‘Unmonitored labour costs in Dimapur skyrockets’ say a local daily in its front page recently. There in the article, Imkong Walling of the Morung Express deplored that labour costs are skyrocketing due to inflation and utter lack of monitoring mechanism. Walling says that daily wages of manual workers costs between Rs 200 - Rs. 400, which is way above the official rate fixed by the Dimapur Municipal Council which stands at Rs. 220 for skilled worker and Rs. 150 for unskilled workers.
Interestingly, in a separate article by Al Ngullie of the same daily says that “The number of unemployed Naga males, is increasing and ironically, the growth of the construction and infrastructural sector in the state has not helped in easing the unemployment index because there are no Naga or local workers”. Quoting the recent GoI -UNDP report it says “although there are significant career opportunities in other sectors, the unemployed Nagas refuses to opt for anything that is not government”.
Well, these separate articles lead us to a rare and tricky economic predicament: a situation where high rate of unemployment exists along with a steep rise in wage rates commonly known as stagflation. Unemployment and inflation are major economic problems and therefore, there are adequate policy prescriptions available to tackle them individually: but when both co exists simultaneously the situation becomes real catchy. One of the popular economic theories dealing with unemployment and inflation is the Phillips curve. It says an economy can either choose a ‘low level of unemployment and a high rate of inflation’ or a ‘high level of unemployment and a low rate of inflation’. Our problem is complex because it is neither of them. And evidently, both unemployment and inflation have been on the upswing for several years.
So the question is why does the economy have to perform so poorly and for so long? Why the market mechanism or the invisible hand fails to bring the economy back on track? Why thousands of college graduates fails to find gainful employment while on the other end huge numbers of migrant labors are entering the workforce? Why the private sector miserably fails to absorb the educated youths? Or simply put why do we find more questions than answers?.
Coming back to Walling, his contention that labour cost increase due to inflation is particularly true. When the rate of inflation is high, the price of goods and services increases. This creates two implications: first, the living cost of the workers will increase; and second, the workers would feel that their productivity, in terms of money, has increased. Both will results in workers demanding higher wages. If the wage rate increases it will again increase the cost of production hence higher price.
However, his second contention that wage rate increases due to lack of monitoring mechanism depends on the type of economy we choose. In a market economy, unlike command economy, efforts to monitor the wage rate will fail, because wage rate is the price for different types of labour, and just like the price of any other commodity it is determined by demand and supply.
The classical economists offer a readymade solution to this problem, but for a variety of reasons it isn’t working in our case. They argue that when there is a high rate of unemployment, the unemployed workers would compete for jobs by offering their service at a lower wage rate. A rational employer will take the advantage and employs workers who are willing to work at a lower wage rate. As the wage rate falls, the producers will find it profitable to hire more workers; this will eliminate the problem of unemployment.
The Keynesian economists, however, tells a different theory. They argue that a reduction in wage rate would lead to a fall in income which would bring down the aggregate demand. Hence in a scenario of deficient demand it would be unwise to increase output by hiring more workers. Therefore, they offered a possible solution by way of government intervention through increased spending and tax cuts along with expansionary monetary policy.
But the Keynesian model was of little help even to the Americans who suffer similar problems of high unemployment and high inflation in the 1970s. The reason was simple; any increased spending and expansionary monetary policy to tackle unemployment during times of inflation will only push the price up and may lead to hyperinflation. On the contrary, choosing tight monetary policy and reduced spending to bring down inflation may depress the economy and create more unemployment, which again would be a policy nightmare.
However, the problem between America of the 1970s and Nagaland of the day is a different issue. First, Nagaland even in 2070 can hardly compare America of the 1970s; secondly, the problem with the Americans then was the supply shock caused by the oil crisis, whereas ours is an outcome of multiple economic, social and political crises.
Government data reveals several thousands of unemployed youths in our state who prefer to call themselves ‘educated’ unemployed youths. And that is the first problem. By calling ourselves educated we already shut the doors of working anywhere that is not government or classy. Luckily, we don’t hear cases of suicide or death through starvation due to unemployment, but if too many members of the labour force choose not to work there will be costs in terms of foregone earnings, personal discontentment associated with unemployment, social unrest and crimes, and the greater danger of being living under indebtedness and poverty trap.
Secondly, the reason why many educated unemployed youth choose not to work in the private sectors in not their making alone; the society or the parents decides it that way. Right from the childhood, the parents’ advice their children that if they do well in their studies they will get good government jobs and once they grew up the parents spend thousands of money to pay for their coaching fees or to facilitate entry into the government sector. And with all that grooming who won’t want a government job? Not only that, but our society have little regards for the striving entrepreneurs or those working in the private sectors. It may seem blunt, but we even tend to consider a clerk in a government establishment as a better bride or a groom than the professor or a manager in a private establishment. Hence, once the society changes its mindset, the youths will follow.
Thirdly, it is the erosion of our social values influenced by the assimilation of foreign cultures. Working in a farm or an industry other than earning fast bucks is considered unfashionable. Rather we are leading into techno- dependent and westernized lifestyles, where there is a growing admiration for speed, fashion, sensationalism and merrymaking and where dignity of labour has become the concept of the OG or what they call old generation. The dream to quickly become rich and famous or to remain a beauty queen is a serious disincentive for hard work but the bait for corruption.
Fourthly, there must be some defect in the government employment policy. Successive governments have promised to address the problem of unemployment, but we don’t have any deep rooted employment strategies. Employment generating programmes like PMRY, SGSY, or CMCF are not creating the necessary impact on our economy. Recently, the government is facilitating employment of local youths in the BPO sectors, catering and hotel industry, fashion and designing etc. These can provide some temporary relief but should not be considered as a part of our long term employment policy, for these are simply outsourcing and would not help create jobs back home. What we really need is jobs that could create more employment, increase output, creates a supply chain and generate market.
Fifthly, the reason why many educated youths remain jobless in the face of heavy influx of migrant labors shows a serious mismatch between the output of our educational system and the demands of the labour market. And this is the area which needs the genuine attention of the policy makers. The polemical phrase ‘our graduates are not employable’ doesn’t seem to have much buyer as it is neither a statement of the real problem nor its remedy. Our inability to harness the skills and services of our teeming youths could only hamper the pace of our technological and economic advancement.
Lastly, the cause of stagflation in our economy is apparently not due to sudden and abnormal rise in demand nor is it an outcome of supply shocks as witnessed in other economies. The stagnation of our economy on the one hand and the ever rising costs of factor inputs and prices of essential commodities on the other is primarily due to insurgency related problem although mismanagement of state’s fiscal policies cannot be ruled out. The atmosphere of forceful and illegal extortions, threats and intimidation can only shoot the price up and keep the engine of the economy running at a bare subsistence level.
So while others would have to worry about finding the right mix of economic policy to contain such situation, we have miles to cross as we need some social change as well as political or law and order stability.
N Janbemo Humtsoe
Email: janbemolotha@gmail.com
