India’s employment paradox of the 21st century: A crackable puzzle

First, determination was a pre-pandemic displacement successful workforce organisation from agriculture to the non-agricultural sector, a cardinal structural translation of the improvement process. Unfortunately, astir of the further employment was chiefly successful low-skill, poorly paid jobs successful operation and services. The workforce translation besides lagged acold down the corresponding translation of the operation of production. Nevertheless, the displacement was a affirmative development.

The 2nd was a displacement from informal to regular employment successful the organized sector, the champion class of employment successful India’s analyzable labour market. Informal jobs remained predominant, but the stock of regular employment successful full employment roseate from 15% successful 2000 to 24% successful 2019.

The 3rd affirmative improvement was a emergence successful labour productivity crossed each sectors, albeit with ample variations. During 2000-2019, productivity accrued the astir successful manufacturing (annually 6%), followed by services (5%), agriculture (4%) and operation (1%). Of course, rising labour productivity besides meant that the labour request per portion of output was declining. It is not astonishing that construction, wherever productivity maturation was the least, is besides the assemblage whose stock successful employment roseate the fastest during this period.

Paradoxically, alongside these affirmative trends, determination were besides immoderate superior antagonistic developments. Thus, the Labour Force Participation Rate (LFPR), the proportionality of India’s working-age colonisation that is either moving oregon disposable for work, declined from 62% successful 2000 to lone 50% successful 2019. Similarly, the idiosyncratic colonisation ratio (WPR), the proportionality of employed persons successful the population, besides declined from 62% to 50% (these aggregate numbers disguise ample sex differences, wherever the LFPR oregon WPR for women are overmuch little than for men). The unemployment rate, the proportionality of colonisation successful the labour unit who were openly unemployed, roseate from 2% successful 2000 to 6% successful 2019.

Once the pandemic struck, the daze reversed each these trends. The stock of agriculture successful the workforce, which had been going down during the erstwhile 2 decades, went up again successful 2021 and remains higher adjacent contiguous (2023 PLSF survey) than successful 2019. There has been a akin reversal of the emergence successful the stock of regular wage employment, which remains little contiguous than successful 2019. But on with the reversal of these affirmative trends, antagonistic trends person besides been reversed. The LFPR, which was declining till 2019, has since gone up. So has the WPR, portion the unemployment complaint has declined. How tin these paradoxical inclination reversals beryllium explained?

For an reply to that question, see the arcane details of however employment is measured successful the PLFS. The marketplace is segmented by conditions of enactment and earnings. The champion occupation is regular wage employment successful the organized oregon ceremonial sector, followed by regular informal employment, casual enactment and self-employment (covering ain relationship workers, employers and unpaid household workers). All those engaged successful these economical activities are counted arsenic employed.

During bully marketplace conditions, workers are capable to determination to amended jobs and the reverse happens during adverse conditions. But these dynamics are not captured successful aggregate employment oregon unemployment numbers. It has been argued that erstwhile conditions were improving, those ‘employed’ successful miserable jobs for small oregon nary wage astatine the bottommost of the pyramid could spend to determination retired of the labour force, since others successful the household were capable to gain better. Also, getting acquisition has been a large origin driving withdrawal from the labour force, particularly for the youth. When municipality non-agricultural employment opportunities collapsed with the pandemic, workers had to migrate backmost to agrarian areas arsenic underemployed workers successful agriculture, which acted arsenic a daze absorber.

The declining workforce stock of agriculture was reversed, arsenic besides the rising stock of regular employment successful the ceremonial assemblage and productivity gains. The fig of self-employed workers, particularly unpaid household workers, had an upswell, and with that the LFPR and WPR improved portion the unemployment complaint declined. After all, unpaid enactment for a household workplace is besides counted arsenic employment successful the PLFS, nary substance however unusual that whitethorn be. These inclination reversals person persisted and showed up successful the 2023 PLFS too. It is inactive excessively aboriginal to archer whether it is an aberration successful the near-term oregon a semipermanent structural reversal.

Finally, a large absorption of the ILO-IHD study is the narration betwixt younker unemployment, acquisition and skills. I person not got into these issues connected relationship of abstraction limitations, but would powerfully urge the study to funny readers. It is important due to the fact that these are the factors, on with related policies, that volition find whether India reaps a demographic dividend oregon faces a demographic catastrophe successful the decennary ahead.

These are the author’s idiosyncratic views