when the next grant would be flowing in. Of course, the large-scale expenditure can range from building a statue or creating a robust public health system. The final decision will be with the city municipal corporation or the state government, that oversees most of the significant urban functions. I believe this proposal would be appealing to all sides as it caters to none and the final winners would be the real underdogs, the cities.

Interventions at MSME level are not the answer for job creation

The jobs problem in India is acute and there isn’t enough we have done to solve it. We have around 12 million new people joining the working age population every year but we create only 4 million jobs per year. To solve this grave issue, the Union Skill Development and Entrepreneurship Minister Dharmendra Pradhan recently started a new centre to guide new entrepreneurs and provide helpline to MSMEs. A novel step but it based on a common assumption that interventions targeted at MSMEs would create new jobs. This assumption has been questioned by a systematic review by Michael Grimm and Anna Luisa Paffhausen that looks at whether the interventions targeted at MSMEs create new jobs.

Grimm and Paffhausen reviewed the existing evidence on the employment impact programmes to evaluate what impact do interventions have when made on the MSME level. The review concluded that the impact was modest. The interventions are able to “successfully affect intermediate outcomes such as management skills (however) only very few interventions enhance job creation.”

The reviewers have looked at employment created as the new jobs coming up in existing MSMEs (privately or publicly owned) and as jobs that arise through the creation of new MSMEs, including self-employment. The authors analysed 53 studies to understand what form of interventions were taken and if employment generation was the primary objective. The review considers that various interventions would have varied responses. For instance, a measure to increase productivity, such as training, would only result in an increase in employment if the interventions are able to increase outputs and reduce cost. A mere increase in efficiency that does not help reduce cost would not convert into more hiring.

The review brings out various insights but some of the most significant ones are:

  • Most interventions at the MSME level are not intended to create jobs. Primarily because, “enterprise performance is typically measured in terms of output, sales, revenues, business expenditures and profits.” The interventions, therefore, focus more on entrepreneurship training and business development.
  • Entrepreneurship training is beneficial for business skills but mostly does not result in business expansion or more jobs. Unless the firms can generate profit and reduce the cost to a point where they can expand, the training does not do much for job creation.
  • Addressing capital constraints is not enough. Most of the firms use the credit or cash provided as working capital used to increase the inventories. It is rare for firms to use it on fixed capital investment like labour. To add to it, the credit is mostly too small to lead to large changes in capital or production technology which could lead to an increase in employment. For potential business starters or subsistence-type enterprises, the credit is substituted for personal needs like healthcare, housing improvement etc.
  • Formalising the firms does not translate into job creation. To begin with, it is difficult to formalise a firm “because the average firm is simply too small and not profitable enough to make use of the potential that formality offers”. Instead one of the studies shows that the firms that do generate more jobs are the ones that create more permanent and large-scale jobs.

One of the things that do work is an intervention that provides a mix of financial assistance and entrepreneurial training. Although the review has looked at a handful of studies for certain conclusions, the learning is in-depth and needs to be taken seriously to avoid falling into the same traps as other countries have.

Who gains from the new Maternity Benefit Act Amendment?

The new Amendment will harm the women working in the formal sector more than those in the informal sector.

There was a recent uproar about the new amendments were made to the Maternity Benefit Act of 1961, which extended the paid maternity leave to 26 weeks from 12 weeks. Although the move sounds positive at first glance, it holds negative repercussions for the women in the workforce.

One of the most obvious criticisms for the Act is that it would make it costly for the employer to hire women whom they would now have to give a paid leave for 28 weeks. Team Lease did a study titled “The Impact of Maternity Benefits on Business and Employment” which stated that 11 lakh to 18 lakh women will face difficulty in finding jobs in the Small and Medium Scale Industries. 

The second and the less discussed repercussion is that the amendment would impact women employed in the formal sector more than ones employed in the informal sector. There are two broad reasons. First, the formal sector is scrutinised more than the informal sector. Second, women in the formal sector are paid higher than in the informal sector. This makes the maternity leave a more expensive affair for the formal institutions.

