The Job Gap

Context: Decline in the unemployment rate, as demonstrated by the recent Periodic Labour Force Survey (PLFS), is based on a statistical approach that masks the deterioration in the quality of employment on the ground.

Highlights of PLFS

• A decline in the unemployment rate from 5.8 % in 2018-19 to 4.8 % in 2019-20.
• This fall in the unemployment rate from the 45 year high of 6.1 % as reported in the first PLFS (2017-18) is indeed a respite.

Issues with Employment and its estimation:  The decline in unemployment presents a different picture.

• Overestimation of under-employment: The data are based on the “usual status” approach wherein the activity status of a person is captured for a reference period of 365 days preceding the date of the survey.
• In developing countries, where casual and intermittent work and part-time and temporary jobs are widespread, employment estimates based on this approach tend to include the under-employed workforce.
• Low-quality jobs: the lower unemployment rate (based on the usual status approach) appears to be a consequence of economic distress and lack of gainful employment opportunities, which have pushed jobseekers into low productivity and low paying work.
• Increase in the number of unpaid labourers - that has witnessed an increase in its share in total employment from 13.3 % (2018-19) to 15.9 % (2019-20).
• The share of regular salaried workers, which had been steadily rising in India until the PLFS 2018-19 and is considered as a more stable and secure form of employment, is now showing a decline.
• In the non-agriculture sector, the share of those engaged in informal enterprises increased from 68.4 % in 2018-19 to 69.5 % in 2019-20.
• Within the agricultural sector, unpaid family helpers have increased (from 25.7 % to 29.7 %), while that of own account workers and employers has declined (48.4 % to 44.5 %).
• Increasing female participation: There is a sharp increase in the female LFPR by 5.5 percentage points. The share of rural women engaged in agriculture has increased substantially from 71.1 % (2018-19) to 75.7 % (2019-20), where mostly they are employed as unpaid family helpers.

• Stalled structural transformation: The share of the workforce engaged in agriculture has risen to 45.6 % (2019-20) from 42.5 % (2018- 19).

• Many job seekers have been pushed back into the agricultural sector resulting in its emergence as an “employer of last resort”.

Conclusion: These metrics suggest that the decline in unemployment rate based on the usual status approach masks a deterioration in the quality of employment and rising underemployment, challenges which are only likely to have intensified post-Covid.