EMPLOYMENT ASPECTS OF THE PLAN
A PLAN for economic development implies the utilisation of available resources in a manner which would maximise the rate of growth of output. This is essentially a long-term task; so is any policy intended to ensure conditions of full employment. Over a sufficiently long period a policy of full employment does not conflict with that of stepping up the rate of development. It is now widely recognised that the problem of unemployment, especially in an underdeveloped economy like ours, can only be solved after a period of intensive development. Over a short period of five years, however, there may be a degree of conflict as between competing claims of capital formation at a rapid rate and the provision of larger employment. In determining the programme for the next five years, the prime consideration is that at least the deterioration in the unemployment situation should be arrested.
SIZE AND NATURE OF THE PROBLEM 2. The task to be faced in the coming years in the field of creation of employment opportunities is threefold. Firstly, there are the existing unemployed in the urban and rural areas to be provided for. Secondly, it is necessary to provide for the natural increase in the labour force, which is estimated at about 2 million persons a year over the next five years. Lastly, the under-employed in agricultural and household occupations in rural and urban areas should have increased work opportunities. Under the joint family system the lack of employment opportunities used to be reflected mainly in under- employment or disguised unemployment. This system provided a measure of social security against unemployment, however inadequate it might have been. With the spread of education, land reform and the natural desire on the part of the youth for independent means of living, there is now a tendency towards seeking wage employment which brings unemployment more and more into the open.
3. Experience during the first plan has emphasised the need to view the employment situation not only in the aggregate but also in its distinct urban and rural components. In assessing the size of the problem, as it would develop during the next few years, it is necessary therefore to take into account its magnitude in the urban and rural sectors in different regions of the country. It is necessary further to distinguish the educated unemployed from other unemployed persons.
4. Among difficulties met with in devising appropriate remedies for unemployment are the lack of adequate data on the extent and nature of unemployment, and the manner in which employment responds to different kinds of investment stimuli. Periodic data on unemployment ranging over the economy as a whole are not available except for places served by employment exchanges, the coverage of which is mainly urban. It is, therefore, not possible to state precisely what the magnitude of the problem in. different regions is. Data from the exchanges suffer from a number of known limitations. Even so, since the only information on unemployment published at regular intervals is that provided by employment exchanges, the change in the numbers on the live registers maybe said to indicate broadly the trends of urban unemployment in the economy. A review of data relating to the first plan period shows that unemployment began to show a marked upward trend when the first plan was half way through. During the first plan period the number on the live registers continued to increase from 3.37 lakhs in March, 1951 to 5.22 lakhs in December, 1953 and further to 7.05 lakhs in March, 1956. These statistics become more meaningful when interpreted in the light of the results of the preliminary survey of urban unemployment undertaken at the suggestion of the Planning Commission by the National Sample Survey. This survey has placed the magnitude of urban unemployment in 1954 at 2.24 millions. It has also sought to establish a rough relationship between the number unemployed and those who remain on the live registers of the exchanges. According to the survey it was estimated that about 25 per cent of the unemployed register themselves with the exchanges. On this basis the magnitude of urban unemployment at present might be of the order of 2.8 millions. This estimate appears to be broadly confirmed by the results of some other surveys recently carried out in urban areas in different parts of the country. Allowing for frictional unemployment, which is inevitable in a growing economy, it is possible to suggest that the backlog of urban unemployment may be of the order of 2.5 millions.
56
57
EMPLOYMENT ASPECTS OF THE PLAN
5. To this backlog is to be added the number of new entrants to the urban labour force. It is estimated that in the next five years, about 3.8 million persons would be added on this account. In arriving at this figure it has been assumed that in the decade 1951-61 urban population would increase by 33 per cent, a rate of urbanisation somewhat higher than for the decade 1931-41 (31 per cent), but lower than the rate for 1941-51 (40 per cent). The rate of urbanisation in 1941-51 was unusually high because of war and partition. It is therefore reasonable to assume that a smaller rate may prevail during 1951-61. Moreover, improvement in rural areas as a result of the operation of the plan and difficulties in securing urban employment experienced in recent years may to some extent check the efflux from rural areas.
6. It is difficult to distinguish unemployment from underemployment in rural areas. Employment opportunities to be provided in these areas have, however, not only to take into account the increased quantum of work and additions to income of a large number of the under-employed, but also the creation of a certain number of whole-time employment opportunities. In this context, a section of agricultural population, namely agricultural workers, especially those who are without land should be specially considered. Surveys of unemployment in rural areas have been recently undertaken in some States. These are yet of a preliminary character, and because of differences in the concepts used a comparative statement for different regions cannot be compiled and national estimates are somewhat hazardous. The only systematic enquiry undertaken recently was the Agricultural Labour Enquiry, according to which in 1950-51 the level of rural unemployment was of the order of 2.8 millions. Recently the National Sample Survey has begun to attempt periodic appraisals of unemployment in urban and rural areas. While its results for the urban population have become available, data in regard to rural areas are not yet available for study and interpretation. It is not possible at present to attempt a quantitative assessment of the change in the structure of employment in rural areas which might have taken place during the past five years. It could, however, be said that since the emphasis in the first plan was on schemes of rural development and since these schemes have on the whole been effectively implemented, rural unemployment is not likely to have increased. In the absence of marked trends in any direction, it might be safe to say that the volume of rural unemployment during the operation of the First plan has not materially changed.