To grasp the magnitude of the problem, we need to start with some basic facts:

  • Number of women working in the informal sector in India (2018): 90%
  • Gender pay gap in India (2017): 20%
  • The difference between the male and the female employment ratio (2017): 79% – 27% = 52%

As women in the informal sector are already cheap labour and the regulatory oversight is limited, the chances are higher than the employment rate for women in the informal sector would remain the same. Meanwhile in the formal sector, where even after the wage gap, providing a 26 week paid leave would be an expensive affair for the firm. With the formal contracts in place, the higher regulatory oversight also ensures that the employer would rather hire a male employee than overlook the new amendment. The final outcome of this would be that we will see a decline in the female labour employed in the white collar jobs, even if the status stays the same for their informal counterparts. Leaving us with the question of who is the actual beneficiary of the Act.

Instead of increasing the cost of hiring women, one of the key solutions is to make more jobs formalised. This initiative need not be just for the women. With just  6.5 per cent of the jobs formalised, the regulatory reach of the State is several limited. Increasing the formal net would allow more people to access the safety benefits provided by the state and ensure better working conditions for more people. One of the other key impacts would, of course, be that it would help empower more women to seek their rights.

Vulnerability in jobs in India

India has been infamous for the magnitude of informal jobs in the country. Though a significant issue, informality is just a part of the bigger issue, i.e, the increase in the number of highly vulnerable jobs. Vulnerable jobs usually include own-account workers and family members working informally. Basically anyone who does not have a stable contract or flow of income, and are open to exploitation. All informal workers are vulnerable to an extent since they aren’t on any payroll or have a formal contract.

This long standing problem has become significant as the number of vulnerable employees has been increasing in the past few years. As per International Labour Organisation (ILO), 77 per cent of workers in India will have vulnerable employment by 2019. In a country where 92 per cent of the employed population is in informal sector, it is a concern if the ratio of vulnerable jobs increase.

 

Source: World Employment Social Outlook2018, International Labour Organisation

The ILO report also pointed out that

“a significant portion of the jobs created (in India) in the services sector over the past couple of decades have been in traditional low value added services, where informality and vulnerable forms of employment are often dominant.

It is no solace that the problem is global in nature,

Globally, the significant progress achieved in the past in reducing vulnerable employment has essentially stalled since 2012. In 2017, around 42 per cent of workers (or 1.4 billion) worldwide are estimated to be in vulnerable forms of employment, while this share is expected to remain particularly high in developing and emerging countries, at above 76 per cent and 46 per cent, respectively. Worryingly, the current projection suggests that the trend is set to reverse, with the number of people in vulnerable employment projected to increase by 17 million per year in 2018 and 2019.

This is not a surprise as 80 per cent of the casual workers and 31 per cent of the regular/salaried workers in 2016 earned less than the national minimum wage of Rs 66 / day. If looked at on the basis of gender, 95 per cent of women working as casual labour got less than the minimal wage as against 74 per cent men. Lower wages make workers more susceptible to being caught in the low income trap. With income not enough to save and invest, people earning low wages are unable to earn or multiply their money and get stuck at living at basic sustenance levels. The only way to move from the equilibrium is by earning a higher amount and saving it.

With low income levels in the country and substantial number of informal workers, India needs to look at vulnerability within jobs as a criterion in itself while assessing jobs problem. In order improve the conditions, the jobs created in the country need to assure a certain level of stability and redressal mechanisms. More than skilling, the government needs to create avenues for job creation. A good starting point would be to modify the labour laws and reduce the cost of doing business in the country.

Jobs amongst the Transgender community

The employment figures tell a positive story but much is left to get jobs for the transgender community in India.

It was a major feat when Transgender Persons (Protection of Rights) Bill, 2016 was tabled in the parliament. Even though the bill was not passed, the mere act of recognising the community provided economic freedom and social support for around 4.88 Lakh people. Also finally, the transgender community has became a part of vital data sets like employment and unemployment surveys.

