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Earlier this week, India’s ministry of statistics and programme implementation released the annual report of the Periodic Labour Force Survey (PLFS) for the reference period July 2020 to June 2021. This is the fourth report in the PLFS data series and offers information on both employment and unemployment for rural as well as urban areas. Preliminary analysis from the 2020-21 round survey indicates a rise in the number of workers in the Indian economy, with the total number of workers (by usual status) at 539.5 million, as against 513.3 million in 2019-20. Of the total increase in the number of workers, i.e. 26.2 million, its count of male workers rose by 10.8 million while female workers increased by 15.3 million.

These increases are in line with the trend seen in earlier PLFS reports, with successive rises found in the number of workers every year since the PLFS began in 2017-18. The annual survey’s increased count of workers was accompanied by a decline in the overall unemployment rate, with joblessness found to have fallen for every group, be it rural or urban or male or female, as well.

Going by the broad numbers, these estimates suggest a sharp recovery in employment creation in our economy, with an accompanying decline in unemployment. But any such interpretation could be misleading, given the complexity of interpreting employment estimates. More so in periods of severe distress, such as the current phase of the economy. Not only did our economy suffer a sharp slowdown after 2016-17, with growth slumping from 8.3% that fiscal year to 3.7% in 2019-20, the two years after 2019-20 have been years of disruption in economic activity due to the pandemic, with our economy yet to fully recover from it. So much so that per capita income of Indians was lower in 2021-22 than in 2018-19. Data on rural wages from India’s labour bureau also shows a decline in real wages of casual workers during the same period.

In fact, an increase in employment during periods of distress in an economy like India is a known feature. This happened between 1999-00 and 2004-05, when the number of workers increased by 60 million even though this was clearly a period of extreme distress. Households that suffer a decline in income generally tend to increase their earnings by pushing the surplus labour available with them. The sharp increase in female employment suggests such a process. This is also true of the younger age group and elderly, as seen in the rise in work participation among these groups.

Another piece of evidence in this regard is the reversal of a trend of the economy’s structural transformation involving the movement of workers away from agriculture. The Indian economy had witnessed a structural shift that accelerated in the mid-2000s, with the absolute number of workers in farming found to have declined by 66 million between 2004-05 and 2017-18. Since then, the farm count has increased by 43 million, reversing that process of transformation. This is not just a worrying sign as far as the structure of employment in the economy is concerned, but also confirms a distress-induced increase in employment witnessed in India.

In an economy with a significant share of poor and vulnerable people, unemployment is a luxury that very few can afford. The natural choice for them is to get into the labour force at whatever cost. This is more of a survival strategy than a natural increase in gainful employment. But a large proportion of such employment is likely to be in the informal sector, with precarious work conditions. Recent data confirms this trend, with the proportion of India’s working population employed in the informal non-farm sector having increased steadily from 68.2% in 2017-18 to 71.4% in 2020-21.

Along with that increase in the country’s count of workers in agriculture, which is entirely informal, recent estimates suggest a process of informalization of the workforce, as against the claim of increasing formalization based on worker registration. While the share of regular workers who generally enjoy a better quality of employment has seen a decline during this period, they have also seen a deterioration in work conditions. The percentage of regular workers who do not get any social security benefit increased from 49.6% in 2017-18 to 53.8% in 2020-21. The desperation to get any regular job even without social security benefits has, however, not led to an increase in the monthly earnings of regular workers. Their wages in 2020-21 are lower in real terms compared to 2017-18 in every quarter, confirming the decline in real wages of casual workers noted by the labour bureau.

Estimates of employment and India’s workforce structure clearly point towards a structural retrogression and decline in employment quality. Along with a decline in earnings from employment, recent estimates only confirm the severity of distress in the economy. Unlike an economic recovery in terms of growth, a retrogression in the employment structure cannot get reversed immediately. This has an impact on people’s medium- and long-term earnings, employment and work conditions. Reversing these trends would require an enabling policy framework to enhance employment quality as well as an economic revival that creates gainful and decent jobs for new entrants to the country’s workforce and for those who are engaged in the informal sector.

Himanshu is associate professor at Jawaharlal Nehru University and visiting fellow at the Centre de Sciences Humaines, New Delhi

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