2.1 Quantitative Dimensions of Employment Trends

Labour force participation rate (LFPR) and workforce participation rate (WFPR) between 1993 and 2009-10 have been declining (IAMR 2011b). The LFPR is the ratio of the labour force in the age group 15 and above to the total population of the country. If the growth rate of total population is higher than the growth rate of those joining the labour force, the LFPR shows a declining trend, which is exactly what the total shows. The total population growth rate, despite its constant decline over the past few decades, is still 1.6% per annum (2001-11), while the growth rate of the labour force is lower. There is a constant decline in both rural and urban LFPRs over the period, as well as in the WFPRs. As soon as the population growth rate, which is systematically declining, is exceeded by the growth rate of the labour force, the LFPR will start increasing.

However, the growth in the labour force will be moderated by rising participation in education. The Right to Education (RTE) for 6-14 year-olds will ensure that even those who turn 14 will continue in school – especially since there is a high likelihood that the RTE will be extended to age 16 (to cover Classes 9-10). Moreover, with the introduction of the National Vocational Education Qualifi cation Framework (NVEQF), and vocational education starting with Class 9, there is a probability that dropout after Class 8 (age 14) will decrease, and children will continue in vocational education (IAMR 2011a). Creating employment opportunities for the educated youth will be a challenge for the country in near future (Rangarajan et al 2011).

The workforce had increased during 1999-2000 to 2004-05 by 60 million, but the corresponding increase in the second half of the decade was only two million. This number could be used to draw the conclusion that employment growth has slowed in the period of faster growth in the latter half of the decade, and therefore, casts doubt on the value of economic growth as a goal. However, this is not true and this

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Table 2: Workforce Estimates for 1999-2000, 2004-05 and 2009-10 (in million)

Age Group Principal Status Principal Status Principal and Subsidiary Status 0 to 24 25+ 0 to 24 25+

1999-2000 Rural male 46 150 48 152

Rural female 20 62 26 80

Urban male 15 60 15 61

Urban female 3 12 4 14

Rural male 48 167 51 168

Rural female 19 72 28 96

Urban male 18 71 18 72

Urban female 4 16 5 19

2009-10 Rural male 41 186 45 187

Rural female 14 67 19 86

Urban male 16 83 16 84

Urban female 3 16 4 19

Source: NSS 50th, 55th and 66th rounds.

is demonstrated by the following inferences that can be made from Table 2.

The first point refers to what has happened to principal status (PS) employment between the first and second halves of the 2000s. The activity on which a person spends a relatively longer time (say farming his land) during the 365 days preceding the date of survey is regarded as the usual principal activity status (UPS) of the person. In addition to her principal status activity, this person could have engaged in some other activity for 30 days or more during this time (called her subsidiary status). The two measures together are used to determine the size of the workforce, and also the number of persons both working and available for work (labour force). According to the NSS employment and unemployment surveys, since 1983, there has been a consistent improvement in PS employment and a reduction in subsidiary employment (Anant and Mehta 2011).

The second important finding is that there is a growing absence of those under 25 from the workforce, which is another extremely welcome development. If children under six and children over 14 are not in the workforce, it is because they are increasingly in school. In fact, the 0-24 year age group sees a sharp decline in their worker population ratio (WPR). As we have analysed in the India Human Development Report 2011, this is happening because the incidence of child labour is declining and there is a simultaneous increase in school attendance of over 14-year olds (IAMR 2011b).

Further, in the age group of 5-14 years, 89.3% of children were in school in 2009-10, up from 82.4% in 2004-05. Further this increase was higher for girls, rising from 79.6% in 2004-05 to 87.7% in 2009-10. In the 15-19 years age group, 59.5% of young people were in the educational system in 2009-10 as compared to 46.2% in 2004-05. Once again, the increase was more for girls, from 40.3% to 54.6%. In the next higher age group of 20-24 years, 22.5% of boys and 12.8% of girls were still in the educational system in 2009-10 against only 14.9% and 7.6%, respectively in 2004-05 (Planning Commission 2011).

