A jobs-for-locals ‘epidemic’

There seems to be a sudden epidemic of sorts among states to legislate jobs for locals. Most recently, the Jharkhand cabinet approved a policy to reserve 75% of jobs in the state’s private sector for local residents. These are all jobs that pay less than Rs 30,000 a month. While this is not official yet, it is likely to be announced during the ongoing budget session of Jharkhand legislature. This comes barely a fortnight after Haryana passed a similar law. The Haryana threshold is for jobs that pay up to Rs 50,000 a month. Andhra Pradesh passed such a law in 2019.

Other states, including Maharashtra, Madhya Pradesh, Karnataka, Rajasthan, Gujarat have all either announced or are in the process of implementing policies to reserve jobs for locals. In Tamil Nadu, which is among the five states headed for Assembly polls, the DMK has promised in its election manifesto that if it is voted to power, it would implement a policy to reserve 75% of jobs for Tamils. The Haryana legislation, too, is the fulfillment of a poll promise of one member of the ruling coalition.

What explains this epidemic? Firstly, it comes from a populist impulse, such as announcing freebies. But that does not mean it does not have popular support. Indeed, a national survey done by the Centre for Study of Developing Societies and Lokniti in 2017 revealed that nearly two-thirds of the youth support the idea of job reservations for locals. Somehow, this idea has broad appeal.

The second reason could be the weakness in the employment situation. Just after last year’s lockdown, the unemployment rate had shot up to more than 30% in April, with 122 million people losing their jobs. The hardest hit were migrant workers who were employed in construction, restaurants, malls, courier services, etc., in the cities. Most of these are in the informal sector, i.e., jobs that do not provide health or retirement benefits. By July, the unemployment rate had dropped below 10% as per CMIE data. The September and December quarterly results of corporate India showed booming profitability, which is one of the reasons why the stock market is greatly enthused. Foreign direct investment flow has been handsome, and next year’s outlook is for a GDP growth of at least 11%.

Read | DMK bets on petrol, diesel price cuts, 75% job quota for locals to win votes in Tamil Nadu

Why then is the employment situation not cheerful? That’s because labour market fortunes are typically a lagging indicator of the health of the economy. It recovers the last. Just as the stock market is a leading indicator, i.e., it becomes bullish much before the actual economy starts recovering, the labour market pick up is seen much after other signals, such as industrial production, capacity utilisation, consumer spending and exports have improved substantially.

In this sphere, there is also an additional spectre of jobless growth. As per reports from the World Bank, nearly 70% of India’s manufacturing jobs are in danger of becoming obsolete or redundant due to automation. So, improvement in job prospects may take much longer than the speed of the economic revival.

A third reason for the appeal of jobs for locals, is inherent xenophobia. This is not unique to India or Indian states but is universal. It was spectacularly manifest in the Brexit vote, when Britons thought that foreigners were taking away local jobs, and hence voted to secede from the European Union. The actual facts were much less damaging. If anything, the so-called foreign workers contribute to the local economy through their productivity, and by paying both consumption and income taxes. In America too, the anti-immigrant sentiment was exploited during the recent presidential election campaign. Of course, the US remains the most friendly and accepting of immigrants among all developed economies. Indeed, 17.4% of the US labour force is made up of foreign-born workers.

Every campaign for a sons-of-the-soil policy, for job reservation, whips up this anti “outsider” sentiment. In the case of Haryana, one of the reasons given for justifying reservations was the proliferation of slums, presumably attributed to “outsiders” shifting to the state for work.

Explained | What Haryana’s 75% private sector job quota for locals means

Despite the rhetoric and populist impulse, it is worth examining why this idea is ultimately infructuous or irrelevant. Firstly, it goes against the Constitution. In fact, it violates several fundamental rights, such as freedom to move anywhere, the right not to be discriminated on the basis of place of birth, the right to be treated equally before laws, and the right to pursue one’s livelihood. These are enshrined in Articles 14, 15, 16 and 19 of the Constitution. Surely if the Haryana law is challenged in court, it will be declared unconstitutional.

As such the topic of reservations is one of India’s deep fault lines, but that is more applicable to social identity, not place of domicile. Secondly, the actual data on inter-state migration shows that it is relatively low in India. While the country may have an estimated 456 million migrants, most of them are intra-state, not inter-state. As per the 2011 census, India had only 54.3 million inter-state migrants. They often bring skills, motivation, energy which may be in short supply or lacking locally. For instance, harvesting of crops like wheat, rice or sugarcane is largely done by landless workers who are migrants. Construction labour, too, has a big migrants-component. A third aspect to highlight, is that free movement of labour partly compensates for the uneven economic progress of different states.

Inter-state divergence within India is a puzzling anomaly. One would have expected poorer states to grow more rapidly than richer states, leading to some kind of convergence. The migration pattern is in some ways an equilibrium market outcome that partially smooths out labour market rigidities. It also partially addresses the mismatch arising out of differences in ageing demographics of India. That is why we see migration from high fertility states to lower fertility states.

States like Kerala have instituted enlightened policies of training migrant workers in the local language (Malayalam) and also offering good education for their children. In the medium to long term, there is no option but for a big national focus on education, skilling, training and enhancement of human capital, which can get us out of this scarcity mindset of rationing jobs for locals. Clearly, this is not the appropriate domain for being “vocal for local.”

(The writer is an economist and Senior Fellow, Takshashila Institution)\

(Syndicate: The Billion Press)