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Employment in India: What Does the Latest Data Show?

The 66th round National Sample Survey Organisation data (2009-10) on the employment situation paints a grim picture of a limited creation of jobs between 2004-05 and 2009-10, widespread withdrawal from the labour force (especially by women) and slow growth of employment in the non-agricultural sector. The shift to education among the youth is a positive development but does not by itself explain the decline of the labour force participation rate.

COMMENTARY

Employment in India: What Does the Latest Data Show?

Subhanil Chowdhury

The 66th round National Sample Survey Organisation data (2009-10) on the employment situation paints a grim picture of a limited creation of jobs between 2004-05 and 2009-10, widespread withdrawal from the labour force (especially by women) and slow growth of employment in the non-agricultural sector. The shift to education among the youth is a positive development but does not by itself explain the decline of the labour force participation rate.

T
he most comprehensive data on employment in India is collected by the National Sample Survey Organisation (NSSO) through its quinquennial surveys, the latest being the 66th round survey conducted in 2009-10. The NSSO has recently released the preliminary data of the large sample round of 2009-10. This latest data reflects a disquieting situation vis-à-vis the employment problem in India.

The first problem area as revealed in the NSS data is that there has been hardly any change in the size of the workforce in the country. In other words, there has not been any significant increase in employment opportunities.

From Figure 1, it is seen that there has been a decline in employment in the rural areas, led by a sharp fall in the employment of rural females. There has been a marginal increase in urban employment mainly due to an increase in male employment, while female employment has come down. In total, there has been an increase in employment of less than a million people in the country between 2004-05 and 2009-10, a period in which the Indian economy was growing rapidly. That this decline in rural employment took place in spite of the implementation of the National Rural Employment Guarantee Figure 1: Number of Persons in Workforce (million)

500

400

300

200

100

0

Act (NREGA) indicates that there has been a steep fall in rural work.

This almost jobless growth of the Indian economy is accompanied by a significant decline in the labour force participation rate (LFPR), particularly for women. This is shown in Figure 2 (p 24).

From Figure 2, it is seen that the LFPR for rural males increased marginally in 2009-10, compared to 2004-05, while for urban males it actually declined. The most interesting observation, however, is that there has been a drastic decline in LFPR for women workers both in the urban and rural areas. In fact, the LFPR is the lowest for women since 1993-94 both in the rural and urban areas. The reasons for such a huge decline in LFPR for women need to be explored. There are two possible explanations that can be given at the outset. Women have simply withdrawn from the labour market in India due to social conservatism. This does not seem to be a plausible explanation because the LFPR in 2009-10 is the lowest since 1993-94 (Figure 2). If, indeed, social conservatism is responsible then there must be some explanation for such a change in the impact of social factors during this period, given that the LFPR for women in both urban and rural areas was the highest (after 1993-94) in 2004-05. It is not plausible that the conservatism has increased dramatically in the course of only five years.

It is also argued that more women are pursuing higher education resulting in a decline in women LFPR. It is, indeed, the case that more persons belonging to the age groups of 15-19 and 20-24 have reported attending educational institutions as their

2004-05 2009-10

Rural Urban Total Male Female Total Male Female Total

Subhanil Chowdhury (subhanilc@gmail.com) is with the Institute of Development Studies, Kolkata. 2004-05 218.9 124 342.9 90.4 24.6 115 2009-10 231.9 104.5 336.4 99.8 22.8 122 The workforce is given according to usual status. Source: Table S1.1 in Key Indicators of Employment and Unemployment in India, 2009-10, NSSO Publication. 457.9458.4
Economic & Political Weekly august 6, 2011 vol xlvi no 32 23
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Figure 2: Labour Force Participation Rate in India (in %)

Rural Male Rural Female Urban Male Urban Female 60 50 40 30 20 10 0 2009-10 2004-05 1993-94 1999-2000

The LFPR pertains to usual status. Source: NSSO Report No 515 on Employment and Unemployment Situation in India, 2004-05 and Key Indicators of Employment

and Unemployment in India, 2009-10.

usual activity in 2009-10, compared to 2004-05 (Table 1).

