Perks Widen Govt-Private Job Divide

Good morning. Government jobs in India are often looked at as more secure and lucrative in the long term thanks to the benefits that they offer during employment and post-retirement. The new Unified Pension Scheme only increases this perception. But this may not be the best thing for the job market. Read on to know more.

Meanwhile, in this week’s Janus View, columnist TK Arun writes about the implications of the American presidential elections on the rest of the world, especially for India.

THE TAKE

Increasing Gap Between Govt And Private Jobs Is A Problem That Must Be Solved

In January this year, it was reported that there were close to 50 lakh applicants for 60,000 Uttar Pradesh constable posts. The Karnataka Examinations Authority received over  5.7 lakh applications for 1,000 village administrator posts in the state, a local news portal News Karnataka reported in June. There are numerous examples of massive numbers of people applying for and landing up physically, risking life and limb, for government jobs. While these numbers may not be accurate, they are likely not too far from the truth. They could be far worse too. 

The central government has approved a new Unified Pension Scheme which is expected to benefit around 23 lakh government employees and will also serve as an alternative to an existing National Pension Scheme. There are several aspects to the new pension scheme that assure pension post retiring, the best case being a qualifying service of 25 years after which the pension would amount to 50% of the basic salary drawn for the past 12 months plus dearness allowance. There is also an assured pension on demise and other aspects of this scheme. 

What it does mean is this — the perception of government jobs as a means to safety and security over the long term will only increase and thus amplify the disparity that already exists in the minds of young Indians. 

A driver who worked with me a few years ago said left the job because he was applying for a government job involving driving a truck in conditions which sounded quite harsh. He admitted the salary was a little lower but he was drawn by the long-term job security and medical benefits for his family. He had even paid off some agent to help him with the job. I ran into him a few years later, before Covid. When asked how his government job was going, he said he did not get it and was cheated by someone. He was back to working with another family.

The latest Unified Pension Scheme only increases this perception of job security with the Government. Some may say that taxpayer money is increasingly funding government employees who don’t deliver their best services. Be that as it may, the larger problem is that the private sector will not and cannot keep up with the promise and challenge of job creation, at least at the level required.

Last week, the deputy managing director of the International Monetary Fund Gita Gopinath said India needs to create between 10 to 24 million jobs annually in the next five to six years. Last month, the government’s chief economic advisor V Anantha Nageswaran put the number at 8 million. Now contrast the need versus the availability of government jobs. The government by offering better pension schemes which also it may not have a choice about, is increasing the gap between the uncertain private jobs and the certain government jobs. 

The larger problem is that government jobs promise a certainty which they should not in this era. A government job may offer relatively more security but it cannot be that once in, you remain for life, unless you get caught committing a crime. 

There are of course options for pension contributions in the private sector too but that is for the handful of well-paid organised sector jobs that make up for around 7% or so of all jobs. And none of them will pan out the same way. Public sector employees enjoy many perks, even after retirement, that employees in the private sector cannot even dream of. Those working in the private sector must figure out their future through smart investing or appropriate life insurance and health insurance schemes.

However, most unorganised sector workers, despite some of the newer savings and insurance options, can barely expect the same level of security and safety of government jobs as we know them today. So even if they work in the unorganised sector they will always aspire for a government job.

Unemployment levels often stay higher for longer among young people because they are going after government jobs, year after year, including the most desired, in the Indian Administrative Service. This drives a thriving industry of predatory coaching classes that prey on insecure parents and their children. This is a problem that needs to be attacked at various levels but we must also work towards making government jobs less secure and thus creating more balance in the jobs market. In that process, we can actually pay government employees more and thus better link productivity and performance.

These ideas aren’t brand new, but the time to implement them is now. Creating more disparities and asymmetries in the job market is dangerous. The new pension scheme will make government employees potentially happy but it will create much discontent elsewhere.

JANUS VIEW

New Shots Heard Around The World From America

What happens in America doesn’t stay in America. Whether it is the US Federal Reserve Chair Jerome Powell’s indication last Friday of a likely rate cut in September, or the Democratic Party’s nomination of Kamala Harris as its candidate in November’s election for the US president, significant developments in the US follow the example of ‘the shot heard round the world’, the opening volley that inaugurated the American Revolutionary War in 1775 – they reverberate far beyond America’s borders. 

At the Jackson Hole gathering of central bankers, Jerome Powell said that a reduction in policy rates is warranted. Even before that, the minutes, released last week, of the Fed Open Markets Committee meeting over July 30-31, suggested a likely rate cut in September. Some members would have been happy to cut rates in July itself, according to the minutes. 

So, US markets have rallied, convinced that the policy rate would move down by 25 basis points in September, and even more sharply, should employment numbers suggest the ongoing slowdown is moving into negative growth. Markets around the world are likely to feel the cheer this week, including in India.

FROM THE PERIPHERY

—💊 The US Food and Drug Administration (USFDA) has sent a warning letter to Aurobindo Pharma’s subsidiary Eugia for manufacturing lapses. The health regulator pointed out that they had failed to ensure the accuracy of data in records and also falsified environmental monitoring records. An Aurobindo Pharma spokesperson said that this had no impact on their existing supplies in the US. 

—🚘 Sales of strong hybrid cars are growing rapidly, outpacing electric vehicle and fossil fuel car sales. According to industry estimates, 23,394 strong hybrid cars were sold in the June quarter, a 62.5% year-on-year growth, compared to 3% growth in the overall domestic passenger vehicle sales. In the same period, about 22,000 electric cars were sold. Overall, the Indian auto market has been struggling with sluggish sales and piling inventory. 

—🏗️ The joint venture led by Adani Group for the Dharavi redevelopment is facing a fresh challenge. Reuters reported that the joint venture is struggling to acquire land to rehabilitate Dharavi residents. Only residents who lived in Dharavi before the year 2000 will be eligible for free housing, and the Adani Group will have to provide housing to about 7 lakh ineligible residents. This would require a major chunk of the land acquired – about 580 acres out of the 594-acre slum. The joint venture has applied to various agencies for more land but has so far not secured any. 

—🛄 The corporate mobility market in India, including employee transportation services (ETS) and corporate car rental (CCR) sectors are expanding quickly, according to industry insiders. This is thanks to an increasing number of corporations, seeking reliable transportation services for their employees, as well as increasing business travel needs. Growth in both sectors is fuelled by growing disposable income as well as regulatory changes like the easing of permit regulations.

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