How Good is India’s Employment Situation?

The Economic Survey (2022-23) has painted a good picture of India’s employment situation, arguing that the labour market has recovered beyond pre-pandemic levels, both in supply-side and demand-side aspects. The Survey presents that the unemployment rate declined from 8.3 in July-September 2019 to 7.2 in the same quarter in 2022. It also touts a decline in monthly demand for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) as ‘normalisation of rural economy due to strong agricultural growth and a swift bounce-back from Covid-19’. In this article, we assess these claims of the Economic Survey in the light of recent employment data.

THE NEW NORM OF OVER 7% UNEMPLOYMENT RATE

This is true that the urban labour market experienced a fall in the unemployment rate from 9.6 in July-September 2018 to 7.2 in July-September 2022, as seen in the Table 1. However, there are two considerations to keep in mind before we start chest-thumping of a faster recovery after the pandemic. First, the new norm of over 7 percent unemployment rate since 2018 is worrisome and is much above the historical trend of about 3-4 percent.

Second, even if we consider this fall as a big achievement and faster recovery, the low unemployment rate in our country where the labour market is highly informal (meaning workers are engaged in low-paying low productive employment and do not have social security in their job) shows the vulnerability of workers in doing or accepting any work/job at any wage rate/earnings.

With a great majority of Indian households hit by the pandemic in terms of job loss and income loss, people became increasingly willing to do any work/job and sought it anywhere, as the situation was returning to the normal. The fall in unemployment might show the desperation of people to just be employed.

Source: Quarterly Bulletin of PLFS of several years

A lower unemployment rate might also mean that the people, frustrated and discouraged, have stopped looking for jobs and hence they are no longer part of the labour force. (Labour force includes both those employed and those unemployed). Hence, a better indicator of labour market performance is labour force participation rate (LFPR) – the percentage of the total population either having a job or looking for a job. We find that it is increasing since 2018 (see Table 1). It is only slightly higher in July-September 2022 than the pre-pandemic level of 47.2 in July-September 2020. This is a good sign of the improvement of the economy in pulling the working-age population in the labour market but at a slower pace. What the economy needs now is a faster rate of improvement.

On the other hand, the Economic Survey shows that the LFPR in urban areas is slightly lower in 2020-21 than in the pre-pandemic year 2019-20, thus suggesting that the urban India is only slowly picking up. While male participation rate has remained unchanged in both rural and urban areas, the female labour force participation rate has increased in both areas.

The Survey has unequivocally welcomed the rising female participation rate; however, it does not necessarily mean an improving labour market condition for females. The rising female labour force participation in India and more so in rural India may be distress-driven. Under conditions of distress and destitution, when the income level falls below sustenance, then normally the non-working population is forced to work to supplement the household income.

EMPLOYMENT WILL WORSEN IN FUTURE

We have yet another piece of evidence on country’s employment situation. This comes from the recently concluded bi-monthly Consumer Confidence Survey (CCS) of the Reserve Bank of India for the month of January, 2023. The CCS obtains current perceptions (vis-à-vis a year ago) and one year ahead expectations on general economic situation, employment scenario, overall price situation and own income and spending across 19 major cities.

We report, for our purpose, only the findings on consumer’s perception on employment situation in the Table 2. One half of the surveyed consumers still hold the perception that employment situation in the country has worsened, and almost 30 percent (not reported in the Table) perceives that future outlook a year ahead will further worsen.

Source: Consumer Confidence Survey conducted by Reserve Bank of India during January 2 -11, 2023.

JOB LOSS IN REGULAR SALARIED EMPLOYMENT

Any discussion on employment situation will be incomplete without talking about the quality of employment. In developing countries like India, much of the problem of employment actually relates to the quality aspects of it. For the sake of brevity, we examine the quality of employment across three broad categories of job viz. self-employment, regular salaried employment, and casual employment. The second category is generally considered a somewhat better employment; they are at least paid better than casual workers, though even in this category, a high proportion of workers does not have any social security such as written contract, provident fund, paid leave, etc. We present the relevant data in the Table 3.

Source: Quarterly Bulletin of PLFS of several years

A first glance at the above Table reveals to us that the percentage of regular salaried people and casually employed has been declining since 2018. While decreasing casual employment points to the increased vulnerabilities of poor low-educated workforce in finding even a day’s employment, the reduction in regular salaried employment reflects the general slack in urban industrial and services sector in creating jobs.

The self-employment in urban India is on continuous rise; this actually reflects that those who are losing out in regular and casual employment are trying to get absorbed in the low, productive informal and petty self-employment to at least make a living. Though not reported here, the regular employment of female workers has also declined in urban areas.

EMPLOYMENT SITUATION

The employment situation in India is not as good as the Economic Survey boasted off. What is most worrying is the new norm of over 7 percent unemployment rate. The high magnitude of unemployment rate in developing countries like India reflects a very grim situation of the economy and its failing ability to absorb the growing workforce in some kind of employment, let alone a better quality of employment.

[The writer is Assistant Professor, Department of Economics, Mirza Ghalib College, Gaya, Bihar]