Opinion
Indian employment data generates both misconceptions and puzzles
Summary
- Data shows that the youth has seen the largest addition to the number of workers relative to its population, which counters a narrative of dwindling jobs for them. Trends like rising female work participation need study, though.
The recent release of the Periodic Labour Force Survey (PLFS) for 2022-23 has generated a considerable measure of interest and commentary, some of which has appeared in this newspaper. Reading these reveals that improvements in data can only be useful if they are accompanied by a better understanding of statistics. To paraphrase an exchange from an old British sitcom, with statistics you can prove anything, even the truth.
In today’s column, we will explore some of the common misconceptions which arise when reporting on employment, as well as some puzzles which would require deeper research.
There are three principal ratios which are used in discussions of labour-market conditions, namely the labour force participation rate (LFPR), workforce participation rate (WPR) and the unemployment Rate (UR). If during the specified reference period, the person is working or otherwise engaged in economic activity for most of the time, then he is presumed to be employed. Further, if not employed as above but still making tangible efforts to seek work, then the person is classified as unemployed. If not engaged in economic activity (work) and also not available for work, then s/he would be classified as not being in the labour force. From these, we derive the workforce participation rate, which is the number of workers as a proportion of the total population. The count of workers plus the unemployed defines the labour force, which is also expressed as a percentage of the population. The unemployment rate refers to the unemployed as a proportion of the labour force.
In using these numbers, we need to keep in mind that the absolute magnitude is determined also by the population of the relevant group. Some of the misconceptions arise when these basics are not kept in mind. Since the last census, when our population was approximately 1.2 billion, our population is estimated to have risen to a little over 1.4 billion in 2023. Thus, the denominator in both WPR and LFPR has risen significantly.
One common misconception that arises as a consequence is from the percentage of people with a regular salary having declined from 22.8% in 2017-18 to 20.9% in 2022-23. This seems like a drop, but when we combine this with population numbers, we see that the number of workers in this category increased by almost 15 million in the same period. Thus, a decline in the share of regular-wage jobs does not mean that the total number of jobs in this category has fallen. As the numbers cited show, it is the reverse.
Similarly, there has been some comment on India’s high unemployment rate among the youth. The PLFS 2022-23 shows an unemployment rate of 10% in the age group of 15-29 years, as compared to an unemployment rate of 3.2% across all age groups. This, of course, is an important difference, but it should be noted that the unemployment rate in the age group of 15-29 has seen a very sharp decline from 17.8% in 2017-18. Further, the WPR in this age group has increased from 31.4% in 2017-18 to 40.1% in 2022-23. This implies an additional 35 million people have found work, even though the population in that segment has increased only by 17 million. The implied narrative of dwindling job opportunities for the youth is not borne out by the data. Instead, this age group has seen the largest addition to the number of workers relative to its population.
Another issue which comes up in many discussions is a comparison of PLFS numbers with our employment/unemployment data from 2011-12. To put this criticism in perspective, it may be useful to refer to the graph alongside, which shows the WPR from 1978 till 2023. This representation of WPR both puts the criticism in perspective and also raises some interesting puzzles relating to the employment situation in India.
While the WPR in 2017-18 is lower than in 2011-12, this simple comparison ignores a steady decline since 2004-05. If we zoom out to look at a longer time frame, the period between 1999-00 till 2004-05 itself marks a recovery in contrast to a secular decline in this ratio since 1978.
An assumption is often made that 2017-18 was the lowest point in the WPR, but it could have been earlier. What is known, however, is that the PLFS data thereafter shows a sustained increase in spite of major disruptions caused by covid.
What is interesting is India’s steady improvement in women’s participation since 2017-18. The urban women’s WPR is at an all-time high of 18.7% in 2022-23, having seen a sustained increase since 2018-19.
What is even more interesting in the long time series is a striking change in rural women’s workforce participation post-2017, compared to the long decline seen since 1978. The rural female WPR in 2022-23 is 30, which is comparable to this ratio in 1999-00 (29.9) and slightly lower than the figure in 2004-05 (32.7). There have been numerous explanations for this secular decline, but the reversal in trend after 2017 has not been adequately analysed. A good place to start would be a recent analysis by chief economic advisor V. Anantha Nageswaran and Indian Economic Service officer Deeksha Supyaal Bisht published in this paper (bit.ly/3HkG1Y3). The different behaviour between rural and urban women would also need careful explanation.
