View: India needs evidence-based policymaking, for which a batch of surveys is being undertaken
There are many important questions in the field of labour markets in India that need evidence for policymaking. The government is committed to uplifting the standard of living of workers and has introduced four labour codes focusing on improving working conditions.
The work of this year’s Nobel laureates for economics – David Card for his ’empirical contributions to labour economics’, Joshua D Angrist and Guido W Imbens, ‘for their methodological contributions to the analysis of causal relationships’ – emphasises the importance of evidence-based policymaking. We have learnt that not only can theoretical models give incorrect predictions, but also that sometimes even if they are correct in the context of advanced economies, they may not be relevant for India.
For efficient drafting of policies, GoI has embarked on an unprecedented data-collection drive in the area of labour. But before we delve into those aspects, let us first understand what the 2021 Nobel winners in economics have told us about the importance of evidence-based policy.
How Card Flipped
Card’s work challenges some universally accepted notions of the way labour markets work. By empirically testing the hypothesis that setting minimum wages or that immigration reduces employment as predicted – and finding that they do not – the work of Card and his co-authors challenged standard economics predictions. The work is important for policymaking because even though the assumptions of the theoretical models on which policy recommendations are made are often far from reality, people accept that the predictions are true.
Earlier, it was believed that relying on models was the only option in economics, as policy experiments are hard to undertake. The genius of the work of this year’s three Nobel prize winners Angrist, Imbens and Card – who worked with Alan B Krueger – was to take observed data and study ‘natural experiments’, or when subjects with similar characteristics have been giving a different ‘treatment’. The empirical methodology developed has allowed economists to study policies that have actually been adopted by governments.
In their 1993 study (bit.ly/31E1s4x), Card and Kreuger looked at the impact of setting of minimum wages high in the US state of New Jersey by comparing it with Pennsylvania, which borders the former state but where minimum wages were not set high. The study found that though New Jersey set the minimum wage at the highest level in the US, it did not witness a decline in employment. The results did not support the predictions of the historical ‘evidence’ that as minimum wages in the US rose, teenage employment rates declined, and so, higher minimum wages were responsible for lower employment. The study showed that a rise in minimum wages did not reduce employment.
There are many important questions in the field of labour markets in India that need evidence for policymaking. The government is committed to uplifting the standard of living of workers and has introduced four labour codes focusing on improving working conditions. To improve upon this effort, GoI planned five surveys to be undertaken by the labour bureau so that benefits of policies percolate down to the grassroots level – all-India surveys on, one, migrant workers; two, domestic workers; three, employment generated by professionals; four, employment generated in the transport sector; and five, an All-India Quarterly Establishment-based Employment Survey (AQEES). These surveys have been developed and designed by the labour bureau, ministry of labour and employment, under the technical guidance of an expert group.
When Numbers Talk
The All-India Survey of Migrant Workers and AQEES were flagged off in March 2021. The first quarterly report of AQEES was released in September, despite Covid-imposed restrictions impacting work to some extent.
These surveys are path-breaking not just in terms of the quantum and novelty of the exercise, but also in the sense that they are following a ‘paperless’ data-collection approach due to the use of tablet computers in the field work. The tablets are equipped with the latest software application, and is likely to reduce the survey completion time by at least 30-40%. In another first, these surveys will be conducted in major regional languages.
The survey on migrant workers is aimed at estimating the number of migrant workers in India, and also to collect information on their living, working and other socioeconomic conditions. The e-Shram portal with over 5 crore registrations will also come in handy in ensuring policies and benefits meant for the migrant workers reach them.
The objectives of the survey on employment generated by professionals are essentially two-fold – one, to estimate the total number of active professionals in the country, and, two, to capture the employment generated by these professionals. The survey to be conducted to assess employment generated in the transport sector will be conducted on similar lines.
The main objective of AQEES is to measure relative change in the employment situation over successive quarters in the sizeable segment of the non-farm economy, covering eight sectors.
These surveys will plug the data gap on various aspects of labour and employment and aide evidence-based policymaking processes.
[This article was first published in The Economics Times and the writer is Bhupender Yadav, Minister of environment, forest and climate change, GoI]