Clearly, we need efficient clearing houses. Isn’t that what employment exchanges are supposed to do? Not quite. First, the system started (in 1945) because of the need to resettle demobilised defence service personnel and later (1948) displaced persons from Pakistan. Second, the mandatory Employment Exchanges (Compulsory Notification of Vacancies) Act of 1959, applicable to public sector and private sector units that employ more than 25 people, isn’t as compulsory as you might think. For the private sector, court judgments allow appointments other than through employment exchanges and, for the public sector too, there are alternate recruitment channels. The labour ministry’s website tells us: “Therefore Employment Exchanges are left with only stray cases that too at the lower levels of employment. Therefore in the placement side (regular wage employment) the role of Employment Exchanges is definitely going to be not very significant.”

You can’t be more honest than that. In August 2007, the National Commission’s report stated: “A few workers said they had registered at the Employment Exchange where they received unemployment allowance of Rs 50 per day. But they stopped going to the Exchange since it costs them Rs 80 each day to reach there.” The apparent attraction of employment exchanges is that they are free. Private placement agencies charge and the labour ministry’s website also tells us that these private ones may be fraudulent, besides being city-centric.

We will come back to that point. But what do the 947 employment exchanges (82 are physically located in universities) do? There will be a song and dance about the training services they provide. That deserves a separate column. However, as of December 31, 2007, 39.97 million were registered with employment exchanges to seek jobs. As far as employment exchange performance is concerned, in 2006, 177,000 got jobs through employment exchanges and 7.3 million registered with employment exchanges. To reinforce the spatial point made earlier, most placements were in Gujarat and most new registrations in UP (with most of the backlog in West Bengal). Administration and expenditure on employment exchanges is now a state subject, an earlier matching grant from the Centre having run its course. Hence, it is difficult to get data on expenditure on employment exchanges, though it must be floating around somewhere in state government budgets. A back-of-the-envelope computation with budgets from four states suggests that, each job through an employment exchange, costs the government (and therefore, citizens) Rs 3 lakh. Is this efficient usage of scarce public funds and equally scarce infrastructure in those 947 exchanges? Isn’t it better to close them down and hand over management to the private sector, including for training? If this is accepted for ITIs, why not for employment exchanges as well?

... contd.