Kerala 2005 - of Planning Commission

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In more recent years, however, one observes a turnaround
in this narrative. Several studies have now come up with the
observation that growth has not completely eluded Kerala
after all. 17 Kerala may no longer be considered a ‘relatively
poor State’, if one compares its per capita income with the
all-India average. Kerala’s per capita net domestic product
has been above the all-India average since 1994-95, and
despite similar rates of aggregate growth, it has been
growing faster than the all-India rate – thanks largely to the
low rate of growth of population. The pattern of sectoral
composition of output too has changed in the 1990s,
increasingly more towards the tertiary sector that now
accounts for over half the State gross domestic product.
High service sector growth may be seen as facilitated by high
human development achievements. This, however, has not
been given the attention that it deserves, perhaps because
of the predominant view that services are not 'productive'.
It is high time we acknowledged that “many services play
a far more important role in the development process than
is indicated by their direct contribution to GDP. Due to
inter-linkages with other activities several services... can
dramatically affect the overall development performance
of countries." 18 Moreover, "if the overall economy is
performing well despite the lag in manufacturing growth on
the basis of the remarkable growth rate of the service sector,
it is logical to re-read the old paradigm of industrialisation
based on manufacturing and form a new vision on the
direction and pattern of industrial development of Kerala." 19
What has been viewed with more or less the same level of
concern as before, if not more, is the problem of a growing
number of the educated unemployed.
An unpacking of the dynamics of the rapidly growing service
sector, along with what we discussed earlier, supports our
basic intuition that there must be complex linkages between
early achievements on the human development front,
people seeking opportunities in labour markets outside
Kerala, and remittance-driven growth in consumer demand
providing considerable impetus to service sector growth.
But what explains the phenomenon of growing educated
unemployment? Even though the unemployment problem
does not belong to the core of the human development
paradigm, an understanding of the linkages between
growth and human development (refer Chapter 5) cannot
be accomplished without an understanding of the problem,
specifically in the Kerala context.
3.2 Unemployment and Emigration
There has been growing literature on emigration from
Kerala and its impact on the economy of the State.
Empirically estimating the total impact of migration
is a difficult task. Nevertheless, some commendable
attempts have been made in this direction 20 (see Chapter
3). Here, we make an attempt to relate analytically the
education system, migration and unemployment, and
we argue that there might be some structural links
between them.
Unemployment, undoubtedly, is the most serious form of
capability failure in Kerala. The issue is discussed in detail
in Chapter 7 as an ‘area of concern’. Of those registered in
the Employment Exchanges, 80 per cent have education
at secondary level and above. We argue here that in the
Kerala context, there are some connections between the
welfarist interventions and unemployment.
The impressive quantitative expansion of education
has brought about a series of interrelated benefits to
the people of Kerala. The argument that health benefits
and positive demographic changes are related to the
universalisation of basic education is now commonplace.
However, educational expansion has led to a mismatch
between the aspirations of the new entrants to the labour
force and the requirement of the labour market for hands
to fill relatively unskilled, low productivity jobs. The
truth is that given the structure of the economy, Kerala
simply cannot absorb a majority of the new entrants
to the labour force who have SSLC and higher level of
education. There is a glaring mismatch between people’s
expectations arising from educational qualification and
the economy’s ability to provide not just gainful but
deserving employment.
One might think that the excess supply of educated
people would force the educated to accept any job after
a while and drive down the wage differential between
the educated and the uneducated. However, the level
of wages in the formal/organised sector, where most of
the educated end up, is still determined by a variety of
institutional factors. In terms of a schematic model, one
can draw some logical inferences, the importance of
which is not readily discernible in our policy discussions.
Here is a sketch:
17 For example, see Subramanian and Azeez (2000); Ahluwalia (2002); Pushpangadan (2003); Jeromi (2003); and Kannan (2005).
18 UNCTAD (1984).
19 Subramanian and Azeez (2000).
20 Kannan and Hari (2002); Krishnan (1994).