7. As stated earlier, new entrants to the labour force during the next five years have been estimated at 10 millions. Deducting from this number the estimated 3.8 million entrants into the urban labour force, new entrants to the rural labour force in 1956-61 may be about 6.2 millions. The following table shows the number of job opportunities which may have to he created if unemployment is to be eradicated during the second plan period:
TABLE I
(Figures in millions)
In urban In rural Total
areas areas
For new entrants to labour
force 3.8 6.2 10.0
For backlog of unemployed 2.5 2.8 5.3
TOTAL 6.3 9.0 15.3
8. The creation of employment opportunities of this order, even if it were possible to bring this about, does not solve the equally pressing problem of underemployment. Here again want of adequate data makes even the formulation of the problem difficult. To provide a suitable guide for the measurement of unemployment and under- employment to agencies which undertake unemployment surveys, a Manual has been recently drawn up by the Central Statistical Organisation. The suggestions made in the Manual have been used in the planning of surveys currently in progress. In regard to other data which are needed to judge the effects on employment of investments in different fields, studies in the Planning Commission are being supplemented by similar studies undertaken on behalf of State Governments during the preparation of the second five year plan. When the results of these investigations become available, it will be possible to give fuller consideration to the regional aspects of the problem of unemployment.
CHOICE OF TECHNIQUES 9. Considering the magnitude of existing unemployment and additions to labour force, as shown in Table I, it would be incorrect to hold out the hope that full employment could be secured by the end of the second plan. As has been pointed out earlier, the goal has to be achieved by a series of planned efforts lasting over a period beyond the second plan. To hasten the process, however, particular attention will have to be paid to maximising the employment potential of projects included in the plan consistent with our long term needs.
10. In the context of an economy with relative abundance of labour, a general bias in favour of comparatively labour intensive techniques is both natural and desirable. Nevertheless, specific investment decisions involving a choice between alternative techniques have to be made in the light of a number of consideration such as have been set out elsewhere.
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SECOND FIVE YEAR PLAN
The area where a conflict in the use of different techniques arises is not as large as is sometimes supposed. In many cases the choice appears to be obvious, dictated purely by technological facts of pro- duction. There is no choice, for instance, in the case of heavy industries, where no one would suggest that considerations of size and technology should be set aside to emphasise employment. Again, the need for the setting up of such industries cannot be questioned in view of their place in the larger interests of developing the employment potential of the economy in the long run. In agriculture, except under certain conditions, in the present stage of development the possible economic advantages of mechanisation may be more than offset by the social costs of unemployment that such mechanisation would involve.
11. Construction of roads, housing, railways and the like have an existing pattern of use of machinery which has been evolved over a period of years consistent with the elimination of arduous human labour, which current social values would refuse to accept. This pattern will have to continue during the next five years, although the need to increase the scope for the employment of labour in lieu of machinery is an aspect which should always be borne in mind. In the case of irrigation and power projects the choice is determined partly by technical considerations, and partly by conditions of labour supply in the area, but where such considerations do not prevail, the use of construction machinery has to be viewed against the background of the manpower available in the country and the need for saving the precious foreign exchange resources. The position with regard to the field of transport and communications, other than railways, is somewhat similar.
12. In the short run the stimulation of construction activity is considered to be a solution for unemployment in developed economies. But in India such investment cannot be encouraged beyond a point. Investment in construction tends to be `lumpy' in character and large displacements of labour have to take place as work nears completion. There are, however, advantages accruing as a result of the facilities which construction would provide and these absorb to a large, extent the labour employed temporarily in construction work. In regard to persons not so employed such investment involves problems of redeployment of personnel, training etc.
