What India’s labour force survey actually says about employment

Photo: Mint
Photo: Mint


The survey has indirectly revealed deeply entrenched problems related to the quality of jobs being generated in the country

The Periodic Labour Force Survey (PLFS) 2019-2020, released by the Indian government recently, in its summary findings, offers a credulity-stretching picture of a decline in the unemployment rate between 2017-18 and 2019-2020, together with an increase in the Labour Force Participation Rate (LFPR), even as the real growth rate of the economy slipped. Thus, the PLFS reports a reduction in the usual- status unemployment rate from 6.1% in 2017-18 to 5.8% in 2018-19 and further to 4.8% in 2019-20, and a corresponding increase in the proportion of people participating in the country’s labour force (the LFPR, that is) from 36.9% to 37.5% and then further to 40.1% in 2019-20. These positive trends have occurred amid a decline in the economy’s real growth rate from 7% to 4.2% over that period. Thus, from a paradox of jobless growth in the past, India seems to have come full circle with ‘growthless employment’!

How can one reconcile the puzzle of weak growth going along with a rise in labour-force participation and/or a reduction in unemployment? And what of the quality and nature of the (un)employment?

A careful study of the 721-page Annual Report of the PLFS may yield answers to this puzzle, besides pointing to disturbing trends setting in even before the covid pandemic arrived.

One, as growth dipped in India, the proportion of rural households reporting themselves as ‘self-employed’, especially in non-agriculture, went up at the cost of regular wage earning/salaried households. Eight states, including populous ones like Uttar Pradesh, have more than 70% of people reporting themselves as self-employed, following the current weekly status (CWS) approach. Among urban households, meanwhile, the proportion of casual labour increased. But aside from these changes, both in rural and urban areas, households that did not earn any income from economic activities, classified as ‘others’, constitute a high proportion of the total: 9.1% in rural India and 14.7% in urban areas. In terms of occupational divisions, the proportion of people reporting themselves in ‘elementary occupations’ is only the second highest to skilled agriculture and fishery workers.

Two, the usual-status unemployment rate of 4.8% masks the differential impact of unemployment among genders, age groups and educational status groups. The PLFS reports an unemployment rate among urban females at 8.6% as almost double the national rate. The impact of India’s dip in growth together with the pandemic on employment of transgenders and non-binary community members may be far worse, which is not captured by the PLFS separately as of now. (Transgender employment is currently reported for urban areas along with that of males using the CWS approach). The unemployment rate among youth in the 15-29 age group is 15%, with urban male and female joblessness rates in this age group even greater, at 18.2% and 24.9% respectively.

Three, the structure of our employment suggests deep disturbing trends. The proportion of the urban workforce dependent on services has gone up from 69.3% to 71.8% over 2017-18 to 2019-20. The proportion of the rural workforce in agriculture has gone up from 59.4% to 61.5% over the same period. Such trends suggest an overall increase in workforce distress, with many falling back on agriculture or taking up low-paid service sector jobs with the dip in India’s gross domestic product growth. Workers employed in the manufacturing sector have reduced from 12.1% to 11.2%.

The data also suggests an unsurprising correlation between employment and consumption, with employment among those consuming the least (i.e., in the lowest decile of monthly per capita consumption expenditure) being the lowest. However, the proportion of those employed among the top decile of the population is greater than those among the lowest decile by more than 10.5 percentage points, suggesting extreme inequity in employment, leading to consumption inequities.

Four, while the unemployment rate itself has declined, the Worker Population Ratio (defined as the proportion of employed persons in the population) and the LFPR together provide a sense of the potential labour force in India, serving as a measure of labour under-utilization. Simply put, 60% of our population is not available to our labour force, and only 38.2% of our population is employed. China stands in stark contrast on this yardstick, with about 66.8% of its labour force actively employed or seeking employment and 63.5% of its population employed in 2020.

Fifth, the reference period of one year that is used by the survey’s usual-status measure of unemployment provides an unduly optimistic picture of the unemployment numbers. Within the PLFS itself, the unemployment reported using the CWS approach is much higher, at 8.5 % for the period July 2019 to March 2020. In the quarter from April to June 2020, this unemployment rate shot up to 20.9%.

The PLFS survey 2019-20 has revealed deeply entrenched issues pertaining to the quality of employment being generated in India. More importantly, it has shown how current measures of capturing unemployment may be woefully inadequate in assessing the magnitude of the joblessness problem in India and the true extent of labour under-utilization.

Tulsi Jayakumar is professor of economics at Bhavan’s SP Jain Institute of Management & Research.

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