Headline labour force survey data masks a pressing employment problem

Headline labour force survey data masks a pressing employment problem

Last week, the National Statistical Office (NSO) released the Periodic Labour Force Survey (PLFS) for 2023-24. This report, the seventh in a series of annual reports, was released just three months after the survey’s completion, unlike the first one, which took almost a year. 

For urban India, the NSO has regularly been releasing PLFS quarterly reports, although data for rural areas is available only as part of the annual reports. 

Recent media reports suggest that the NSO is likely to release unemployment estimates at a monthly frequency for both rural and urban areas. Timely data would be welcome.

But what does the data tell us about the state of India’s economy? Much of the labour market discussion has been restricted to broad estimates of India’s unemployment rate and net job additions. 

This may suit developed economies, but not India’s. Given that a large proportion of our workforce is employed in informal jobs, on low pay, estimates of job creation and unemployment could be misleading.

Preliminary estimates from the 2023-24 round of the PLFS suggest an increase in India’s workforce from 563 million in 2022-23 to 607 million in 2023-24. This rise, while unprecedented, is part of a trend observed since 2017-18, when the PLFS series began. 

Since then, 149 million more people have joined the workforce. The broad estimates of unemployment suggest a sharp decline in joblessness rates since 2017-18 in both rural and urban areas and for males as well as females. All this may suggest that our economy has been generating jobs satisfactorily.

Yet, it is not just premature but also unwarranted to conclude that India has no labour-market problem. The fact that job generation was a key focus area of this year’s Union budget tells us that dissatisfaction over job availability is a significant national concern.

Clearly, our employment statistics deserve closer attention. An in-depth look suggests a deep structural problem. First, India is undergoing a reversal of the structural transformation that is expected of an emerging economy like ours. 

Unlike the period from 2004-05 to 2017-18, when employment in agriculture declined by 66 million, the subsequent phase saw it swelling by 68 million. 

Not only has the entire gain of our workforce moving away from less-productive farming towards better jobs been wiped out, the workforce in agriculture is now at a historic peak.

One consequence of this has been a decline in per-worker productivity in agriculture, with the income from cultivation per worker showing a real decline since 2017-18, despite a rise in production.

Second, much of the 44 million-odd expansion in the workforce reported by the latest PLFS has been in rural areas, where distress remains visible and has worsened over the years. 

Between 2017-18 and 2023-24, three-fourths of our workforce increase has been on account of more women working and individuals working in rural areas, in agriculture, or as self-employed and unpaid family workers.

Why is agriculture absorbing so many workers when the rural economy has been in distress? The net sown area in this sector has declined over the past decade, while increased mechanization has reduced labour requirements. 

Yet, farming is absorbing not just new entrants to the workforce, but even those who are displaced from other sectors. At the same time, the proportion of workers in the manufacturing sector has steadily declined since 2017-18.

While it is too early to suggest any de-industrialisation underway from a labour-market perspective, it is likely that financial distress has driven people back to farms, where remuneration is low. 

With agriculture a refuge for all those unable to find employment elsewhere, the crisis in India’s agrarian economy is only going to get worse. A close look at the data also confirms declining earnings among regular workers and deteriorating employment conditions.

The PLFS report is a timely reminder that our problem is not one of jobs or unemployment per se, but of earnings and the quality of employment. 

With most workers earning less than even government-specified minimum wages, the government’s focus should not just be on creating more internship opportunities and contractual jobs, but on improving economic conditions so that secure, regular and remunerative jobs are widely available.

India’s employment challenge is not about broad headline numbers, but about the fine details of how financially comfortable our workers are.

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