The third important finding is about development in regard to women’s employment. Since the 1980s, there has been a near consistent decline in WPR for women (Mazumdar and

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Neetha 2011; Rangarajan et al 2011). In the Indian case, far from being a bad thing, this is entirely a welcome development. For male PS employment in ages 25 or more, there has been a sharp increase in the growth of workers – quite the opposite of what might be implied by the mere two million increase in total employment that occurred between 2005 and 2010. However, the situation is quite different for women, whose employment has declined. Their employment fell because as we noted above, young women are attending school, which is where they belong. In fact, a comparison over a longer period shows that from the 1980s there has been a sustained decline in women’s employment.2 The main worry here is that as Rangarajan et al (2011) note, only 44% of the decline in the female WPR is accounted for by increased participation of women of working-age in education.

The rural unemployment rate has been consistently lower than the urban, which is not surprising given the reliance of the rural workforce on self-employment in agriculture. This, of course, might be a last resort activity since evidence is growing of rural distress among the 84% of all farmers who till under one hectare of land – the small and marginal farmers who eke out an uncertain livelihood. What is worrying is that on account of the slow rate of growth of output in agriculture in an otherwise high growth economy, the unemployment rate by UPSS as only shown an increase between 1993-94 and 2004-05, and has remained at roughly the same level in 2009-10 (IAMR 2011b). On the contrary, in urban areas, where a lot of the economic growth has tended to be concentrated, there has been a decline of the unemployment rate.

Table 3 shows some further positive developments in the latter half of the 2000s. Unemployment by the CDS measure has declined, after rising from 6.06% in 1993-94 to 7.31% in 19992000 and further to 8.2% in 2004-05. But, as we noted above, more men are indeed working in the latter half of the decade compared to the fi rst

2.2 Qualitative Dimensions in Employment Trends

Formal and Informal Employment in the Non-Agricultural Sectors: The share of organised sector employment was around 14% in both 1999-2000 and 2004-05. However, our analysis of the NSS 2009-10 data (NSSO 66th round) in the second half of the decade shows it has risen to 16%. That is, unorganised sector employment has declined from 86% in 1999-2000 and 2004-05 to 84% in 2009-10. Organised and unorganised sectors have been defined as per National Commission for Enterprises in the Unorganised Sector (NCEUS) definition (Table 4).3

An analysis of formal versus informal employment, again using the NCEUS defi nition,4 shows employment within both organised and unorganised sectors with social security benefi ts. While there has been a decline in the share of formal employment from about 9% in 1999-2000, to nearly 8% in 2004-05 and further to 7% in 2009-10, there has been a consistent increase in informal employment, especially in the organised sector (Table 4).

Table 4: Formal and Informal Employment in Organised and Unorganised Sector

Figures in parenthesis are percentages. Source: For 2009-10, computed from NSS 66th round, for 2004-05 and 1999-2000, NCEUS (2007).

The share of informal employment in the unorganised sector is unchanged at 99.5% throughout the decade. This is because there are hardly any social security benefits for workers in the unorganised sector. However, what is notable is that the share of formal employment in the organised sector has been falling continuously from 62% in 1999-2000, to 53% in 2004-05, further down to 42% in 2009-10. This is matched by a corresponding increase in informal employment in the organised sector which currently stands at 58% compared to 38% at the beginning of the decade. Thus, while the organised sector’s share in employment is increasing, it is only due to the increase in informal employment in that sector.

As per our conceptual framework, the first two transitions are taking place. There is a movement of workers from the agricultural sector to informal non-agricultural sectors, mainly construction. Next is the transition from informal employment in the unorganised sector to informal employment in the organised sector. This is shown by a decline of 8.4 million informal workers in the unorganised sector along with an increase of 13 million informal workers in the organised sector. Correspondingly, the share of all workers employed in the organised sector has increased (from 14% to 16%). But the cause of worry is that formal employment in the organised sector, which is by definition, the most decent form of employment, is not increasing. This shows that employers are increasingly hiring workers on contractual terms due to labour laws and other concerns.

