In India, government jobs pay far more than equivalent jobs in the private sector \u2014 so much so that the entire labor market and educational system have become grossly distorted by rent-seeking to obtain these jobs. Teachers in the public sector, for example, are paid at least five times more than in the private sector<\/a>. It’s not just the salary. When accounting for lifetime tenure, generous perks, and potentially remunerative possibilities for corruption, a government job’s total value can be up to 10 times that of an equivalent private sector job<\/a>. (See also here<\/a>.)<\/p>\n As a result, it’s not uncommon for thousands of people to apply for every government job \u2014 a ratio far higher than in the private sector<\/a>. In one famous example, 2.3 million people<\/a> submitted applications for 368 “office boy” positions in Uttar Pradesh.<\/p>\n The consequences of this intense competition for government jobs are severe. First, as Karthik Muralildharan<\/a> argues, the Indian government can’t afford to pay for all the workers it needs. India has all the laws of, say, the United States, but about one-fifth the number of government workers<\/a> per capita<\/em>, leading to low state capacity.<\/p>\n But there is a second problem which may be even more serious. Competition to obtain government jobs wastes tremendous amounts of resources and distorts the labor and educational market.<\/p>\n If jobs were allocated randomly, applications would be like lottery tickets, with few social costs. Government jobs, however, are often allocated by exam performance. Thus, obtaining a government job requires an “investment” in exam preparation. Many young people spend years out of the workforce studying for exams that, for nearly all of them, will yield nothing. In Tamil Nadu alone, between one to two million people apply annually for government jobs, but far fewer than 1% are hired. Despite the long odds, the rewards are so large that applicants leave the workforce to compete. Kunal Mangal estimates that around 80% of the unemployed in Tamil Nadu are studying for government exams<\/a>.<\/p>\n Classical rent-seeking logic predicts full dissipation: if a prize is worth a certain amount, rational individuals will collectively spend resources up to that amount attempting to win it. When the prize is a government job, the “spending” is not cash, but years of a young person’s productive life. Mangal calculates<\/a> that the total opportunity cost (time out of the workforce) that job applicants “spend” in Tamil Nadu is worth more than the combined lifetime salaries of the available jobs (recall that jobs are worth more than salaries, so this is consistent with theory). Simply put, for every \u20b9100 the government spends on salaries, Indian society burns \u20b9168 in a collective effort of rent-seeking just to decide who gets them.<\/p>\n![\"\"](\"https:\/\/quotulatiousness.ca\/blog\/wp-content\/uploads\/2024\/04\/Flag-of-India-Wikimedia-Commons-480x320.png\")
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