Growing calls to preserve jobs for locals as Indian job market shrinks

It is estimated that around 19 million salaried, formal economy jobs have been lost after the lockdown.
It is estimated that around 19 million salaried, formal economy jobs have been lost after the lockdown.PHOTO: AFP

NEW DELHI - Protectionist calls to reserve employment for locals are getting louder in some Indian states as provincial governments try to combat rising unemployment while ensuring labour mobility, which is essential for economic growth.

Madhya Pradesh Chief Minister Shivraj Singh Chouhan announced last month that all government jobs would be reserved for "the children of Madhya Pradesh". The Haryana government also plans to introduce a Bill in the state assembly in an effort to reserve 75 per cent of all jobs in the private sector for the state's youth.

Even Maharashtra, which serves as a key destination for migrants, wants to bring in a law that would secure 80 per cent of jobs in local industries for residents of the state.

In July, the Maharashtra government launched a jobs portal to connect workers with prospective employers but it requires applicants to produce proof of residence in the state.

Many experts fear that such protectionist moves could multiply amid the ongoing economic crisis brought on by the Covid-19 pandemic at a time when migrants are headed back to the cities after being forced to return to their villages by the lockdown imposed in March.

The Indian economy contracted by 23.9 per cent in the April-June quarter - the highest contraction since India began maintaining quarterly records in 1996.

Unemployment reached 8.35 per cent in August, up from 7.43 per cent in July this year,according to data from the Centre for Monitoring Indian Economy (CMIE).

It had peaked in April at 23.5 per cent.

The CMIE estimates that around 19 million salaried, formal economy jobs have been lost after the lockdown.

While the pandemic dealt a severe blow to the economy, it was already ailing with years of jobless growth. Government data show that labour participation rate (LPR) in the workforce - defined as the percentage of persons working or seeking work among the population - fell from 43 per cent in 2004-05 to 36.9 per cent in 2017-18. It crept up marginally to 37.5 per cent in 2018-19.

A falling LPR implies that a lower proportion of the working age population is willing to work. A key reason cited for this is lack of desirable employment.

 
 
 

A study released by the Azim Premji University (APU) last month found that employment growth between 2011 and 2017 lagged behind population growth for both men and women. For instance, employment for men aged 25 and above grew at just 60 per cent of the rate of their population growth during that period.

"Work is not being made available in proportion to the people who are likely to seek work," said Dr Amit Basole, an associate professor of economics at APU's Centre for Sustainable Employment. Over the years, this has resulted not just in falling labour participation rates and rising unemployment but also growing calls for protectionism that have become even louder since the Covid-19 outbreak.

"Because the labour market is stagnating, it has led to this backlash that we all need to look out for ourselves when the pie is not growing," Dr Basole told The Straits Times.

The Madhya Pradesh proposal to reserve all government jobs for locals is particularly contentious because Article 16 of the Indian Constitution guarantees equal treatment when it comes to public employment. Only the Parliament is allowed to legislate "prescribing" a requirement of residence for jobs in a particular state.

Reserving private sector jobs will also be faced with difficulties if allowed to go ahead. Firms in India have become heavily reliant on migrant labour from other states to fill in local supply gaps and work at cheaper rates.

In 2016, Karnataka had proposed reserving all private sector jobs that secure concessions from the state, with the exception of jobs in the sizeable IT and biotechnology industries that were reliant on outside labour. The move was dropped after widespread opposition and because of potential legal complications.

Mr Gautam Mody, the general secretary of the New Trade Union Initiative, said such proposals risk aggravating existing divisions in the country.

"We must ask ourselves again: are we one country, one people, or are we many people who are going to be at war with each other for the limited number of jobs by caste, by race, by community, by religion, by region and by state?" he told The Straits Times.

However, Mr Deepak Sood, secretary-general of the Associated Chambers of Commerce and Industry of India, told The Straits Times in an email that he did not expect these proposals to cause "major disruption".

 
 
 

He said that such policies exclude senior management and specialised roles as well as the informal sector, which accounts for a large chunk of migrant employment.

"Most services industries like IT have been permitted to work without any locational restrictions and we believe it would remain so," he added.

While India announced a 20 trillion rupee (S$376.4 billion) economic package in May, including collateral-free loans and equity infusion, there have been calls for the government to put in more money into consumers' pockets to boost consumption.

"The government must invest in boosting demand which will help the private sector to invest. It also must ensure its own expenditure is oriented towards capital expenditure for job creation," added Mr Mody.

"This is not rocket science, it is public policy that has existed on this planet for close to over a century since the Great Depression."