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Let me begin this show with a confession.
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Yes, you heard me right.
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Now, it might seem kind of contradictory that I am also an atheist, but that's what happens
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when you lack self-belief.
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Anyway, let me tell you about what happened yesterday morning.
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It was monthly admission day, that day in the month when I admit dead souls into heaven.
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So, I was sitting at the gates of St. Peter's and as the applicants trooped past me, I gazed
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into their souls to determine if they were worthy of admission.
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Had they been defenders of freedom all their lives?
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Had they respected the personal autonomy of others?
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Had they been kind and empathetic to their fellow humans?
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Did they like golden fried prawns?
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Anyway, so I chose a few thousand souls and they all gathered before me.
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I said to them, you will now get the rewards for your earthly good deeds.
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You can have whatever your heart desires.
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Who here wants an eternity of sensual pleasures?
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No one stepped forward.
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Who here wants to lie on a comfy divan with slaves in silk harem pants holding grapes
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Who wants to listen to some divine music?
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Who wants to watch movies and eat seafood platters all day?
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Who wants to do adventure sports without risk of death, for you're already dead, ha ha ha?
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Who wants to watch CCTV footage from any place on earth?
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No one seemed to want any of these things.
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I asked them, so what the hell do you want?
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One of them shouted, we want jobs.
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Then all of them shouted in chorus, we want jobs, we want jobs, we want jobs.
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My mouth was open in divine astonishment.
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Finally, the first guy said to me, we want jobs.
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Jobs is our idea of heaven.
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Welcome to The Seen and the Unseen, our weekly podcast on economics, politics and behavioral
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Please welcome your host, Amit Varma.
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Welcome to The Seen and the Unseen.
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This episode follows on from last week's episode in which I discuss the right to education
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act with my guest Vivek Kaul.
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We ended the episode when Vivek pointed out that one of the unseen effects of our dismal
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education system was that so many people were simply unqualified for the job market.
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Because there was a demand supply mismatch at the level of education, there was also
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a demand supply mismatch at the level of jobs.
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Both Vivek and I feel that India is herit for the jobs crisis.
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This jobs crisis is the unseen effect of decades of bad policy.
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Our education system is messed up, our labor laws are horrible, the license and inspector
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arch has crippled India and our agricultural policies have trapped our farmers in a vicious
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cycle of continuing poverty.
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To talk more about this jobs crisis, I've got Vivek back with me in the studio.
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Thanks for having me over again.
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One of my friends, Varun Mitra, who was on the show a few weeks ago, often quotes Naipal
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and talks about the million mutinies that are brewing in India.
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And some of these recent mutinies that we've seen are like the Jat agitation in Haryana,
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the Patidar agitation in Gujarat.
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And all of them revolve around the question of jobs, a subject which you've studied very
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deeply and are very worried about.
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Can you expound on that a bit?
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You know, the funny thing is that most of these job agitations are centered around people
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who come from landowning castes.
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If you look at Jats in Haryana or you look at the Patidar Patels in Gujarat or the Marathas
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who have been having these silent rallies all across Maharashtra or the Kapus in Andhra
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Pradesh, they are landowning castes.
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So the point is that they never really needed jobs up until now.
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What has happened is that over a period of time, the average landholding of a farmer
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in India has come down dramatically.
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And as per the agriculture census of 2010-11, which is the latest data that we have, it's
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come down to around 1.1 hectare.
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And they've come down essentially because families are growing and every generation
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You know, there is only so much of land going around and so the land keeps getting smaller
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and smaller and as the land keeps getting smaller and smaller, the economies of scale
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keep going out of the window.
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So farming is not as lucrative for them as it used to be.
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The problem, as we discussed in the last episode, is that the educational outcomes of people
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who have been through the Indian schooling system are really not up to the mark.
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And they want government jobs.
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So the irony again is that, you know, the government jobs are going up at a very, very
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I mean, in case of many, many, in many states, the government jobs may have actually come
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down in one particular state that I studied in the book was Haryana.
