Robust macroeconomic fundamentals lead to one ultimate goal: jobs. At least that is the theory. You go through the hoops of fiscal consolidation, current account balance, debt sustainability, and manageable inflation to get to sustained economic growth, the guarantor of jobs.
When you have the temerity to pick holes in the theory, arguing, for instance, that we have had stretches of decent economic growth without a perceptible change in employment levels, you are told high growth rate is not enough. You need long-term uninterrupted stretches.
We are now informed that given our demographics we need to post at least 8% GDP growth for each of the next thirty years to absorb all those entering the job market. "See, China did it", we are gleefully reminded. Our baleful riposte "But we are not China" is parried.
In despair, we turn to our economist friends and get an earful. Yes, they tell us, in times of recession and cyclical unemployment you can play Keynesianism - all that stuff about boosting aggregate demand through an expansionary fiscal policy plus a loose monetary policy.
Then they take the mickey out of this seemingly sensible solution by peppering it with caveats. Expansionary fiscal policy would entail borrowing, exacerbating the already high debt level. It will have a crowding-out effect, leaving less for the private sector investments. Interest rate cuts will be meaningless if banks are reluctant to lend to private sector in the presence of a risk-free dominant borrower (the government).
They don't stop here. They add to our discomfiture by telling us our unemployment is of a structural nature requiring supply side remedies, more than the temporary palliative of the Keynesian demand stimulus. This would require interventions like education and training, reduced labour market rigidities, and targeted geographical and employment subsidies.
Nothing is lost in translation: there are no quick fixes to our unemployment problem.
Sorry, but that's not something that we can live with. Not economically, not socially, not morally.
Economically you pay the price of non-documentation, lower demand, lower tax revenues, and higher benefits spend (Ehsaas, subsidies, State Enterprises). To boot, this means greater government borrowing!
Socially, you bear the cost of crime, vandalism, beggary, street children, and above all, social alienation - especially among the young who constitute the largest cohort of the unemployed.
Morally, it is simply indefensible - an unassailable case of state failure. Employment may not be enshrined as a fundamental right in our Constitution but human dignity is deemed an inviolable right. What could be more demeaning than to be forced to live on charity, whether state funded or out of the goodness of philanthropists.
The numbers are daunting. Some estimates put the number of employed (non-farm) at 72 million, of which some 45 million are in the informal sector where you are perpetually struggling to stay in the job, with no unemployment benefits of any kind when you are out of it.
Then the government tells us from 12 to 19 million jobs may be lost due to Coronavirus. Clearly, the situation is dire enough to warrant a more calibrated response - a response that goes beyond the Economics that is more attuned to issues of developed countries.
For the developed countries threat of inflation supersedes the promise of full employment. Indeed, as a matter of deliberate choice, they do not want to let unemployment go below 3% for fear of an uptick in inflation. They have thus tasked their central banks to go for 'inflation targeting', firmly convinced that inflation is a monetary phenomenon.
How relevant is this for Pakistan, where large scale unemployment speaks for itself? More so when inflation has been more cost-push than demand-pull!
Politics and jobs are inextricably linked. Even that champion of market forces, the United States, has had to concede this in times of a slowing down of the economy. Government steps in, directly, to provide and promote jobs. The most important economic indicator is the monthly report on employment!
PTI government had the right political instincts when it promised ten million jobs; perhaps going a little over the top but the thinking was right. Its failing was it didn't quite know how. It ceded space to charlatans selling nostrums (aka Economists) without giving job creation even the semblance of a chance.
Benazir too had the right instincts, even as she parted company with her father's socialistic model. But she went about it the wrong way, treating jobs as giveaways - to reward her retainers, or as loyalty baits. The idea of 'due process' was alien to her. Worse, government was unimaginatively used as employer of the last resort.
Politics of jobs is evidenced by the battles regions in the same country fight to attract investments, offering all kinds of inducements. Sound Infrastructure (social and physical) and tax breaks are standard allurements.
In Pakistan we do the opposite. We penalize businesses that create more jobs with ingenious levies, expecting them to bear the burden of state responsibilities. Apprenticeship scheme, workers welfare fund, workers profit participation fund, etc. It has been an unrelenting employment-dampening onslaught.
Take the celebrated EOBI, alongside its provincial sibling the Employees Social Security Institute (SESSI for Sindh). Between them they tempt the employers to understate numbers, resort to low-productivity sub-contracting, and resist trade unionism.
EOBI/SESSI take in a lot. How much do they give out? With their inefficiencies, pilferages, and misappropriations it will be a miracle if a quarter of collections reaches the intended beneficiaries.
Any event, haven't they squirreled away enough to give employers a break? They have properties that they don't know what to do with (renting out plots of land now!) and investments that yield poor returns. Surely, employers can get greater mileage if allowed to raise and employ these funds themselves.
In the wake of lockdowns the government is more focused on saving jobs. It should be working harder on creating jobs. This can only be done by being more creative; by reposing trust in business. Do away with all these levies that dampen job creation without giving commensurate benefits to the workers. Think of tax breaks and subsidies to those who create more jobs.
Finally, there is the devil incarnate that the bureaucracy thrives on: Regulation.
Good politics is converting threats into opportunities. Let's deregulate - massively. Let's free businesses of levies that discourage job-creation.
Comments
Comments are closed.