Moneycontrol | Reservation For Locals: Whither jobs, economic freedoms, and economic unity?

It is both easy and tempting to dismiss the entire saga of the reservation of jobs for the locals in Haryana as one of misplaced policy action duly corrected by the judiciary. It could even be tempting to celebrate the strength of the checks and balances present in the Indian Republic. Briefly, to set the context, the Haryana government, acting on the election promise of the current Deputy Chief Minister Dushyant Chautala, passed the Haryana State Employment of Local Candidates Act, which came into effect in January 2022. The law mandates that all private employers in the state must reserve three-fourth of jobs paying less than Rs 30,000 a month for local residents. Read the full article here.

What Explains the High Demand for Low Paying Government Jobs?

My hypothesis is that this can be explained by three factors:

1. The number of private jobs available is obviously too few. Job creation has stagnated and even receded in the private sector. Thus, the industry does not have the capacity to absorb a large number of graduates and post-graduates who are passing out of the system. Since the supply of labour far outstrips the demand for labour, employees have increasingly stringent qualification requirements. Only the best of the lot get a good, high paying job in the private sector.
2. There is also an obvious skills mismatch. A lot of the students who pass through the Indian education system are not as qualified as their degrees tend to signal. A typical Post-Graduate often has the skills of a person who has passed the 12^th grade and thus, cannot obtain or at least retain a high paying job which would require the skills of a Post-Graduate (One report, for instance, finds that nearly 80% of the engineering graduates in India are unemployable as their skills set do not match the requirement of the industry). What further complicates this issue and turns it into a vicious cycle is the fact that a lot of individuals end up studying due to the lack of job opportunities. These are students who enter into an educational programme solely due to the signalling value and to differentiate themselves from the nearest competitors. However, while the degree gained has some signalling value, the skills gained are inadequate for industry standards.
3. A person who has gained a degree but not the appropriate skills cannot get a job in the private sector which will assure a reasonably high salary and job security. The private sector option is typically a low paying job, which can be lost at any time and with no benefits. Given this scenario, a government job that is assured of job security, even at the cost of a lower salary seems attractive.

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