Size of Enterprises by Employment: In Table 5 we examine the number and share of workers in what could be termed as micro, small, medium/large enterprises. There seems to be a remarkable shift occurring in non-agricultural employment in the 2000s, if we examine the size class of enterprises by the number of workers that they employed. The workers in the enterprises with less than six employees (i e, microenterprises) show a remarkable decline both in absolute and relative terms between 2004-05 and 2009-10. Such microenterprises accounted for 152.5 million workers in the middle of the decade, or 75% of all non-agricultural workers. By the end of the decade the number of workers in such enterprises had fallen by nearly four million, and the share of such microenterprises in the total non-agricultural employment was down to 65.6%. Correspondingly, there was an increase in the number of workers employed in enterprises with six and above but less than 10 workers, from 15.2 million in the middle of the decade to nearly 24 million at its end, thus raising the share of workers in such enterprises from 7.5% to 10.5% of all non-agricultural employment in the country. This is clearly a positive development since it is easier for slightly bigger enterprises to be reached with services (credit, marketing support, design support). It is also better for workers since it reduces the fragmentation and enables them to organise – which is next to impossible to achieve when workers are dispersed in millions of microenterprises.

What is remarkable about this shift in the size class of enterprises by employment in non-agricultural work is the growing absolute number of employees in enterprises where 20 or more workers were employed. Workers in what could be called the middle and large enterprises, by size class of employment, rose from 24 million in 2004-05 by a remarkable 15 million to nearly 39 million at the end of the decade. At the same time, the share of such employment in total non-agricultural employment grew from 11.8% to 17.1%. This is consistent with our argument, based on the analysis of organised manufacturing employment in the latter half of the 2000s, that there has been a rise in organised sector manufacturing.

Table 5: Number of Workers by Size of Enterprise

Source: NSS, 61st and 66th rounds.

This shift in the distribution of employment across fi rm size groups between 2005 and 2010 is very significant since the World Bank (2012) reports that this distribution had not shifted over time between 1993-94 and 2004-05.

Self-employed, Regular Wage Employed and Casual Wage Labour: Table 6 (p 67) presents for three points of time disaggregated data for the workforce distributed by categorywise employment: the self-employed, the regular wage/salary worker and the casual labourer. The self-employed see a

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remarkable increase in employment in absolute terms until the middle of the decade, and then a decline; a similar trend is noticeable for the share of self-employed in the workforce. The decline is largely explained by withdrawal of women from the workforce of about 23 million women (of whom 1.7 million got jobs as casual labour and 0.2 million as self-employed). As many as 21 million of these women were in rural areas who, as we noted earlier, withdrew because they were either now studying or engaged in domestic work. Urban women did the same but on a much smaller scale (Rangarajan et al 2011; Himanshu 2011).

Table 6: Number of Workers according to UPSS Approach by Broad Employment Status (in millions)

Source: NSS survey reports.

The decline in the numbers of self-employed has a corresponding increase in the numbers of those who had casual work in the latter half of the decade. Both types of work are in the unorganised segment, so there is little change in terms of the quality of employment – both would involve informal employment.

In terms of the quality of employment, the one welcome development has been the consistent rise in both the absolute number and the share of workforce of regular workers, throughout the decade. The increase over the decade was 17 million. This welcome development needs to continue. The only downside about this increase, at least in the latter half of the decade, is that 96% of the jobs were picked up by men.

