Situated at the extreme end of the country, and being a mountainous region with a very large population base, has serious locational disadvantages in terms of high input cost and lack of market access having untold hardships on account of negative perceptions, have negatively impacted the investment scenario that deprived the populace from multiplier advantages which created the “Heat of Unemployment” rather the prevailing system has caught Jammu & Kashmir in an Unemployment Trap which would lead economy into vicious circle of poverty in the decades to come.
Nevertheless, in Jammu & Kashmir unemployment resulted from the elastic(high wages rates i.e., 6th pay, 7th pay……..nth pay……..allowances etc.) nature of wage structure which created the volatile crisis situation in the labour market – means left lakhs (6,02,979) of people unemployed on the one hand and cost push inflation on the other and therefore, if all the policy measures and interventions would be taken together to adjust the equilibrium path in the labour market by making the reduction in wage rates(money wages), will surely lead the Jammu & Kashmir in the long run path of full employment level that will automatically reduce the inflation and unemployment level up to the large extent.
In simple words, I mean to say, that wage rate of all the government employees from ‘Karamcharies to Bureaucrats’ should be curtailed down from an immediate effect which could be the long-run solution for unemployment in Jammu & Kashmir because it will decrease the income inequality rather will streamline and rationalize the whole economic system as it will save huge budget that will help to fill the gap of unemployed. However, recent announcement of the government to provide allowances to all government employees is not a good sign for development rather it will increase more inflationary gap in the system that will create more unemployment. However, my model is totally against to the classicals (rigidity of wages and not government interventions) and Keynesian (increase the wage rates) model of employment because their model is purely based on the Industrial Economies of the World which could not be applicable in the economy like Jammu & Kashmir which is an agricultural and conflict one, so it is being felt that this model(my model) will be suitable to minimize the heat of unemployment in J&K for the long run. In a symbolical terminology, say point E is the point of full employment (N1) and the real wage W/P at which full employment is secured in Jammu & Kashmir.
Henceforth, if the real wage will be maintained at a higher level W/P1, supply exceeds the demand for labour by ML and N1N2 labour would get unemployed. Therefore, if wage rate will be reduced to W/P, the Heat of Unemployment would get vanished and the level of full employment will be attained where marginal productivity of labour (MPL) curve slopes downwards as more labour is employed. Since, every worker will be paid wages equal to his/her marginal product(fig), therefore, the full employment level N2 will be achieved when the wage rates curtails from W/P1 to W/P. Thus cut in money wages, the real wages will also get reduced to the same extent which will reduce the “trap of unemployment” and ultimately brings full employment in Jammu & Kashmir given the assumption that prices are proportional to the quantity of money and it is being argued that in “Jammu & Kashmir Economy” a reduction in the money wage reduces the cost of production and prices of products thereby raising their demand. In order to meet the increased demand for the products, more workers would be employed to produce them given the capital stock and technological knowledge.
Hence, the aforesaid “Employment Model for J&K” is fit to adopt as a policy measure to cripple down the unemployment syndrome in long run from the face of Jammu & Kashmir which is rather a simple opinion rather a suggestion to the government. Therefore, addressing this model, all efforts need to be made to put Jammu & Kashmir back on the confidence map of the country and situations need to be factored in the largest development model that will minimize the unemployment.
Dr. Mohammad Ibrahim Wani is Post Doctorate Fellow, Economics, CCAS, University of Kashmir. ( firstname.lastname@example.org)