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And in case of Haryana, the rate of, you know, job acceleration at the Haryana government
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level has been very, very slow.
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So the funny thing is that, you know, I really don't know as to why are they asking for a
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government reservation because the government doesn't really create jobs anymore.
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So give me a sense of the scale of the problem, like this demographic dividend that we speak
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of, is it really a dividend?
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So, you know, there is a lot of research around this and essentially the researchers try and
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estimate as to, you know, the number of new individuals entering the workforce every month.
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And the estimates vary.
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But on an average, they all come to, you know, something around 1 million individuals entering
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the workforce every month, which is around 1.2 crore every year, which is around half
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the population of Australia.
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Now in the traditional sense of the term, you know, what does demographic dividend mean?
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It essentially means that when your working population, working age population is growing
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at a faster rate than your overall population, then the country tends to benefit because
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as these guys get jobs and, you know, they spend, you know, they earn money and they spend that money,
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the economy tends to grow at a much faster rate than it did in the past.
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So there are examples of this demographic dividend happening all over the world, including China.
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But then there are other examples in the Middle East where the demographic dividend did not
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turn out to be a demographic dividend.
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You know, in India, the way we are currently going, there are not enough jobs being created
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for the 1.2 crore individuals who are entering the workforce every year.
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So there is a supply problem.
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There is also a problem at the level of people who are entering the workforce in the sense
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that their learning outcomes, their educational outcomes are really not in place.
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I mean, as we discussed in the last episode, you know, people can't do basic reading, basic
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writing and an average Indian is educated only until the primary school level.
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You know, which is not in this day and age, which is, you know, it's very difficult to
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be a primary school pass out and find something of a proper job.
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So the tragedy of so many people coming into the workforce and those jobs simply not being
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there is really the unseen effect of a number of different policies which have, you know,
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perpetuated themselves over the decades.
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One of them, of course, is education.
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There is a mismatch at a fundamental level between the kind of education that people
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want or need and the kind of education which the state in a supply let top down kind of
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wisdom actually ends up providing.
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And that creates a sort of a massive mismatch.
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What would you say are the other huge causes for those jobs simply not being there?
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See, over the last few years, what has happened is that, you know, the Indian corporates have
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been heavily leveraged and they've taken on a lot of loans from banks and are no longer
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in a position to repay.
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And given that they are not in a position to expand.
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So when you're not in a position to expand, you know, you're not really creating jobs.
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I mean, if you look at the rate of investment in the Indian economy, it has fallen dramatically
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over the last five years.
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So what would you say are the fundamental causes for this?
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So one is, as I said, that, you know, there is already as far as industries are concerned,
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they already have enough capacity, that capacity in itself is not being utilized.
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The second thing is that, you know, labor laws in India are extremely screwed up.
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So anyone, you know, who wants to expand things twice.
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So if you compare, you know, India with China, I mean, I don't have specific numbers.
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I don't remember specific numbers right now.
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But India has many more small industries, whereas China has mid-level and larger industries.
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And the small industries in India continue to remain small because it is unviable for
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You know, the moment they grow any bigger, the law of the land catches up with them and
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they have to follow, you know, all these labor laws and a lot of other laws, which makes
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it very, very difficult for them to continue to be viable.
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And this is not something that, you know, I'm making up.
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Even the National Manufacturing Policy of 2011, which ultimately was copied and became
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the make in India thing, elaborates on it in great detail.
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So this is, you know, labor laws and the fact that corporates are heavily leveraged is,
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you know, one thing which is essentially holding back capacity expansion, two things actually.
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So at a policy level, let's say you're sitting right now in the PMO and Modiji calls you
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into the office for a meeting and he says, Vivek, I've heard your podcast, I've read
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your book, amazingly insightful.
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These are the jobs that the nation needs if we are to make something of a demographic
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So that's a, you know, that's a very long answer.
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I mean, I can give you a long answer.
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I can't give you a short answer.