Incidence of Employment by Level of Education: It was a notable fact about the incidence of employment by level of education in India (by UPSS) that illiterates have the lowest rate of employment, and the rate of unemployment tends to rise with every level of education: Table 7: Incidence of Unemployment

for 15 Years and Above Age Group, by

primary, secondary and

Level of Education (2004-05 and 2009-10; higher secondary, with the UPSS, in %)

Level of Education 2004-05 2009-10

highest unemployment rate

Not literate 0.3 0.3

characterising those with

Literate without

diploma/certificates (or those

formal schooling 1.2 0.3

with one or two years of post-

Below primary 1.2 0.7 higher secondary education) Primary 1.4 1.2

(Table 7). In fact, the last Middle 2.7 2.1

group had an unemployment Secondary 4.8 2.7 Higher secondary 6.4 5.2

rate of 10.4% in 2004-05

Diploma/certificate 10.4 9.6

and 9.6% at the end of the

Graduate 8.8 6.9

decade. The unemployment

Postgraduate and above 8.1 6.7

rate does decline for gradu-

All level of education 2.3 2 ates and slightly again for Source: NSS. postgraduates and above, but not signifi cantly. In other words, those with relatively higher education are clearly still able to survive, precisely because unemployment over 182 days of the preceding 365 days (before the survey closed) is a situation that can be borne only by the relatively well-off (who are also the relatively better educated). What is

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interesting is that by this UPSS measure the unemployment rate is very low for the illiterate or neo-literate, but by the CDS measure the unemployment rate in the country is close to that (by UPSS) of those who have graduate qualifi cation.

3 Non-Agricultural Employment: Potential for Future Employment Growth

The strategy for increasing employment during the Twelfth Five-Year Plan must rely upon an analysis of how employment trends have evolved over the last decade. For this reason most of the analysis in this section will rely upon employment trends for agriculture, manufacturing, non-manufacturing industry and services. We examine employment trends for various sectors for three points of time: 1990-2000, 2004-05 and 2009-10 and the data are reported in Table 8.

Table 8: Employment across Various Sectors (in millions, 1999-2000, 2004-05, 2009-10)

Employment across Absolute Increase Various Sectors in Employment

Sectors	1999-2000	2004-05	2009-10	1999-2000 – 2004-05 –
				2004-05	2009-10
Agriculture	237.67	258.93	244.85	21.25	-14.08
Manufacturing	44.05	55.77	50.74	11.72	-5.03
Mining and quarrying	2.17	2.64	2.95	0.47	0.31
Electricity, gas and water supply	1.13	1.30	1.25	0.17	-0.05
Construction	17.54	26.02	44.08	8.48	18.06
Non-manufacturing	20.84	29.96	48.28	9.11	18.32
Trade	36.63	43.36	43.53	6.74	0.17
Hotels and restaurants	4.62	6.10	6.13	1.48	0.03
Transport, storage
and communication	14.61	18.47	19.97	3.86	1.5
Banking (and insurance)	2.25	3.10	3.82	0.84	0.72
Real estate, renting
and business activities	2.67	4.65	5.75	1.98	1.12
Public administration and defence	10.48	8.84	9.46	-1.64	0.62
Education	8.47	11.43	11.85	2.96	0.42
Health	2.62	3.34	3.59	0.73	0.25
Other services	11.85	13.51	12.24	1.66	-1.27
Services	94.20	112.81	116.34	18.77	3.53
Total	396.76	457.46	460.22	60.70	2.76

Source: NSS Employment and Unemployment Surveys, various rounds.

The fundamental issue facing the Indian economy at the commencement of the Twelfth Plan period is whether more rapid employment growth can be combined with the rapid growth of output in industry and in services. The problem of employment growth not keeping pace with growth of output has been experienced in other developing countries as well and it has bothered policymakers for at least half a century (Patnaik 2011; Ghosh 2011). One of the main objectives of the growth strategy in the Twelfth Plan period must be to ensure that the process of structural change in terms of employment is accelerated. So what is the nature of the structural change that is taking place in employment that we observe from the examination of data for three points of time (2000, 2005 and 2010)?