Table 1: Percentage of Persons Reporting Attending Educational Institutions as Their Usual Status, in the Age Groups 15-19 and 20-24 Years

Rural Urban
Male Female Male Female
15-19
1999-2000 41.3 25.8 58.5 51.7
2004-05 43.6 31.5 58.7 56.7
2009-10 57.3 47.1 70.1 68.2
20-24
1999-2000 8.6 2.9 21.8 15.8
2004-05 9.1 3.9 21.5 14.9
2009-10 16.6 7.5 29.7 23.4

Source: “Key Indicators of Employment and Unemployment in India, 2009-10” and NSS Report on Employment and Unemployment, various issues.

Taking cognisance of an increase in the proportion of people attending educational institutes, an EPW editorial (9 July 2011) argued:

Why did male employment increase more slowly in the recent period? This is almost entirely because more young men are now continuing with their education rather than looking for jobs….a significant part of the decline in female employment in 2009-10 can also be attributed to this trend.

This argument is, however, problematic. Even if we accept that the decrease in the LFPR is the result of a higher proportion of the economy or a situation of labour shortage. Clearly, this is not the case in India. The only explanation then for an almost stagnant employment situation is simply that not enough jobs are being created in the economy, even with an 8% plus growth rate.

Additionally, it is also doubtful as to whether an increase in women attending educational institutes can be put forward as an explanation for a fall in the female LFPR. This is because unlike for men, it is seen that the LFPR for women has decreased for all ages above the age of 15. In the case of men, there has been a decline in the LFPR mainly for the age groups 15-19 and 20-24 because of an emphasis on education. For the other age groups, LFPR has remained more or less constant, with marginal changes. Thus a decline in the LFPR for urban males can be explained mainly by an increase in the proportion of men in the 15-19 and 20-24 age groups undergoing education. This cannot be said for women, where the LFPR for every age group has declined. This is shown in Table 2.

The decline in female LFPR across all age groups indicates that there must be

Table 2: Age-Specific Labour Force Participation Rate

some other factor inhibiting women from participating in the labour market. The decline in the LFPR for women, irrespective of age, might be because of a decline in overall employment opportunities. In 2004-05, there had been an increase in f emale LFPR, compared to earlier rounds of the NSSO survey. But subsequently, with a fall in employment opportunities overall, these women could not find employment and withdrew from the labour market. In this regard, social orthodoxy may have played a role in pushing out women rather than men from the labour force. Additionally, with the financial crisis of 2008, exports from India suffered adversely. Women have been working in the export industries in large numbers. With the export industry hit hard due to the recession, these women lost their jobs and perhaps could not be re-absorbed in the labour market. In other words, the withdrawal of such a large number of women from the labour force was also a result of falling employment opportunities.

Nonetheless, the increase in the proportion of young men and women undergoing education is a welcome development. However, the point of worry is that when these youth offer themselves in the job market, open unemployment in the country might increase, if the employment-generating potential of the economy remains low.

The fall in the LFPR and a resultant decline in the size of the labour force, on the other hand, resulted in a fall in the unemployment rate. This is shown in Figure 3 (p 25).

It is seen that the unemployment rate decreased for all workers in 2009-10 compared to 2004-05, although the

