Employment issues in India
Ever since the Keynesian Revolution in economics, we know that output is determined by aggregate demand.
It is the demand for the total volume of goods and services produced in an economy.
The demand for labour is entirely dependent upon this demand.
There is no demand for labour independent of the demand for goods.
Firms that employ more labour while aggregate demand has not increased will find themselves with unsold goods.
So, an offer by workers to work longer hours will not ensure that they will find employment so long as firms are unwilling to hire them.
Firms are guided by the profit motive and will employ more labour only if there is increased demand for their product.
There is not an iron law of the market pinning us down helplessly to high unemployment through low aggregate demand in India.
There are two strategies economic policy here can attempt.
The first is to use the global market or world demand to grow the domestic economy, but India’s goods would have to be globally competitive.
The experience of South Korea is relevant.
As most of the produced inputs into production are available to all countries via trade, a country’s competitiveness is ultimately determined by the productivity of its workforce and the physical infrastructure that complements labour.
The strength and dexterity of a workforce, manifested as productivity, is related to its health and skill.
In both these categories, India’s workers are at a disadvantage compared to the most successful economies of Asia.
To have not brought its workers on a par with the rest has prevented India from using the world market to grow.
A second route to greater output and employment is to expand the domestic market .
To see how this can be done, recognise that the economy produces both food and non-agricultural goods and services.
These are placed differently in relation to our consumption needs.
If food can be produced at lower cost, the real income of the majority of Indian households would rise.
What can we learn from south Korea
Another economy that saw long working hours in this period was South Korea.
Some of its features are similar to those that had prevailed in Germany and Japan then.
It too was recovering from a war, though a different one, and its resurgence was supported by considerable foreign aid received from the U.S., of which it was an ally.
However, a political aspect beyond finance, common to all these three countries, is a strong nationalistic element that is likely to have accompanied their post-war reconstruction.
It is not inconceivable that there was a voluntary supply of effort to rebuild the nation after a shared catastrophe imposed by ‘foreigners’.
There is insufficient recognition of the fact that the manufacturing success of the east is underpinned by prior success in agriculture.
The high working hours that contributed to this are unlikely to have been witnessed in a system in which labour was allocated according to consideration of profit.
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