13. It is only when we come to the production of consumer goods that the choice between techniques of production may raise difficult issues. The use of capital intensive techniques irrespective of other considerations involves a double loss in the form of (a) displacement of labour which has in any case to be maintained, and (b) a greater draft on the scarce resources for investment, particularly foreign exchange resources. The issues involved in this field go to the roots of the problem of economic and social development; some of them are touched upon in the appropriate chapters. The long-term objective of having a rising rate of investment which cannot be sustained without an adequate level of savings out of current output, has to be accepted. It is particularly when the capacity of decentralised production to accumulate surpluses is challenged that the conflict among different desirable objectives becomes a matter of some concern. The surplus generated per person in a comparatively labour intensive technique may be less than in a more advanced technique but the total surplus available per unit of output for capital formation, taking into account the social and economic cost of maintaining those who would otherwise remain unemployed, may perhaps be larger in the case of labour intensive methods. In an underdeveloped economy where the distribution of doles to the unemployed is not practicable, the balance of advantage from the standpoint of equity lies decidedly in favour of labour intensive techniques. From the point of view of development, however, the difficulty in the adoption of such techniques lies in the mobilisation of the available surplus from a large number of smaller units; but this is an organisational problem and requires to be faced. At the same time continued efforts to put traditional techniques on a more efficient basis are necessary. Indeed, though technical developments in such units cannot be spectacular, they can create a substantial demand for new types of tools and equipment and facilitate growth of other industries. Recent studies show that there is enough scope for increasing productivity in small industry without additional capital investment or even greater labour inputs. This requires to be fully exploited. It is only when larger employment opportunities are generated at higher levels of income that the economy will receive a stimulus in the form of improvement in morale of the working population. This is the manner in which we envisage the economy to develop. It is after all the people that are the carriers of progress, even as they are beneficiaries to it.
14. These are some of the considerations which have guided us in the choise of schemes to be included in the plan. The possible effects on employment, direct and indirect, arising from these schemes now require to be set out.
EMPLOYMENT ESTIMATES FOR THE SECOND PLAN 15. Total outlay in the public sector is estimated to be of the order of Rs. 4,800 crores, of which Rs. 3,800 crores represent investment. In addition, investment in the private sector is expected to be of the order of Rs. 2,400 crores. It has been possible to work out the additional employment likely to be generated by the second five year plan, on the basis of employment data
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EMPLOYMENT ASPECTS OF THE PLAN
supplied by States and Central Ministries and on the basis of physical targets proposed for the private sector with certain assumptions regarding productivity increases. The results of the study are summarized in the statement below:
TABLE II
(Figures in lakhs)
Estimated Additional Employment
(i) Construction 21.00*
(ii) Irrigation & Power 0.51
(iii) Railways 2.53
(iv) Other Transport & Communications 1.80
(v) Industries & Minerals 7.50
(vi) Cottage & Small-scale Industries 4.50
(vii) Forestry, Fisheries, N.E.S. and allied schemes 4.13
(viii) Education 3.10
(ix) Health 1.16
(x) Other Social Services 1.42
(xi) Government Services 4.34
TOTAL (i to xi) 51.99
(xii) Plus `others' including trade and commerce @ 52%
of total 27.04
GRAND TOTAL 79.03
or say 80
16. A brief account of the methods used in arriving at these estimates is given in the paragraphs below.
(i) Construction.-As has been explained earlier, construction enters into all spheres of developmental effort. The estimate given in the table above under this head brings together the employment during construction phase of all projects such as irrigation and power, roads, railways, buildings, factory buildings, housing and the like. In assessing the employment from the construction component, the level of expenditure scheduled to be incurred in 1955-56 is compared with the expenditure in 1960-61 (the latter assumed at 20 per cent. of the construction expenditure
*The detailed break-up of construction employment tinder dif- ferent developmental sectors is as follows:
Estimated
Name of Sector additional
employment
in construc-
tion
1. Agriculture & Community Development 2.66
2. Irrigation & Power 3.72
3. Industries & Minerals (including cottage & 4.03
small-scale industries)
4. Transport & Communications (including 1.27
Railways)
5. Social Services 6.98
Miscellaneous (including Government service) 2.34
TOTAL 21.00
of the second five year plan). For irrigation and power the labour component of the total expenditure-is estimated on the basis of studies undertaken by the River Valley Projects Technical Personnel Committee. In case of roads the labour component of the expenditure was available from the Roads Organisation of the Ministry of Transport. These estimates were accepted after discussion with the road engineers of different States. The Ministry of Railways supplied the number of persons required for construction of a given mileage of railway on the basis of their experience of work in different regions. In case of housing the employment norms for a crore of expenditure were provided by the Works, Housing and Supply Ministry and these were accepted with certain modifications after discussions with the State engineers. The same norms were used for housing in the private sector. The employment estimates for construction are likely to err on the high side.
(ii) Irrigation and Power.-Employment under this head is for the continuing activity in the field of irrigation and power. This includes maintenance staff on such projects and the personnel required for distributing the benefits accruing out of such projects. The norms for this purpose were worked out by the River Valley Projects Technical Personnel Committee on the basis of a study of the maintenance and operational personnel required on completed projects.
(iii) Railways.-The estimate of continuing employment in Railways for maintenance of new lines and for operating them was, again, provided by the Ministry of Railways.