people (particularly women) attending 2004-05 2009-10
educational institutions, this cannot explain why the overall employment situation in the country did not improve. If more people 15-1920-2425-29 Rural Male 52.9 89.1 98.2 Rural Female 33.1 43.5 53.0 Urban Male 38.1 76.9 95.7 Urban Female 14.4 25.0 26.1 Rural Male 39.0 81.3 97.5 Rural Female 19.5 31.4 40.4 Urban Male 26.3 68.2 94.7 Urban Female 8.5 19.7 22.2
are moving out from the labour force, in 30-34 98.8 59.3 98.7 30.8 99.0 43.4 98.5 23.9
the 15-24 age group, then, given a particular 35-39 99.1 64.2 98.4 34.0 99.2 49.7 99.1 27.8
rate of employment creation in the country, 40-44 98.5 62.7 98.3 31.7 99.4 49.8 98.7 25.6
people from other age-groups should fill 45-49 98.2 61.6 97.6 26.9 98.4 49.2 97.9 23.1
the posts. To argue that employment 50-54 96.3 56.2 93.9 25.9 96.7 48.5 94.8 22.8
declined because of a decline in supply of labour, since more people attended edu 55-5960 above 15-24 93.1 64.5 68.9 50.9 25.4 38.2 83.2 36.657.0 21.8 10.019.7 93.4 64.7 56.7 41.1 22.6 25.4 85.5 34.2 46.3 19.1 7.0 14.2
cation in the age group 15-24 years, is to 15 and above 85.9 49.4 79.2 24.4 82.5 37.8 76.2 19.4
argue that there is full employment in Source: Same as Figure 2.
24 august 6, 2011 vol xlvi no 32 Economic & Political Weekly
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COMMENTARY

Figure 3: Unemployment Rate (CDS) for All Workers (in %)

12 10 8 6 4 2 0 Rural Male Rural Female Urban Male Urban Female 2009-10 2004-05 1993-94 1999-2000

CDS refers to Current Daily Status. Source: Same as Figure 2.

decline in unemployment in rural a reas has been marginal and less than that of urban areas. This decrease in unemployment, however, is not because of an increase in employment, rather it is a result of a decrease in the number of people, particularly women, offering themselves for work.

The other important issue with regard to employment is the type of employment that is being generated. In 2004-05 what was important was that self-employment grew significantly with a fall in casual employment and a marginal rise in Table 3: Percentage Distribution of Employment (Self-employed/Regular Employed/Casual Labour) by Sex and Sector in India

Employment Status and Year Rural Urban
Male Female Male Female
Self-employed
1972-73 65.9 64.5 39.2 48.4
1977-78 62.8 62.1 40.4 49.5
1983 60.5 61.9 40.9 45.8
1987-88 58.6 60.8 41.7 47.1
1993-94 57.9 58.5 41.7 45.4
1999-2000 55.0 57.3 41.5 45.3
2004-05 58.1 63.7 44.8 47.7
2009-10 53.5 55.7 41.1 41.1
Regular employees
1972-73 12.1 4.1 50.7 27.9
1977-78 10.6 2.8 46.4 24.9
1983 10.3 2.8 43.7 25.8
1987-88 10.0 3.7 43.7 27.5
1993-94 8.3 2.8 42.1 28.6
1999-2000 8.8 3.1 41.7 33.3
2004-05 9.0 3.7 40.6 35.6
2009-10 8.5 4.4 41.9 39.3
Casual labour
1972-73 22.0 31.4 10.1 23.7
1977-78 26.6 35.1 13.2 25.6
1983 29.2 35.3 15.4 28.4
1987-88 31.4 35.5 14.6 25.4
1993-94 33.8 38.7 16.2 26.2
1999-2000 36.2 39.6 16.8 21.4
2004-05 32.9 32.6 14.6 16.7
2009-10 38 39.9 17 19.6

regular-salaried employment. In 2009-10, the trend was different. The proportion of self-employment has decreased, and it is the lowest proportion for all workers since 1993-94. The decline of self-employment is the highest for female workers. Casual workers have increased significantly in the rural areas compared to 2004-05, perhaps because of the impact of the NREGA. For regular-salaried workers, there has been a marginal increase (Table 3).

