Slowing economy may be forcing more urban youth to withdraw from labour market

More working age urban Indians, especially the youth, are withdrawing from the labour force, according to the latest quarterly periodic labour force survey by the statistics department for March quarter of 2019.

The Labour Force Participation Rate (LFPR), defined as the share of working age population (15+) that are either employed or looking for jobs, declined to 46.5% in March quarter from 46.8% in December quarter. LFPR for the urban youth (15-29 years) declined at a sharper rate to 37.7% in March quarter from 38.2% in December quarter.

PLFS was launched by the Ministry of Statistics and Programme Implementation with the objective of analyzing the employment scenario every three months in urban areas and once a year in both rural and urban areas. At the all India level, LFPR in the age group of 15-29 years, has been declining and touched 36.9% in 2017-18.

A rapidly slowing economy which grew at 5% in June quarter, a six year low, may be creating less number of jobs, possibly forcing many to opt out of the labour market. In September quarter, data for which will be released later this week, the economy is expected to have slowed further below 5%. This is likely to raise questions about whether India is suffering from jobless growth. According to Census 2011, India has 333 million youth—a number that is likely to touch 367 million in 2021 and 370 million by 2031.

For a developing country like India, LFPR is considered to be a better metric to analyse labour market trends rather than unemployment rate which is the percentage of the labour force currently unable to find any job. Urban unemployment rate which rose to 9.9% in December quarter moderated to 9.3% in March quarter, according to the latest PLFS. For urban youth (15-29 years), unemployment rate declined to 22.5% from 23.7%, yet indicating that more than one fifth of urban youth looking for jobs remain unemployed.

The LFPR has traditionally remained low for females which has puzzled economists. Many attribute it to growing income level of families which no more force women to take up low-paying jobs, especially in rural India while others argue that there are lesser number of job opportunities available to women, forcing them to stay at home. LFPR for urban women (15 years and above) further declined in March quarter to 19.1% from 19.5% in December quarter, while LFPR for urban men, also fell to 73.4% in March quarter 73.6% in December quarter.