(iv) Other Transport and Communications-This is a composite group consisting of roads and road transport, communications, broadcasting, etc. Part of the new employment in this sector is on maintenance and the rest is on operation. Norms for maintenance employment on roads were settled in consultation with the Roads Organisation. So also were the personnel requirements for road transport worked out. The State Governments in their schemes had supplied data on continuing employment in this sphere. These were used to tally the estimates made available by the Central Ministries. Continuing employment likely to be generated under the schemes of the Communications Ministry was worked out on the basis of the expenditure on the continuing phase shown under the plans of that Ministry.
(v) Industries and Minerals.-Employment estimates for the large- scale industries were based on the data supplied to the Licensing Committee. Where such data were not available and physical targets to be achieved under the second five year plan were set, employment estimates were worked out on the basis of latest data in the Census of Manufacturers. A 20 per cent allowance was made for increase in productivity. In
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SECOND FIVE YEAR PLAN
the case of steel, fertilizers, synthetic petrol, heavy machinery for fabrication of steel plants, and heavy electrical equipment, the estimates furnished by the respective Ministries have been taken into account.
As to mineral development, the present output per person was worked out and after making a 20 per cent allowance for productivity increase and taking into account the production targets to be achieved by 1961, a rough estimate of employment in 1961 was arrived at.
(vi) Cottage and Small-Scale Industries.-As for cottage and small-scale industries, the Karve Committee's estimates of about 4.5 lakh full-time jobs have been used. No credit has been taken for fuller jobs mentioned in that Report since these will provide more work to the under-employed.
(vii) Forestry, Fisheries, etc.-With regard to forestry and fisheries, data supplied by the States have been relied upon. For the N.E.S., the employment estimates made by the Community Projects Administration have been used.
(viii to x) Social Services.-For Education, Health and other Social Services, data supplied by the States were scrutinised in consultation with the respective Divisions in the Planning Commission, and were suitably adjusted.
(xi) Government Services.-As to employment in Government services, estimates of likely increase in non-developmental expenditure on the civil side by 1960-61 over the 1955-56 level were first worked out On the basis of the average yearly payment per person employed in the Government, a rough employment figure was computed.
(xii) Others.-Employment estimate for `others including trade, commerce and other services' is much less firm. This has been based on the occupational pattern revealed in the 1951 Census. The group `others' comprises commerce, transport (other than railways), storage, warehousing and miscellaneous services not elsewhere specified and general labourers*. According to the 1951 Census, these groups provide employment for 12.876 millions of the working force. The total of these groups, when compared to persons occupied in activities except cultivation consisting of primary occupations, mining and quarrying, industry, railway transport, construction and utilities, health, education, public administration and communications, which account for 22.447 millions, gives a ratio of 0.52. It is assumed that the same ratio would prevail in 1961. The omission of purely agricultural occupations in working out the employment ratio is justified on the assumption that in the second five year plan it is intended that additional employment should be largely in the non- agricultural sector. With increase in production in the agricultural sector, persons already in the category `others including trade and commerce' will find fuller employment by handling greater volume of work from their existing clients. The rartio 0.52 is likely to be considered as conservative.
17. These estimates have to he judged in the context of the objective of the second five year plan of providing employment opportunities outside agriculture on an adequate scale. Even if existing unemployment were to remain unchanged, 10 million jobs require to be created for this purpose. But, of the 10 million new entrants to the labour force a large number will be among families depending on land. In regard to such persons, as has been pointed out earlier, the quantum of additional work has to be measured not in terms of jobs, but in the form of additional income accruing to them. Further, on account of irrigation provided during the plan period, it is reasonable to assume that of the additional acreage irrigated, a part will provide opportunities of work on a full-time basis according to rural standards. There are also allied schemes of reclamation of land by manual labour, schemes of Central Tractor Organisation, etc., and expansion and development schemes of plantations, pepper and horticulture. These put together are estimated to provide employment to about 1.6 million new entrants to the labour force in rural areas. The balance of the irrigation facilities will account for relieving under-employment in agricultural pursuits. In addition, one has to take into account the fuller employment opportunities provided by schemes under the Village and small industries programme. Viewed in this light the results of the plan in terms of employment are likely to be significant, but the problem of unemployment will continue to require a great deal of attention during the operation of the second plan.
18. It will be useful at this stage to compare the overall employment content of the first and second five year plans. Studies made in the Commission show that direct employment generated daring the first plan period in the public and private sectors was of the order of 4.5 million. This estimate, however, excludes additional employment in fields such as trade, commerce, etc. With almost double the size of the development effort, the additional target of employ- ment during the second plan is not likely to be much higher. This is because the step up in the developmental expenditure, during the second plan period is not expected to be much larger than that achieved during the first plan period. The reason is that the plan