The situation with regard to the real wage of the workers has improved in 2009-10 compared to 2004-05. Table 4 shows that there has been an improvement in the wages for all categories of workers. If indeed there has been an increase in the real wage in the economy, which has been driven by market forces, then the labour force must have shifted Table 4: Average Daily Real Wage Rate for Workers in 2004-05 Prices (Rs)employed in agriculture and allied sectors both in the rural and urban areas. Even then, more than 67% of the people in rural areas and 7.5% people in urban areas are dependent on agriculture, while the share of this sector in GDP has come down to 14%. In other words, agriculture continues to be a sector ridden with surplus l abour and low productivity.

Rural Urban
Male Female Male Female
Regular salaried
2004-05 144.93 85.53 203.28 153.19
2009-10 165.13 103.31 259.77 212.68
(2.79) (4.16) (5.56) (7.77)
Casual workers
2004-05 55.03 34.94 75.1 43.88
2009-10 67.29 45.69 90.86 52.85
(4.46) (6.15) (4.2) (4.09)

More importantly, along with a decline in the share of employment in agriculture, there has also been a decline in the share of employment in manufacturing, both in rural and urban areas. Even in the

Table 5: Share of Employment in Various Industries in India (in %)

Rural Persons Urban Persons 2004-05 2009-10 2004-05 2009-10

Agriculture and allied 72.7 67.6 8.8 7.5

Mining 0.5 0.6 0.8 0.6

Manufacturing 8.1 7.2 24.6 23

Electricity, gas and water supply 0.2 0.2 0.7 0.6

Construction 4.9 9.4 8 10.2

Trade, hotel and restaurant 6.1 6.4 24.6 24.3

Transport, storage and communication 2.5 2.9 8.6 8.7

Finance, real estate, etc 0.5 0.6 5.3 6.7

Public administration, other services 4.5 4.8 18.7 18.5

Source: Same as Figure 2.

Table 6: Growth Rate of Employment in the Non-agricultural Sector (%)

Total Male Female

1999-2000 to 2004-05 4.65 4.42 5.76

2004-05 to 2009-10 2.53 2.89 0.76

Source: Chandrasekhar and Ghosh (2011).

services sector, there has been a fall or no

Source: Same as Figure 2 and NSS Employment and Unemployment Surveys, various issues.

Economic & Political Weekly

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august 6, 2011

Figures in brackets denote average growth rate of real wages per year. The wages for urban workers have been deflated by consumer price index (industrial workers) (CPI(IW)) and that of rural workers by consumer price index (agricultural labour) (CPI(AL)). This wage refers to the wage for casual workers engaged in work other than public work. Source: Same as Figure 2.

from the low-productive to high-productive sectors. In other words, there must have been a transfer of the labour force from the traditional primary (agriculture and allied) sector to the modern industrial or manufacturing sector, as envisaged by the famous Lewis model.

From Table 5, it is seen that there has been a decline in the proportion of people

vol xlvi no 32

change in the proportion of employment in the trade, hotel and restaurant and transport and communications sector with a slight increase in the finance and real estate sector. The entire decrease in proportion of employment in the agriculture as well as the manufacturing sector has been compensated by an increase in employment in the construction sector, both in the rural and urban areas. In fact, the increase of this proportion in the

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COMMENTARY

rural areas is almost 100%. This can be explained in terms of NREGA, which mainly involves construction work. The increase in this proportion in the urban areas can be attributed to the real estate development that is happening at a rapid pace in India.

From Table 6 (p 25), it is obvious that there has been a substantial slowdown in employment growth in the non-agricultural sector in 2009-10, compared to 2004-05. This slowdown in employment growth has been most severe for female workers. With such a slowdown in non-agricultural employment growth there is less possibility of an increase in the real wage of workers. Even then if real wages have increased, the reason for such an increase

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-is not because of a structural change in the economy but perhaps due to other as yet unidentified factors.

References

Chandrasekhar, C P and J Ghosh (2011): “Latest Employment Trends from the NSSO”, Business Line, 12 July.

EPW (2011): “Don’t Shoot the Messenger”, Economic & Political Weekly, 9 July.

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august 6, 2011 vol xlvi no 32

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