Rajeev Mantri, executive director of Navam Capital writes in WSJ:
The distinction between job creation and income growth is not as well understood as it should be. Nobel laureate economist Milton Friedman once visited China at the height of Communism, and was taken to a construction site. He asked why the contractors were not using machinery and modern equipment, and was told that the project was part of a government job creation program. Friedman replied that the spades used by the labor force should be replaced with spoons, and that would increase employment even more! The lesson is that it is easy to "create" jobs, but harder to grow incomes because incomes rise only when productivity increases. Productivity increases when companies compete and innovate.Read the full article: The Genesis of Jobs on WSJ.
If we are serious about creating jobs, we should focus on creating an environment where people like Jobs prosper. Bharat will become more like India.
In the current regime, India is being turned into Bharat. Well-intentioned policies that claim to employ the poor are distorting the labor market by incentivizing people to migrate back to villages from cities. The country must urbanize if it has to develop economically, it cannot continue to live in villages.
Much has been made of India's demographic dividend. An average of nearly 1 million people will be entering the work force every single month for the next 20 years, a scale unprecedented in human history. The only comparable event is the post-World War II Baby Boom in the US. This is an opportunity, and can be a huge challenge, because all those people will want to be well-fed, educated and productively employed. It would be futile for the government to even try employing so many people.
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Consider NREGS the govt gives a minimum wage to poor villagers and uses their manual labour for some public works like de-silting ponds,village roads. The govt instead can effeciently carry out the works using private contractors at a cheaper price. But the ultimate purpose of schemes like this is not creatin rural infrastructure but its a alternative to giving direct handouts like US does(giving 500$ checks) to promote spending and create demand for goods and despite the criticism its working brilliantly.(tell that to milton friedman)
ReplyDeleteIndia does not invest enough in its urban infrastructure (it invests less than one-fifth of that of china on a per-capita basis). Indian urban centres strain to support the existing population and if the govt doesnt provide incentives for the rural population the denmographic dividend will turn into a nightmare.
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