Goa has recorded a high unemployment rate in the past quarter with CMIE reporting a 15.5% unemployment rate in April, and while the State government’s response to this economic problem has been ‘atmanirbhar’ emphasising on self-employment, it shows a clear fallacy in government policies. This response of self-reliance and making jobs for oneself is the easy way to abdicate oneself of responsibility of providing jobs.
The mere existence of government is to ensure welfare in the market in the presence of market failures. Goa, with its high literacy rate, and improving infrastructural facilities, is facing a conundrum in the labour market. Goa has been reported as a high performer in terms of knowledge capital in the Niti Aayog Innovation Index. Knowledge capital indicates tertiary level of human capital, the human capital necessary for driving service led growth. Ideally, these factors of good human capital, good infrastructure should lead to more employment, but surprisingly the Goan labour market is not responding to these factors. This is a classic case of “coordination failure in the labour market” and the only player that can resolve it is the government. Let’s take an example to explain this; assuming a group workers in an economy with identical productivity levels will find it easier to increase output of effort only if each and every worker does so.
Each worker’s choice depends on the level of effort of the other workers. Therefore, if none of the workers work hard, then an individual has no incentive to work. This coordination failure also exists between firms and employees.
The situation where neither employer invests in skills of firms invest in a region is known in economics to be low equilibrium and only a high equilibrium where both entities take complementarity beneficial decisions is where all entities are better off.
This is ideally the situation in Goa, where lack of employment providing firms have no incentive to invest, and the workforce has no incentive to invest in upskilling. Therefore, the government before proffering the solution of creating a job for oneself needs to ensure that workers have sufficient savings and thereby sufficient capital to invest, sufficient ease in the regulatory and legal procedures to start up a firm. But in Goa, in terms of regulatory procedures and ease of doing business, there has been a drop in rankings from 21 to 24, in the index published by the RBI. This lack of poor technical skilling coupled with complex legal procedures deter firms from making investments. The government has marginally increased budgeted expenditure on university education to 18.36% in 2018-2019 from 18.30% in 2017-18.
Systematic targeting of funds, increase in spending on vocational education, introduce reforms suggested by the Department for Promotion of Industry and Internal Trade (DPITT) in Business Reform Action Plan, bring about reforms in legal and business environment should be the long-term goal of the government to tide over this crisis.