What Explains the High Demand for Low Paying Government Jobs?

We are increasingly seeing the phenomenon where there are an enormous amount of applicants for a few government postings. Take this story where a million people applied for 700 clerical postings in Telengana. Or where there were 302 applicants for each posting of railway gangman:

On 17 September, 1.9 crore applicants will appear for the Railway Recruitment Board (RRB) examination to fill 62,907 vacancies at ‘Level 1’, earlier called ‘Group D’.

That is, 302 applicants for every job — jobs that are at the lowest level in the railways, including posts such as gangman (those who maintain tracks), gateman, pointsman, helper in electrical/mechanical/engineering/ signal/telecommunications, porter etc.

A majority of applicants for these jobs are graduates, post-graduates and even engineers, according to RRB sources.

Or take this case:

3,700 PHDs, 50,000 graduates, and 28,000 PGs have applied to fill 62 messenger posts in UP Police; position like this requires the minimum skills and has the lowest bar of eligibility.

Stories such as these have become all too common and are perhaps the most accurate reflection of India’s ongoing jobs crisis.

The big obvious question here is regarding the inexplicably high demand for low paying government jobs by apparently overqualified job seekers. My hypothesis is that this can be explained by three factors:

  1. The number of private jobs available are obviously too few. Job creation has stagnated and even receded in the private sector. Thus, industry does not have the capacity to absorb the large number of graduates and post-graduates who are passing out of the system. Since supply of labour far outstrips the demand for labour, employees have increasingly stringent qualification requirements. Only the best of the lot get a good, high paying job in the private sector.
  2. There is also an obvious skills mismatch. A lot of the students who pass through the Indian education system are not as qualified as their degrees tend to signal. A typical Post-Graduate often has the skills of a person who has passed the 12th grade and thus, cannot obtain or at least retain a high paying job which would require the skills of a Post-Graduate (One report, for instance, finds that nearly 80% of the engineering graduates in India are unemployable as their skills set do not match the requirement of the industry). What further complicates this issue and turns it into a vicious cycle is the fact that a lot of individuals end up studying due to the lack of job opportunities. These are students who enter into an educational programme solely due to the signalling value and to differentiate themselves from the nearest competitors. However, while the degree gained has some signalling value, the skills gained are inadequate for industry standards.
  1. A person who has gained a degree but not the appropriate skills cannot get a job in the private sector which will assure a reasonably high salary and job security. The private sector option is typically a low paying job, which can be lost at any time and with no benefits. Given this scenario, a government job that is assured of job security, even at the cost of lower salary seems attractive.

 

Employment Elasticity of Growth in India

Recently, there have been a spate of articles on employment elasticity of income in Indian newspapers and how important that is to job creation in India. The Hindustan Times has a series on India’s job challenge, Mint’s editorial discussed quality of jobs created, and the Economic Times cautions against India mimicking China’s strategy in creating jobs.

But what exactly is employment elasticity? And why is it important?

According to an RBI working paper by Sangita Misra and Anoop K. Suresh, employment elasticity is a measure of the percentage change in employment associated with a 1 percentage point change in economic growth. It indicates the ability of an economy to generate employment opportunities for its population as a per cent of its growth or developmentprocess.

An employment elasticity of 1 denotes that employment grows at the same rate as economic growth. Elasticity of 0 denotes that employment does not grow at all, regardless of economic growth. Negative employment elasticity denotes that employment shrinks as the economy grows.

This is crucial as it is commonly believed that economic growth alone will increase employment. However, as we examine the data, we see that despite India’s impressive economic growth, employment has not grown alongside. Ideally we would like to see an employment elasticity >=1, but, from the Misra and Suresh paper, we see that employment elasticity in India declined from 0.44 in the first half of the decade 1999–2000 to 2004–05, to as low as 0.01 during second half of the decade 2004–05 to 2009–10.

YearsEmployment Elasticity
1999-2000 to 2004-050.50
2004-05 to 2009-100.01
2009-10 to 2011-120.18

Similar trends have been witnessed at the sectoral level. In agriculture and manufacturing, employment elasticity between 2004-05 and 2009-10 has been negative.

Sector1999-2000 to 2004-052004-05 to 2009-102009-10 to 2011-122004-05 to 2011-121999-2000 to 2011-12
Agriculture1.09-0.39-0.44-0.41-0.08
Manufacturing0.80-0.271.740.100.33
Mining & quarrying0.870.20-1.76-0.140.34
Utilities0.67-0.277.601.421.17
Construction0.881.63-0.251.121.01
Trade, transport, hotels0.45-0.020.540.130.25
Finance, real estate1.400.34-2.32-0.450.06
Other services0.46-0.112.960.480.47
All sectors0.500.010.170.060.20

The negative employment elasticity in agriculture indicates movement of people out of agriculture to other sectors where wage rates are higher. This migration of surplus workers to other sectors for productive and gainful employment is necessary for inclusive growth. However, the negative employment elasticity in manufacturing sector was a cause of concern particularly when the sector has achieved 6.8 per cent growth in output during Eleventh Plan. It did bounce back during 2009-10 to 2011-12, but the average employment elasticity in manufacturing between 2004-05 and 2011-12 was still only 0.10.

 

References:

Misra, S., & Suresh, A. K. (2014). Estimating Employment Elasticity of Growth for the Indian Economy. Reserve Bank of India.

Planning Commission, India. (2013). Twelfth Five Year Plan, 2012-2017. Sage Publications, India.

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.

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 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.