Why Reservations Are Not a Solution to the Job Crisis

Manohar_Lal_Khattar_2015Last week, the government of Haryana notified the the Haryana Backward Classes (Reservation in Services and Admission in Educational Institutions) Act, 2016.

The Act provides 10 percent reservation to Jats, Jat Sikhs, Rors, Bishnois, Tyagis and Muslim Jats, in Class III and Class IV government jobs. It also provides a 6% reservation in Class I and Class II jobs to the castes mentioned above. Further, the Act provides a 10% reservation to these castes for admission into educational institutes.

In February, earlier this year, Jats had gone on an agitation, resorted to violence and destroyed public property across Haryana, to demand reservation in government jobs. The Parliamentary forces had to be called in order to control the mess that followed.

But the point is will this reservation in government jobs help the Jats? Or to ask a more speciic question, does reservation really help these days?

Take a look at the following table. It shows the number of people employed by the government of Haryana over the years. Honestly, when I started writing this column, I was apprehensive that I would be able to find such data. Nevertheless, I did. The data is two years old. If it was more recent, the analysis would have been a little more definitive.

Date Number of Employees
March 31, 2014 3,40,698
March 31, 2013 3,40,086
March 31, 2012 3,35,945
March 31, 2011 3,28,370
March 31, 2010 3,26,021
March 31, 2009 3,23,149
March 31, 2008 3,27,490
March 31, 2007 3,17,245
March 31, 2006 3,11,340
March 31, 2005 3,13,775
March 31, 2004 3,11,005
March 31, 2003 3,11,938
March 31, 2002 3,16,135
March 31, 2001 3,19,027
Source: Census of Haryana Govt Employees


Despite slightly old data, one can make some very good inferences. Between March 2001 and March 2014, the number of employees of the Haryana government went up from 3,19,027 to 3,40,698. This means an increase in jobs at the rate of 0.51% per year, over a 13-year period. This is slower than the rate of population growth.

Interestingly, the total number of people employed by the government of Haryana fell between 2001 and 2004. How do things look if we take March 2004 as the base year? The numbers of jobs grew by around 0.92% per year.

The point being that the Haryana government jobs have been growing at a very miniscule pace. In this scenario, the reservations in governments jobs that Jats have got, is not going to be very beneficial.

In fact, what is valid for Haryana is valid at the country level as well. Take a look at the following table of central public sector enterprises.

Employment Average Annual Emoluments in CPSEs

The number of permanent employees in the public sector was 16.14 lakh in 2006-2007. But by 2014-2015, this had fallen to 12.91 lakh. This essentially means that the public sector enterprises on the whole did not create any jobs between 2006-2007 and 2014-2015. In fact, the number jobs came down by 20%.

Given this, on the whole, reservations did not benefit any caste, when it comes to employment in the public sector enterprises. What is interesting nonetheless is that the average salary of a public sector employee has jumped three-fold in the eight-year period. This essentially means an average increase of around 14.9% per year.

How do things look for the central government employees? On January 1, 2006, the central government had a sanctioned strength of 38.25 lakh. Against this, it had 32.74 employees on its roll. By January 1, 2010, the sanctioned strength had gone up to 38.92 lakh, while the number of employees had fallen to 32.31 lakh.

By January 1, 2014, the sanctioned strength had risen to 40.49 lakh whereas the number of employees had risen marginally to 33.02 lakh. So between 2006 and 2014, the central government basically added around 28,000 jobs.

Let’s look at some more data. Data from the Centre for Monitoring Indian Economy suggests that the number of people working in the public sector in India has come down over the years. This includes people working in the central government, state governments, quasi government bodies and local governments. In 1991-1992, the year the economic reforms were initiated, the public sector employed close to 1.92 crore individuals. By 2011-2012(the latest data that is available) fell to 1.76 crore. So over a period of two decades the number of jobs in the public sector has come down by 16 lakh.

There is nothing that suggests that this scenario has changed between 2011-2012 and now. Given that jobs in the public sector have been coming down, reservation in government jobs, on the whole, can’t be of any benefit.

It only benefits politicians briefly, who try and take credit of having given reservation to a certain caste. But given that the government isn’t creating many new jobs on the whole, reservation as a process of upliftment of certain weaker sections of the society, doesn’t work anymore. Of course, it needs to be said here that Jats do not belong to the weaker section of the society.

Interestingly, the jobs in the organised private sector between 1991-1992 and 2011-2012 went up from 78.5 lakhs to around 1.2 crore. This basically meant an increase of 2.1% per year.

The era when the government created jobs is long gone. Of course, people do not still realise this and given this they demand a reservation in government jobs. The trouble is that the organised private sector is also not creating enough jobs for the 13 million Indians who are entering the workforce every year. As far as the unorganised private sector is concerned, without access to good data, it is difficult to say anything.

Also, it needs to be mentioned here that the Haryana government has created another major problem for the country in the days to come. By giving reservation to the Jats, who resorted to violence while demanding reservation, they have set a precedent. It is more than likely that other well-off communities across the country, might resort to a similar strategy in the days to come.

And this can’t possibly be a good thing.

The column originally appeared on the Vivek Kaul Diary on Equitymaster on May 17, 2016


About vivekkaul
Vivek Kaul is a writer who has worked at senior positions with the Daily News and Analysis(DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System , the latest book in the trilogy has just been published. The first two books in the trilogy were published in November 2013 and July 2014 respectively. Both the books were bestsellers on Amazon.com and Amazon.in. Currently he works as an economic commentator and writes regular columns for www.firstpost.com. He is also the India editor of The Daily Reckoning newsletter published by www.equitymaster.com. His writing has appeared across various other publications in India. These include The Times of India, Business Standard,Business Today, Business World, The Hindu, The Hindu Business Line, Indian Management, The Asian Age, Deccan Chronicle, Forbes India, Mutual Fund Insight, The Free Press Journal, Quartz.com, DailyO.in, Business World, Huffington Post and Wealth Insight. In the past he has also been a regular columnist for www.rediff.com. He has lectured at IIM Bangalore, IIM Indore, TA PAI Institute of Management and the Alliance University (Bangalore). He has also taught a course titled Indian Economy to the PGPMX batch of IIM Indore. His areas of interest are the intersection between politics and economics, the international financial crisis, personal finance, marketing and branding, and anything to do with cinema and music. He can be reached at vivek.kaul@gmail.com

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