ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Some Macro-theoretical Foundations of Jobless Growth

An alternative heterodox explanation of the phenomenon of jobless growth is advanced, involving an interaction between demand and technical change. A mathematical condition is derived whose satisfaction ensures that both a high and low rate of growth of output results in a fall in the rate of growth of organised sector employment. During an output boom, the high rate of growth of labour productivity overwhelms the high rate of output growth, while in a period of slowdown the low or negative rate of growth of output more than compensates for the reduction in the rate of growth of labour productivity, resulting in persistent jobless growth.

The neo-liberal era has been characterised by jobless growth (Patnaik 2007b). In countries at the capitalist periphery, such as India, a period of high economic growth since the 1980s has not been accompanied by an increase in organised sector employment after 1991 (Tejani 2016). Instead, there has been a creation of jobs in the unorganised sector. Unorganised sector jobs are characterised by lower wages, longer working hours, limited social security, more adverse work conditions when compared to jobs in the organised sector (Chandrasekhar 2016). In what follows, jobless growth refers to a process of growth of output where organised sector jobs do not increase significantly.

A neoclassical argument about jobless growth would emphasise that labour market rigidities result in the adoption of techniques that employ more non-labour means of production and less labour. However, this argument is theoretically untenable (Sraffa 1975). Even if other postulates of neoclassical economics are admitted, there need not exist an inverse relation between relative input proportions and relative input prices. Besides, those labour laws that make firing difficult stabilise aggregate demand, output, investment and employment by reducing fluctuations in the wage bill of the economy. In other words, wages are a component of both cost and demand in the economy (Bhaduri and Marglin 1990). Neoclassical arguments in this respect are also contradicted by empirical evidence (Unni and Rani 2008; Kannan and Raveendran 2009; Tejani 2016).

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Updated On : 8th Apr, 2019
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