The Lure of the Government Job

The Hindustan Times carried a piece on April 22nd which said that the Indian Railways is set to carry out the world’s largest recruitment drive, one that will fill ninety thousand vacancies from a pool of 2.5 crore applicants.

What struck me most was this seemingly innocuous quote by one of the applicants:

I am anxious for a job and a regular income.

This rather simple statement fits into a hypothesis we have developed over the last few weeks: employment can affect income in two orthogonal dimensions – through income stimulation and through income stabilisation. Income stimulation happens purely because the budget line of an unemployed individual shifts to the right once she becomes an employee. By income smoothening or stabilisation, we mean that the employee is reasonably certain that she will receive her employment wage over the next few payment cycles. For example, a job like the now famous Pakoda seller demonstrates an income stimulation effect but lacks income stability. A software engineers’s job at a large firm by contrast does better on both income stabilisation and income stimulation.

Now, the simple observation by the railway job aspirant shows that the lure of a government job is that for less well-paid jobs, a government service leads to income stabilisation as well as income stimulation which is not the case with a private job for the same skill level. At least that is how the perception is. And this is essentially the lure of a government job. What this means is that for any meaningful rise in employment in India, private sector jobs will have to compete with government jobs on both these dimensions.