Agriculture saw an absolute increase in employment in the first half of the decade from 238 million in 1999-2000 to nearly 259 million in 2004-05. This increase in agriculture, at face value, cannot be seen to be a positive development, if the expected structural transformation with growth is that there would be a shift in labour from agriculture to non-agricultural employment. However, if the increase in employment in agriculture in first half of the decade is accounted for by a diversification into allied economic activities like fi shery, dairying, poultry, sericulture, horticulture and floriculture, it is indeed a welcome development.

While in the latter half of the decade there was a decline in absolute numbers employed in agriculture from 259 million to 245 million, the problem remains that total agricultural employment at the end of the decade was still higher than at the beginning of the decade. That means that the process of structural change in employment that one would expect with a period of very rapid, in fact, unprecedented growth in output in the economy outside of agriculture, is not occurring. In fact, if anything that process of structural change is stalled has been least as far as the employment structure in the economy is concerned.

In manufacturing, there is an absolute increase in employment in the first half of the decade from 44 million to nearly 56 million in 2004-05. This increase by nearly 12 million in manufacturing in the first half of the decade was, however, offset by a decline by five million in the second half of the decade. What is interesting is that the absolute size of employment in 2009-10 (50.74 million) was up by about 15% from total manufacturing employment of 44 million at the beginning of the decade – but only an increase of six million in a period of 10 years. It may be pointed out here that even in China the number of workers in the manufacturing sector has stagnated at 230 million since 2004, even though industrial production has more than doubled during the period 2004 to 2010 (Ghosh 2011).

3.1 Employment Trends in the Unorganised and Organised Segments of Industry and Services

In Table 9 we provide a detailed analysis of organised and unorganised employment, for agriculture, industry and services for three points of time: 1999-2000, 2004-05 and 2009-10.

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Agriculture: We have already seen earlier that a structural change in terms of employment has hardly even begun during the period of rapid economic growth of the 2000s, despite rapid growth in industrial and services output. The numbers employed in agriculture at the end of the decade is, in fact, more than what it was at its beginning. The share of the organised segment of agriculture in total agricultural employment (238 million in 1999-2000 and 242 million in 2009-10) was barely 5.5 million at the beginning and fell further to 2.7 million workers at the end of the decade, while numbers in the unorganised segment slightly increased from 232 million to 242 million.

Manufacturing: In the first half of the decade there was a very sharp rise of 30% in unorganised employment in manufacturing (from 31 million to 40 million), but fi ve million workers in unorganised employment in the manufacturing sector in 2004-05 had lost their jobs by the end of the decade; as a result total unorganised manufacturing employment had fallen to 35 million.

Organised manufacturing, which accounted for 30% of total manufacturing employment at the beginning of the decade, increased its share to only 31% by the end of the decade. In other words, to the extent that organised employment constitutes an improvement in the scale of decent work over unorganised sector employment (see Section 1), over the decade of rapid economic growth there was no improvement in this regard either (Goldar 2011a and b; Nagaraj 2011; Kannan and Raveendran 2009; Mazumdar and Sarkar 2004).

3.2 Informal vs Formal Employment in Organised Manufacturing

We have noted above, on the basis of an analysis of NSS data for 1999-2000, 2004-05 and 2009-10, that employment in the organised segment of manufacturing has grown from 13.13 million to 16.06 million (during the first half of the decade), and it remained there (16.03 million) during the second half of the decade. It is very important to emphasise that even in organised manufacturing employment, as defined by the NSS, there are both types of employment: formal and informal. We noted in Section 1 that the most decent form of employment would be formal employment in the organised sector of the economy.

