Can private sector reservation solve employment crisis in Meghalaya?

The recent rally organised in Shillong demanding reservations in the private sector was not very surprising. Similar demands have been raised in other parts of the country as well and laws have been passed on the issue. However, these state laws were challenged in court, which will also be the fate of any law that the Meghalaya government might bring up for reservation in the private sector. 

That notwithstanding, the problem plaguing the job sector in the state has to be acknowledged. But here it is important to disentangle the difference between unemployment and underemployment, something that appears to have been conflated and treated as being the same.

According to the Centre for Monitoring Indian Economy (CMIE), a leading independent economic think tank, as of July 2023, the unemployment rate in India was around 7.95%. This was higher than the 6.1% during 2017–2018, as reported by the Labour Ministry of the Government of India, which was the highest in 45 years. This means that the current figure is the highest in the last 50 years. 

At the same time, the unemployment figures for Meghalaya of 2.7% as of December 2022, as reported by CMIE, were much lower than the national average. The figures may have gone up in the last few months, but it is highly unlikely that they have breached the national average. The problem of employment is not so much unemployment as underemployment, i.e., a situation where people are working in low-paying jobs because they cannot get employment suitable for their qualifications and/or experience.

According to the Ministry of Statistics and Programme Implementation, Government of India, the 2022–2023 Per Capita Net State Domestic Product of the state was Rs 98,572, the lowest among all states for which data was available. This means the amount available to every Meghalaya resident, if the total amount of money generated in the economy is distributed equally, is just over Rs 8,000 per month. 

But it has now been widely accepted, as recently admitted by former RBI Governor Raghuram Rajan at the IMF-World Bank annual meet in 2022, that inequality is a major problem affecting not just India but the whole world. 

The ‘State of Inequality in India Report’ released by Dr. Bibek Debroy, Chairman, Economic Advisory Council to the Prime Minister (EAC-PM), also confirms the same by revealing that the top 10% accounts for one-third of all incomes earned. 

This means that 90% of the population in Meghalaya will have an average income of just over Rs 5,000 per month. It is, therefore, apparent that the money generated in the economy is severely inadequate to provide the majority of people with decent jobs, i.e., a well-paid job with good social security benefits.

Although the inferences derived from published data already make for a very distressing read, the actual situation on the ground is even more alarming. People who already have a job are finding it very difficult to make ends meet, forcing them to engage in more than one job. 

Good examples of this are the Rapido drivers, many of whom actually already have a job, whether in the private sector or even the public sector (contractual in nature), but, on many occasions, have to work a combined total of more than 12 hours a day to earn enough income to support their families. For quite a few, driving a Rapido is the only job that they have, which makes their situation even more precarious. 

Then there are people who are working in shops, at people’s houses, etc., whose salary is less than even the minimum wage prescribed by the government of Meghalaya, which ranges from Rs 8,382 to Rs 11,748 per month. Such kinds of workers are known as informal workers, and they constitute more than 80% of the workforce in the country, which will be true for Meghalaya as well. Here, low wages, no social security benefits, and uncertain working conditions are the norm. 

So, even if there is reservation in the private sector, it doesn’t really solve the problem of a lack of decent employment (underemployment) in the state. What is required are decent jobs that are well-paid and have good social security benefits. This can be achieved in two ways.

The first is the one proposed by the Government of Meghalaya: the promise of doubling the state’s GDP by 2028 and transforming the state into a 10-billion-dollar economy. If that can be achieved, it will definitely raise the Per Capita Net State Domestic Product and, with it, the amount of money that will be available in the economy. This in turn will translate to higher wages, thus raising the ability of workers to support their families without exploiting themselves. 

However, this line of reasoning is dependent on the fulfilment of certain conditions. The most important condition is that the government is able to not just control inequality but ultimately reduce it. If this is not done, any gains made in increasing the GDP will not translate to increasing the well-being of the population. 

A very good example of this is the support of the BJP-led NDA government to Adani and Ambani, which, according to Arvind Subramanian, the former Chief Economic Advisor to the Government of India, will lead to “an extraordinary concentration of economic power… (this) could create an oligopolistic economy that will stifle innovation and growth.” 

In fact, as the fortunes of the two industrialists have risen, the unemployment rate has also been increasing in the country, as admitted by the Labour Ministry of the Government of India in 2017–2018 (well before the COVID years). ‘Trickle-down economics’ did not work. 

So, just increasing the state GDP by supporting certain individuals or a group (by awarding contracts and investing through preferential treatment) is not going to solve the lack of decent jobs in the state. In fact, the more inequality grows, the more dangerous the situation will become.

The second is to combine the drive to increase the state GDP with redistributed mechanisms being put in place. This can be achieved by increasing the minimum wage based on the aim of providing living wages to all workers. Living wages refer to income that allows individuals or families to afford decent living conditions in terms of adequate shelter, food, and other necessities. 

It is usually higher than the legal minimum wage. For example, if we consider the house rent of Rs 5,000 per month, it constitutes around 50% or more of the minimum wages prescribed by the Government of Meghalaya, while the figure should not be more than 30% under a living wage scenario. Workers, therefore, are highly underpaid in the current structure.

Raising the minimum wage to a living wage also improves local demand, which can help local businesses grow, which can then reinvest the profits to expand the business, thus raising the state GDP in the process. This spreads out the benefits to a larger number of people, which also ensures that the profits earned do not leave the state. 

This is in contrast to bigger players, who will always look to reinvest their profits in locations where the rate of return is much higher, like the metros or other parts of the country where the GDP is much higher. But to invest in those locations also requires a lot of capital, which is not available to small businesses that are generally restricted to the local area. 

At the same time, because such businesses are localised, the benefit also accrues to the local economy, both in terms of jobs and taxes. This is a much more sustainable option than making the state indebted in the long run. One thing that, however, could ruin this process is the illegal taxes collected by non-state actors. Whether it’s from illegally operated toll gates or ‘donations’ collected in the name of certain organisations, such taxes take away the profit, which could be reinvested back into the businesses. 

More worryingly, since such gains are ill-gotten, they can be used to fund illegal activities like the burgeoning drug trade in the state, which is ruining many lives and creating a law and order problem in the state. Something under which businesses do not thrive, at least the legitimate ones, is uncertainty. 

If there’s no peace and harmony in the state, the economy will be adversely affected, and we can forget the 10-billion-dollar economy and the provision of decent jobs for the people. If things are bad now, they will only get worse in the future.

Reservation of jobs in the private sector may seem like an attractive solution to address the problem of unemployment (actually underemployment), but in the short and long run, providing decent jobs—a well-paid job with good social security benefits—is a much more important struggle. 

That requires a more structural transformation and orientation of the way the economic policies of the state are being envisaged. Will that happen? It’s up to the citizens of the state. It always was and always will be their choice.

(Views expressed in the article are of the author and do not reflect EastMojo’s stance on the matter.)

Also Read: Assam-Meghalaya border: Is the Khasi-Karbi conflict a ticking time bomb?