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So, you know, as we were talking before the podcast, you know, I mean, and as I have repeated
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through the last two podcasts, you know, most of the Indians coming out through the education
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system are not really properly educated.
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So their educational outcomes are not in place.
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And given that the jobs that they can do are essentially, you know, low skilled, what we
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Typically, you know, when people move away from agriculture into other jobs, they move
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into construction jobs.
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Now, if you look at construction, construction jobs essentially get created at, you know,
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One is when corporates expand, which isn't happening right now.
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Two is when the government tries and builds physical infrastructure, which is happening
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But then, you know, the government has a limitation on the amount of money that it can spend in
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The third thing is real estate.
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Now, this is where, you know, things can change and India's so called demographic dividend
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can find jobs despite the fact that they are not very well educated because real estate
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does create a lot of low end jobs.
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The problem is that in the top, you know, in the biggest eight cities in India, which
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is where the real estate market really is, the demand for homes is simply not there.
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And the reason for that lies in the fact that prices have reached a level where people simply
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So, for real estate demand to pick up, prices need to fall.
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And when prices will fall, then, you know, demand will pick up and then construction
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activity will pick up and then all these people, you know, not all, but, you know, a significant
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portion of the people entering the workforce will find lower level jobs.
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Now, the question is why are real estate prices not falling?
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You know, this is something that everybody keeps talking about and, you know, a simple
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as well as a complicated answer for it is the fact that a lot of real estate is essentially
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run in the black economy.
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Now, you know, why does a builder want you to pay a certain portion of the money that
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You know, I mean, let's say you are an honest tax payer and when you're buying a home to
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live in, when you pay a builder in cash, you're converting your white money into black.
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But why is the builder asking for that money in cash?
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I mean, obviously, you know, a simple answer is that he does not want to pay tax on it.
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But there are other answers as well.
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Now, he needs that cash because he needs to one, pay his suppliers in cash, two, he needs
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to pay the politician who is backing him in cash.
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Why does he need a politician?
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He needs a politician because our real estate regulations, you know, across states are so
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complicated that anyone who does not have the blessings of the local politician and
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the local bureaucrats would not be in real estate business in the first place.
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Now, this also explains to a large extent as to why we do not have, you know, a pan
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India real estate company if you were to look at it.
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In fact, we don't even have a pan Mumbai real estate company.
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There are, you know, players who concentrate different pockets of the city, which explains
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to you, you know, many things.
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So again, so the question is, why does the politician need money in cash?
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The politician, obviously, you know, one is because he's corrupt.
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He also needs money in cash because he has to fight an election every five years.
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And elections in India now have become very, very expensive.
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In fact, some time back I was talking to, you know, a pollster and who was telling me
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that even municipal level elections, if you're serious about contesting a municipal level
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election in a big city in India, it can cost you a few crores and you may not win the election,
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you know, at the end of the day.
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There go my dreams of being a corporator, Vivek, what have you done?
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So, you know, so the point I'm trying to make is so the politician needs cash to fight elections.
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So unless electoral funding is cleaned up, you know, if we can clean up this entire process
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of electoral funding, I mean, like in the US, the electoral funding is very, very open.
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If in India we can have a some sort of a system, you know, like the American system, I mean,
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not that the American system is perfect.
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They have, you know, there are problems there as well.
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But at least it's clean and it's, you know, it's transparent.
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So if we can have some sort of a similar system, then, you know, the electoral financing part
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Now, once the electoral financing part starts to get cleaned up, then, you know, your real
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estate guy suddenly does not need all the black money that he needs as of now.
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Then the prices start to come down, then we create jobs.
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But the point is that, you know, this is not like, you know, a government taking a single
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decision and a solution emerging.
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There are multiple decisions at multiple levels which need to be taken.
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I mean, take the fact that, you know, take agriculture for that matter.
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Now, as of now, if you have agriculture land, I mean, you would have discussed it in your
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If you have agricultural land, you can only sell it as an agricultural land.
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Now, the change in land usage depends on the local government and which is where they make
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all the money that they do, all the corrupt money that they do.
