I thought I knew India well. Still, it was poles apart Jaipur that welcomed me a few months back, in my first visit to the capital of Rajasthan. It was undoubtedly not Chennai, New Delhi or Bangalore – cities I have been familiar with. Despite being a tourist attraction, with its glamorous palaces, forts and museums, Jaipur is visibly poor. Interestingly this poverty comes as a consolation to a visitor. Hotel room rates lower. It was off-season, but even peak season rates too, I learnt, are not that high. Souvenirs are cheaper.
One can buy fascinating stuff for INR100 to INR200. Something similar may cost four times as much in a big Indian city. Basically everything – including food and tuk-tuks – cost less. Nothing or no one is in a rush. Everything seems to move in slow motion. It’s even less hurried than was Bangalore before the 1992 liberalisation. So what’s really wrong with Indian metros? Why do tuk-tuk drivers demand INR350 for a trip that will cost a third in Jaipur? Why does everything cost more? Why is everyone seemingly in a rush? That’s a paradox. Metros are more developed because of their considerably higher economic activity. That makes the cost of living and competition higher in the big cities.
How? Imagine this.
A section of the population, say, software engineers, are paid far better than they would be in Jaipur. They have more buying power. Land prices increase with more firms looking at space for offices and factories. Housing costs rise as professionals are ready to pay for convenience. All these economic happenings increase employment opportunities but also the cost of living. The latter escalates faster than the former. So even if cities provide more jobs, they are also a treadmill that never stops.
A tuk-tuk driver charges higher because his costs of maintaining a family in the city are higher. A Jaipur tuk-tuk wallah does not face that problem. This phenomenon is seen in every large South Asian city. They develop fast by attracting more significant investment. They create a new middle class, which then spends more. Its something economists term the ‘trickledown effect’, part of the newly created wealth is passed to the poor.
So why complain? Here’s why. The challenge is not the trickledown effect. It happens. The problem is the rising cost of living and competition. Job creation isn’t a problem. ‘Jobless growth’ as some suggest isn’t correct. Quantitatively, jobs increase. The challenge is that the increase is only at the lowest layers.
They create more ‘blue-collar’ jobs with limited opportunities for advancement. These city jobs aren’t ones that interest youth. But they have no option. Perhaps this explains why so many in Sri Lanka risk illegally migrating to Italy or Australia, knowing well the massive risks associated.
“If issues miring both demand and supply in the job market are not addressed urgently, we are looking at an economy in which over 200 million will be in ‘bad jobs’ or even without jobs by 2025,” writes senior Indian business journalist Goutam Das in his book ‘Jobonomics’ – released early this year. He gets the issue right. India, says he, does not have an employment crisis; but an underemployment crisis. The other point, he continues, is Indians are not productive. That is the reason for underemployment. Why is India not productive? Because Indians don’t develop advanced skills essential for industry today. It is a cycle – if you have skills, you become more productive; if you are more productive, you get better wages. This cycle is broken in India. So while the middle class grows, the poor never advance. If inflation were taken into account, they are worse off every year. The Sri Lankan version of this story is already being unveiled in Colombo and suburbs. We hear fewer complaints about not having job opportunities now. (If you exclude the so-called unemployed graduates, that is. It is hard to satisfy them anyway).
We see many young people drop high school to run a tuk-tuk, purchased on easy payments. Still, more men with motor bicycles now deliver online food orders. The number of online freelancers, too is rising. Mostly females take jobs in apparel factories en masse. These are among job categories that expand fastest. Ideally, they should all be temporary positions.
Those who engage in such a job must study to find something better a few years later. They must climb the employment ladder. What we don’t see is that progression. One who starts driving a tuk-tuk continues it eternally. That is bad.
In its recent publication, Sri Lanka State of Economy 2018, Institute of Policy Studies offers a few more points to ponder. During the period 2006-18, it says there is a distinct difference between the increase in the number of employed in urban and rural areas. While the former has increased by 39%, there has not been any employment growth in rural areas. In cities, opportunities in construction, transport, communication and commerce increased. The agriculture sector that dominates rural areas has shown no such improvement.
On the other hand, the workforce is still mostly rural – constituting as many as 80% of the total. Rural sector also accounts for 95% of self-employed and 90% of unpaid family workers. The last category here, now taken into labour forces as per international practice, does not create any real wealth for their own families or the economy. These aren’t good indicators. Sri Lanka has a history of youth unrest, in the North and South. These episodes were partly a result of the lack of opportunities. Fortunately, these are now past, and there is no imminent danger of another uprising. Young men and women today are intelligent enough to engage in legal and ethical employment rather than in revolts against the state. That shouldn’t be a reason for complacency. A stagnant job market can be far more dangerous than we ever think.
Its time our leaders understand we can’t be satisfied with organic growth of the economy. We must have a more ambitious plan, which ensures not just a higher growth rate but also one that creates more decent jobs. There isn’t a better time than an election to drive the point home.