In order to assess the size of formal vs informal employment in organised manufacturing over the past decade we examine data from the Annual Survey of Industries (ASI) for three points of time 1999-2000, 2004-05 and 2008-09 (the latest year for which ASI data for organised manufacturing is available for 2008-09). The contrast between employment in organised manufacturing as defi ned by the NSS and the ASI defi nition is instructive. In 1999-2000 the NSS reports organised manufacturing to be employing 13.13 million workers, while ASI reports that the size of employment in organised manufacturing in the same year is less than half at 6.3 million. The defi nition that ASI uses for organised manufacturing is that the fi rms counted are those registered under the Factory Act 1948 employing 10 or more workers; this is a tighter definition than the one used by the NSS to identify firms in organised manufacturing. NSS

70 captures manufacturing enterprises run by government (or included in the public sector) and cooperatives, trust and other types of private enterprises employing 10 or more workers – these belong to organised manufacturing. The latter defi nition includes both formal and informal employment (see Section 1 for the distinction), while the ASI’s definition is restricted mostly to formal employment. In other words, the difference between the ASI’s number for workers employed in organised manufacturing (6.3 million) and that of the NSS (13.13 million), is explained by the fact that 6.53 milllion of the 13.13 million in NSS’ organised manufacturing segment are mostly workers that would be regarded as contract or ad hoc labour (i e, informal workers in the organised segment of manufacturing industry) (NCEUS 2008 and 2009).

By 2004-05 organised manufacturing by the ASI defi nition barely increased from 6.3 million to 6.6 million, while NSS reports that it grew by three million (13.1 million to 16.1 million). The NSS is reporting that by the broader definition of organised manufacturing, employment remained unchanged at 16 million between 2004-05 and 2009-10. However, the ASI is reporting that by the tighter definition (which focuses on formal employment mostly) it actually increased from 6.6 million to 8.8 million between 2004-05 and 2008-09, i e, the share of formal employment in organised manufacturing increased.

3.3 Non-Manufacturing Industry

While employment in services and in manufacturing had increased sharply in the first half of the decade, in the second half employment in these sectors either increased slowly or fell. By contrast, employment in non-manufacturing industry, and especially construction, provided hope to the millions working in agriculture who wanted to leave agriculture in favour of employment in non-agricultural sectors. Mining saw an increase in employment from 2.17 million to 2.64 million in the first half of the decade, and a further increase to 2.95 million in the second half. Most of this increase was accounted for by the organised mining segment, while the unorganised segment saw only a very marginal increase in employment over the entire decade.5

The star performer of all sectors in respect of employment, by far, was construction, which saw an increase in employment from 17.54 million to 26 million in the fi rst half of the decade and a further increase to 44 million. Table 9 shows that there was a very sharp increase in employment in the unorganised segment throughout the decade. However, the most surprising phenomenon is that the organised segment of construction also saw very sharp increase in employment, from 4.6 million to 6.35 million in the first half of the decade. But the most stunning increase is the doubling of employment that occurs in organised construction in the latter half of the decade within a matter of five years from 6.35 to 14.91 million. This latter increase in organised construction’s contribution to employment growth could only be explained by the fact that there was a significant expansion of infrastructure investment during the Eleventh Five-Year Plan period from 4% of GDP at the beginning of the Plan increasing to 7.5% of the GDP in the terminal year of the Plan. While most of the increase in

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unorganised sector employment in construction would be that coming from private development of housing, it is possible that the large-scale projects involving the construction of airports, metros, highways and express ways, urban fl yovers and private ports, are likely to have involved such huge fi rms as L&T, Gammon India, GMR, Shapoorji and so on – all of which are likely to have employed workers directly on terms usually applicable in the organised segment, even though their subcontractors would also generate significant employment in construction in the unorganised segment.

3.4 Services

In the latter half of the decade when manufacturing employment, both organised and unorganised, was declining, the organised segment of services continue to see a growth in employment. But the unorganised segment of services saw a fall in employment from 81.7 million to 80 million in the latter half of the decade. More than half of this decline in the unorganised segment of employment in services was accounted for by the decline in employment in wholesale and retail trade, which is perhaps a reflection of the overall fall in economic activity in the aftermath of the downturn of the Indian economy after the global economic crisis. Nevertheless, the experience of the 2000s suggests that organised segment employment may well continue to grow during the Twelfth Five-Year Plan not only in the construction sub-sector, but also in services. Both these sub-sectors seem to have survived the impact of the global economic crisis.