Source: Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR) and Unemployment Rate (UR) for persons aged 15 year & above according to Usual Principal Status Approach (UPS) based on 2″d, 3’d, 4th and 5th Employment-Unemployment Survey (EUS), Annual Report 2017-18

The 2016-17 Employment and Unemployment Survey captured the Labour Force Participation rate amongst the transgender population. Labour force participation rate refers to the part of working population that is currently employed or seeking employment. It is, hence, used widely to understand the willingness to work within the population between 16-65 year olds. Hence, its a major accomplishment if the LFPR for transgender population was 48 percent in 2016-17. In comparison,  the LFPR for women and men was 23 and 75 per cent respectively clearly signifying how low the female labour force participation is.

Although the figures tell a positive story, the reality lies in the fact that in the first week of their job, 8 of the 23 transgender people, all trans women, quit. As elaborated by Somak Ghoshal,

Employed in a variety of roles, from ticketing to housekeeping staff, which paid between ₹9,000-₹15,000 a month, most of them found it impossible to make ends meet, especially since landlords in the city charged them ₹400-₹600 a day for the most basic accommodation. That is, if they agreed to rent a place to them at all.

Women: The Unpaid Workers

“With an increase of 22.3 million in the male workforce between 2004-05 and 2009-10 being virtually cancelled out by a fall of more than 21 million in the female workforce, the need to understand the gender dimensions of employment trends in India has acquired a new urgency.”

Let the statistic sink in. The paper on ‘Gender Dimensions: Employment Trends in India, 1993-94 to 2009-10’ by Indrani Mazumdar, Neetha N, drives home the magnitude of the problem in front of us. The authors highlight that “the most striking revelation of the National Sample Survey Office’s (NSSO) 66th round survey is a significant fall in the Female Labour Force Participation Rate (FWPR )between 2004-05 and 2009-10.” The paper expands on how the liberalisation, unlike the popular opinion, did not lead to an increase in the female labour force participation.

One of the key insights of the paper is the drastic increase in the number of unpaid women helpers. As per the NSSO, the employment activity categories have been segregated as self-employed, regular salaried and casual labour. Out of all the three segments, the highest proportion of female workforce is in the self-employed group. However within the self-employed group, the largest proportion of women are employed as unpaid women helpers. From 2004-2009, the total number of employed women rose from 61 to 72.5 per cent, while the regular salaried women only accounted for 9 per cent of the total number. These numbers clearly show that the increase in the FLFPR was mostly due to the increase in the unpaid job rather than the formal jobs.

The paper also shows how the characteristics of the unpaid jobs also varied between rural and urban regions. In rural regions, unpaid workers vary from peasant to supervisors. The jobs are also significantly dependent on the economic background of the household. For instances, the women are usually supervisors only if the land is owned by either their husbands or in-laws or fathers or parents. In urban spaces, the nature of the job is largely different as 43 per cent of the women are engaged in community and personal services which includes domestic workers, teachers, launderers, beauticians, and so on. The second biggest sector that hires unpaid women in urban region is the manufacturing sector (primarily home-based, piece-rated work). 

This disparity in the type of jobs and the variety of them is an indicator of how most of the women work at minimal wages and how vulnerable their jobs are. While in rural regions the family income defines their jobs, in the urban spaces they are mostly engaged in low wage and high risk jobs. With the large segment of women working in the informal spaces like domestic help and agriculture, one of the keys solutions to look at can be to formalise these sectors. A good example would be the increase in the number of online platforms like BookMyBai.

The Art of Letting Go

It shouldn’t be a surprise that Air India, one of the most beloved public enterprises, is not finding any buyers. The government owned enterprise has been a cause for major concern for the union government with the size of its losses increasing over the past few years. Although, the proposal to sell the government owned airline has been put into action, it is evident that the appropriate desire has not followed.

The airline had opened up the offers for two months and did not see a single buyer concert. As per the reports,

“While the Rs 33,000-crore debt that was to be bundled with the airline was initially seen to be a major hurdle, industry analysts believe it was the government’s decision to retain 24% stake that ultimately proved to be the big deterrent.”

