The entire philosophy behind selling the reforms to the masses is the so-called ?trickle-down effect´ theory which wants you to believe that the ultimate gains would come to those living at the bottom of the pyramid. The gains would also come to the middle-class educated engineers seeking jobs in the private sector and to those as well who still aspire for the government jobs?be it in the Centre or states or even the local bodies like the municipalities.
But the empirical data demolishes the ?trickle-down´ theory. In fact, it has worked the other way. Instead of trickling down the benefits, the reforms, centered mainly around cost-cutting, have cut the number of jobs whereas the increasing GDP growth should have added to the employment.
According to the figures released in the latest issue of Economic Survey, the number of people employed in the private sector was 86.86 lakh in 1997. This number, instead of adding up, along with the overall growth in the economy, came down to 84.21 lakh.
Finance Minister P. Chidambaram and Commerce and Industry Minister Kamal Nath want it to improve by something like 12 per cent. They argue, in chorus, that it is only through the manufacturing and the double-digit growth that more and more jobs would be created and it is through these new employment that millions of under-nourished can be given food and shelter.
Manufacturing, touted much for creating new jobs, came out rather poor as far as feeding new mouths is concerned. As many as 52.39 lakh people were dependent on manufacturing in the private sector in 1997. Their number is down to 47.44 lakh. This is about private sector which keeps harping on the need for the so-called labour reforms so that it can further reduce their wage bill to boost its bottomline and reward its shareholders and over-paid management bosses.
Competition had obviously pushed the public sector also to cut the ?flab? which they did, as shown by the numbers. The VRS (Voluntary Retirement Scheme) became the buzzword and lakhs of employees working in the supposedly ?secure´ places were shown the doors. Besides, as the turnover and the profitability improved and share prices of these firms were outshining the indices in the market, few would have realised that a part of this would have happened because of the employees being forced to show their back on the bottomline.
The number of people employed in the public sector was 168.31 lakh in 1997 and by 2003 they were not more than 156.75 lakh. If we take the combined figure of the public and the private sector, the number of jobs got reduced from 282.45 lakh in 1997 to 270 lakh in 2003.
The phenomenon of decline in the headcount was not restricted to the industry. The central government, state governments and even the local bodies reduced their muster roll. The Centre reduced the workforce from 32.95 lakh in 1997 to 31.33 lakh in 2003; states from 74.58 lakh to 73.67 lakh and local bodies from 22.44 lakh to 21.79 lakh.
If the job-creation were to go hand-in-hand with the GDP growth or the sectoral improvement, millions of people would have got new employment. Take for instance, the manufacturing sector which, on an average, grew by about six per cent between 1997 and 2003.That means if this sector had employed 52 lakh people in 1997, the number should have increased by at least 15 lakh (taking average growth of six per cent per annum) by 2003. But there was a job cut of about five lakh in the name of cost-cutting and going global.
The trickle-down theory stands exposed and demolished not by some innocuous research by some vague think-tank, but by the data published by the Labour Ministry in the Finance Ministry´s prestigious Economic Survey 2005-06. If one look at the tables on page S-49 and S-50 of the Survey, it would tell it all! But then, the government would go on pressing for the labour reforms till, of course, it is able to build a political support.
?The importance of reforming the labour laws to enhance productivity, competitiveness, employment generation and general economic reforms hardly needs emphasis´´, says the government document. Alas it is not borne out by facts!