High wages vs high vacancies: the governments’ hiring conundrum

The Union government’s recent decision to set up the eighth pay commission affords an opportunity to revisit one of the most confounding predicaments confronting the Indian state; one that has a significant impact on its capacity to govern but rarely gets debated outside of rarified policy circles.

Contrary to popular wisdom, the Indian state is remarkably understaffed but in line with popular beliefs it is, at the lower end of the hierarchy, paid remarkably well. Given the significance of government jobs in our polity, an unusual democratic bargain has been struck: one that generates enough political pressure to keep wages – particularly at the lower end of the bureaucratic hierarchy where the bulk of the state is hired – high but accepts low staff and high vacancies as the trade-off. In public debates on the Indian state and its routine incompetence, these contradictions and capacity constraints have been ignored, to our own peril.

In the popular imagination, the Indian state is widely regarded as a large, overstaffed, inefficient leviathan. Government jobs with guaranteed job security and power – where apathy, inefficiency and corruption are rarely frowned upon – are deeply desired. Politicians thus have incentive to prey on this desire to dispense patronage, which in turn, generates pressure both to expand jobs and distort the market by offering above-market wages.

The reality couldn’t be more different. In State Capability in India, two of India’s finest civil servants T V Somanathan and Gulzar Natarajan collate staggering statistics to highlight personnel gaps. Here’s one: at an aggregate level, in 2011, the government employment as a share of total employment was 4.6 per cent. Contrast this with the United States where government employment accounts for 15.9 per cent of employment. Put differently, India has 1,622.8 government servants for every 100,000 residents; the US has 7,681. The problem, Somanathan and Natarajan point out, begins at the top. In 2018, there was a 23 per cent shortfall between sanctioned positions and actual recruitment amongst IAS officers. India has a mere 940 diplomats in its civil service compared to the US State departments’ nearly 14,000. And despite a large expansion at the grassroots, personnel shortages remain rampant. In a study on Block Development Officers, Devesh Kapur and Aditya Dasgupta find that on average 48 per cent of officially sanctioned full-time posts are vacant.

When you juxtapose this remarkably under-resourced state with the societal clamour for government jobs and the political pressure this generates, the persistent hiring gaps present a puzzle. What is remarkable is that government employment has been falling – between 1995 and 2011, it fell by 2 million, replaced by increased contractual employment and outsourcing to the private sector. At the same time, politics has generated significant bottom-up pressure to ensure that wages at the lower end of the bureaucratic hierarchy remain well above market wages for permanent employees. Studies show that regular government school teachers make 20 times more than their private sector counterparts.

Indeed, the social compact undergirding the politics of government jobs places the burden of providing a safety net against the market vagaries on the state. For most Indians, the government remains the primary provider of opportunity, mobility and dignity. Economist Kunal Mangal’s study on candidates in the Tamil Nadu Public Services Commission examinations highlights this best: between 2000 and 2019, the engineering wage premium fell by half. In this period, the number of applicants to the PSC examinations with engineering degrees doubled. Keeping wages high is politically tantalising. It is no accident that the decision to set up the eighth pay commission comes amidst the high-octane Delhi election.

High wages inevitably create financial pressures to keep recruitments low or higher through temporary, contractual processes. This is problematic – contractualisation breaks the social contract terms (security, mobility and dignity) of government jobs, making it routine for contract staff to unionise and demand permanent jobs, leading to litigation and hiring freezes, effectively perpetuating the bargain between high wages and high vacancies.

When viewed from the perspective of these contradictory pulls and pressures that shape hiring and wage setting, the state capacity debate can be turned on its head! As Somanathan and Natarajan quip, for its size and the burdens it shoulders, the Indian state is remarkably efficient. But it is worth reflecting on what it does not do because it is understaffed. Kapur and Dasgupta show, if all vacant positions were filled, MGNREGA would increase employment delivery by 10 per cent. Of course, productivity gains are premised on employees showing up and being held accountable for work. However, hiring is a necessary condition for strengthening state capacity. India’s challenge lies in reimagining the terms of the democratic bargain. The state is and will remain the primary vehicle for security, mobility and dignity. It has to perform this role while navigating the trade-offs. This is the challenge of state capacity that ought to be at the heart of the debate.