This is not the first time the proposal to sell the government enterprise has been brought to notice. Twice before, in 1996 and again in 2000, much more feasible plans to sell the airline, then in much better health than now, were scuttled. The problem is much deeper than this non-viable auction. The problem lies at the core strategy towards divestment.

Government with all its units and resources is still a limited body that has various responsibilities to fulfil with scare resources. Keeping this in mind, it is important to consider the sectors or firms in which the government invests, in order to ensure that the resources are being put to the best use. On of the first litmus test for this would be to see if the good or service being provided can be provided more viably by a private body. If yes, there is no reason for the government to enter the sector as the player. If not, government can either regulate it to make it feasible or provide the good or service itself to ensure their provision. This simple test helps limiting the number resources being directed to ineffective causes.

If we put Air India into this consideration, it is evident that in the current set-up there are enough players in the sector to ensure competition and air travel is increasingly becoming viable. Hence, there is no role for a government enterprise to exist in this space. Knowing this, it would be best for the government to sell all its ownership claims towards the loss making government unit. Government needs to instead invest more in strategic sectors such as defence, healthcare and education.

Even though the argument for strategic divestment have been made in previous occasions, it is quite clear that the lack of focus has made it difficult for the union government to let go of the age old air line.

Political Will To Solve Jobs Problem

The recent 12th grade results declared by the Central Board of Secondary Education were a pleasant surprise for the Delhi government where the government schools took a 9 per cent lead in performance over private institutions. Although it is comforting to see that appropriate steps are being taken to improve the education system at school levels, we are yet to look at the larger problem facing us in the next few years- the problem of jobs.

One of the key features for the change was the political will and upfront commitment to bring about the change. Rohan Joshi, who has a vast experience of working in Education and Skill Development sectors, attributed the success to systematic engagement with the external stakeholders. He also mentioned that the political will translating into driving bureaucracy to focus on education quality among other factors have led to the remarkable achievement of Delhi Government Schools. He did, however, flag that while celebrating the achievement, we must also continue tracking progress in the coming years. Typically, 3 years is too short a time to reform an entire education system of a state. Overall, Delhi government has certainly taken the steps in the right direction, the point now is to build further upon this great start.

It is this political will that is required to solve other pressing issues like the jobs problem. With 12 million new people joining the workforce every year in the country for next few years and 29 million labour lying redundant in rural areas, it is the evident that India needs to create around 20 million jobs annually for next few years to satisfy the demand. This problem currently faces two broad issues- lack of political will to create systematic solutions and limited attention given to the quality of the solutions.

The lack of political will can be seen in the redundant attempts being made to redefine the level of unemployment rather than having discussions on increasing the number of jobs. One of the key learnings from the success of the Delhi government is that external stakeholders can have huge impact, if they are given proper targets and feedback. Hence, if there are NGOs incentivised to skill the labour or reduce the labour employee mismanagement, it would go a long way. This, of course, does not take the burden away from the government to create policies that ease up the labour laws and helps promote large manufacturers.

The other problem lies in how little attention is being paid to a problem of such magnitude. The atmosphere created over the years by the Delhi government focused on quality rather than quantity. Hence, the solutions went beyond just throwing money at the issue. With respect to jobs problem, the conversation hasn’t come to a point where the quality of jobs are being discussed. For instance, Prime Minister Modi in his infamous remark claimed that jobs like that of street-food vendor should also be included in the employment numbers. The conversation went back and forth on this paradigm but there is yet to be a substantial remark on the quality of jobs that need to be created for a country with the poverty and demographic levels as ours.

We have to take the conversation beyond just jobs or occupations and talk about sustainable work environment and employment options in the country. For instance, the policymakers should look at creating incentives to increase jobs that provide sustainable wages and decent work environment.

It is evident that enough work needs to be put in to sustain outcomes that the Delhi government saw in this year’s exam results. This one successful attempt has enough learning on how a motivated policy move can show positive results.

Making flying viable for everyone

To successfully provide affordable air travel, government needs to ensure economic viability of its policies.