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There is discretion, there is rent-seeking.
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So these are the things, you know, these are fundamental reforms that are needed.
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And it's all, believe me, it's all connected.
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I mean, you know, if these things are cleaned up, you know, some amount of jobs will start
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to get created, at least in construction.
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If labor laws are cleaned up, you know, manufacturing can, you know, small manufacturers can hope
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of, you know, becoming a little bigger.
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And there is enough research, you know, globally, which shows that jobs are created.
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Big companies don't create jobs.
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Jobs are created when small companies become bigger.
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And simultaneously, as I spoke about in previous episodes with other guests, you know, in our
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service industry, jobs are actually going because of artificial intelligence.
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Even in manufacturing, there's a limit to how many new jobs can now spring up because
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I mean, all of these decades, we had these terrible labor laws and terrible regulations
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which kind of crippled the manufacturing industry.
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But even if they were all to be removed overnight, we might just have missed the bus.
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We might have missed the bus.
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But the point is, you know, what else can you really do?
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What else can you really do?
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It's pretty depressing when you look at the causes of, you know, our shortfall in jobs
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because it starts right from education because you have, you know, a top down command and
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control kind of system where market inputs don't really dictate what kind of schools
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we have and what kind of education people get, which leads to a lot of underqualified
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or non-qualified people emerging into the workforce and they don't have jobs because
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the manufacturing industry has been stymied with these terrible labor laws and regulations
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Plus, there is a whole mess of what you described as happening in real estate.
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Plus, you have tens of millions of people in this country literally trapped in agriculture
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because they're not allowed to get out.
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So tell me in the years to come, like one of my friends has expressed this fear to me
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in the past that we only have 20 years to sort things out because after that, instead
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of getting younger as we are now, we start getting older and people start moving out
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And if we don't fix it by then, we are in for a disaster and be a lot of social unrest.
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Which is, you know, social unrest has already started.
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I mean, it's happening.
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I mean, it's not very in the face right now, but it's there.
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Now, whether that will turn into something like an Arab Spring is something that one
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cannot speculate about.
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But the funny thing is, you know, I mean, as we were discussing before the podcast,
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the official rate of unemployment in India is just 5%.
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So it's the way you calculate unemployment basically.
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So there are two methods.
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And in the first method, you know, if you are employed for 183 or more days during the
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course of the year, you are considered to be employed.
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So you can be unemployed for 182 days in a year and you would still be considered to
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So as per this method, the rate of unemployment is 5%.
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Then we have another method, which is even more interesting, which basically sees that
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have you been employed for the last 30 days?
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You know, whenever the survey happens, they check this.
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So if you've been employed for the last 30 days, you're considered to be employed.
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As per this method, the rate of unemployment is 3.7%.
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But then, you know, even though these data points mislead, there is another data point
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that the government puts out, which tells you the real state of unemployment in India
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is that only 60% of, a little more than 60% of people who look for jobs during the course
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of the year, I mean, 12 months of the year are able to find jobs.
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In case of rural India, this number is even lower at 52%.
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So only 52% of rural India has a job all through the years.
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This tells you the real problem of unemployment in India.
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So what we have is not unemployment, but under employment, you know, everybody is doing something,
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but then that something is really not productive enough.
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This is a very scary story you've laid out Vivek and it just reminds me of how privileged
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Thank you for coming on the show.
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Thanks Amit for having me.
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That was Vivek Kaul, a columnist at Equity Master and author of the book, India's Big
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Government, The Intrusive State and How It's Hurting Us.
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And hey, before you go, let me finish my story.
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I was standing at the gates of heavens and all these new entrants were chanting, we want
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Finally, I held up my hand and they all fell silent.
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And then I said, you want jobs?
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I can give you anything.
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Jobs come out and say hello to these wonderful people.
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And as I said this, Steve Jobs stepped out from behind me.
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Next week on The Scene and the Unseen, Amit Verma will be talking to Pawan Srinath about
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