This year the Indian government decided to connect 56 unserved airports, under the Ude Desh ka Aam Naagrik (UDAN) scheme. The aim of the entire scheme is to make air travel affordable. Although the intentions of the scheme are noble, the steps taken have limited the scope of implementation. One of the key failures lies with the inability to understand the repercussions on the economic viability of airlines.

While the capital invested in buying and maintaining even a single airplane is already high, fuel cost and hiring the crew to keep an airline going add to the expensive affair. To give a ball park figure, domestic airlines in the U.S. spends a combined $2 to $5 billion on just jet fuel every month. Keeping the costs in in mind, it is important for the airline industries to ensure that the flight routes are economically viable. One of the ways this is ensured is by connecting less frequented routes with the major stops in order to cross subsidise the cost. In India, we follow a hub and spoke model where the major cities are the hub or the centre of the wheel and the all the traffic is connected to the centre and passes around the spokes. This helps increasing connectivity while keeping the flight routes viable. This heavy traffic is the the primary reason why most major cities in the world have two airports. The traffic going to and fro from these metropolis does not only keep the city running, but the airlines too.

It is in light of this distribution between traffic that the government policy to connect underserved airports can be questioned. That said, the current scheme tries to provide Value Gap Funding to certain routes for first few years to cover for the additional cost incurred. VGF is an economic tool that includes tax redemptions and financial support provided by the government to make the project viable. For instance for UDAN, the union government contributes 80 per cent of the VGF amount, while the remaining comes from the state governments concerned and in the case of north-eastern states and union territories, the sharing ratio is 90:10.

Although, the funding does provide incentives for flight to opt for the routes till they are being subsidised, it does not create enough incentives for the routes to remain viable after. The inherent flaw in the policy move, therefore, make it unsustainable. The grimness of the possible outcome is captured best in an article in  The Economist :

“High per-passenger costs on seldom-used routes will force Mr Modi to draw the line somewhere. Inevitably, he will conclude that not every commoner deserves the gift of flight.”

To make the airports truly viable, union government needs to look at making the cities more attractive for regular travellers or tourists. Hence, to bring a ghost airport to life it is important for the government to put some life into the host city.

Beyond petty politics

A few days ago my office folks had a long debate on the morality of voting. This entire conversation was ignited when one of the colleagues questioned how non-voting is considered to be a lesser moral position that voting. The conversation that followed was a like a strong debate where both sides had valid arguments. On one hand came the argument that supported non-voting as a lesser moral activity since it’s about the aggregates impact that registering the discontent has as opposed to not voting. On the other hand, it was argued that going to the voting booth to cast a NOTA (None Of The Above) vote was as good as showing dislike for all parties and emphasised on how little an impact a single vote has in such situations. I supported the latter. 

All of this conversation reminded me of a brilliant book by José Saramago called Seeing. Here’s the brief summary from a review:

The story begins with those ordinary citizens, who not so long ago regained their sight and their tranquil day-to-day lives, doing something that seems quite unconnected with vision or lack of it. It is voting day, and 83% of them, after not going to the polls at all in the morning, go in the late afternoon and cast a blank ballot.

We see the dismay of bureaucrats, the excitement of journalists, the hysteria of the government, and the mild non-response of the citizens, who, when asked how they voted, refuse to say, reminding the questioner that the question is illegal.

I will not ruin the book for you but it was interesting to remember how the story shows that coalitions and disagreements between parties is a much smaller problem for a democracy compared to apathy of the people. The citizens in the book were not just indifferent to who came to power but did not see how the person who did come to power would make any difference to them. This stark realisation brings forth the significance of governance and institutions structures that secure the incentives and relations between the civilians and their governments, beyond the rigmarole of political terms.

While the Congress and JD(S) government come into an agreement over Karnataka’s election, it is time to see beyond the petty politics and realise that although there has been just 0.9 per cent of NOTA votes this time, it is more than six smaller parties in Karnataka, including two parties with a nation-wide presence. 

PS: I would also highly recommend Death at Intervals by José Saramago.