Labor and Employment Sector of India

Udayan Hazarika

(The writer can be reached at udayanhazarika@hotmail.com)

TThe India Employment Report 2024, released in March this year, is an assessment of the performance of India’s labor and employment sectors, covering various aspects such as India’s workforce, labor force, unemployment scenario, etc. The report covers 22 years (2000–2022) of comparative data analysis on employment and related issues. The report has highlighted several critical aspects of the employment sector in India. Against the background of the COVID scenario, the overall increase in the labor force and labor force participation rate as shown appears to be a positive sign. The data used for this purpose are the data made available by SKS for the periods in question. Thus, the analysis is purely based on secondary data obtained through sample surveys.

The labor force participation rate (LFPR) is an indicator of the size of the labor force (consisting of persons over 15 years of age) of a country in a given period of time who are either engaged in certain types of work and/or are waiting to be engaged. The LFPR as estimated for 2000 was 61.6 percent, which fell to 50.2 percent in 2019, i.e. in the pre-Covid period, but there was a steady increase in 2022 to 55.2 percent in the post-Covid period. The greater the percentage of the labor force participation rate, the greater the expectation of employment expansion leading to further expansion of economic activities, ie manufacturing, trade and commerce, manufacturing, construction and more specifically services sector. A similar trend can be observed in the case of the working population ratio (WPR). WPR gives the idea of ​​the proportion of employed people to the total population, which, in other words, can be said to be the rate of employment in the economy. Available data shows that the WPR was 60.2 percent in 2000 but declined to 47.3 percent in 2019 and showed a steady increase in the post-COVID-19 period to 52.9 percent in 2022. Another notable indicator is the open unemployment rate, which shows those who are willing to work for a certain wage, but, due to the lack of opportunities or the availability of jobs, are not being recruited and are unemployed. So they are the actual unemployed in the economy. This ratio shows the current capacity of an economy to absorb the available labor force. The more this unemployed workforce is engaged in the economy for production or services, the better the health of the economy will be. The lower the percentage of open unemployment, the greater the capacity of the economy to absorb the unemployed workforce. The overall open unemployment rate was up to 2.0 percent during the period 2000–2012, which rose sharply to 5.8 percent in 2019, but fell steadily to 4.1 percent in 2022.

A look at the absolute numbers of the above indicators would show that the volume of the labor force increased from 396.3 million in 2000 to 495.5 million in 2019, an increase of 99.2 million in two decades. On the other hand, the growth of the workforce during these two decades was only to the extent of 79.4 million people, leaving a gap of 19.8 million people, which is actually the size of open unemployment during the period in question. In the next slab, ie between 2012 and 2019, open unemployment increased by 18.6 million persons, while employment generation was at the rate of 2.0 lakh, leaving only a huge gap of 16.6 million. In the third slab, that is between 2019 and 2022, the labor force increases from 466.5 to 544.5, giving an increase of 78 million people during the critical years of the pandemic, which is the size of the labor force. Despite this, labor force growth was 71.9 million, from 495.5 million to 567.4 million.

Let’s take a look at the gender gap in the context of labor force participation rates. Male LFPR, as estimated for 2000, was more than 2.14 times (83.16 percent) that of female LFPR (38.9 percent). This rate for men fell by 8.1 percentage points to 75.5 percent in 2019. However, the drop in the case of female LFPR was greater, which was 14.4 percentage points, from 38, 9 percent in 2000 to 24.5 percent in 2019 However, this trend was reversed during the period between 2019 and 2022, when the male LFPR increased from 75.5 percent to 77.2 percent, i.e. with a difference of only 1.7 percentage points, while The LFPR of women increased from 24.5 percent to 32.8 percent, ie. an increase of 8.3 percentage points. This is quite an achievement within the category. But compared to the total strength of the male LFPR, the female LFPR was 2.35 times stronger.

Regarding employment in the main sectors of the economy, the study shows that in the period between 2000 and 2012, employment in the agricultural sector has shrunk significantly by 0.39 percent. The situation worsened further between 2012 and 2019, when the rate of employment contraction increased to (-) 2.55 percent. However, during the post-pandemic period, the sector saw a turnaround, with an employment rate increase of 8.93 percent—the highest of the four sectors. The manufacturing sector contributed an employment rate of 2.89 percent during 2000-2012, which shrank significantly by 0.33 percent, but returned with a positive rate of 3 percent during 2019-2022. The construction sector initially had a significant return of 9.15 percent of employment during 2002 and 2012. But then, it fell to only 2.18 percent, but again increased to 6.37 percent during 2019-2022. Another notable traditional performer, i.e. the service sector in this context, has also shown a dismal performance during 2000–2012, with employment around 0.67. However, the sector showed a turnaround during 2012-2019, implying 10.80 percent, but again fell to 1.09 percent during 2019-2022.

The report also presented a comparative study of employment positions by sector and the sector’s respective contribution to gross value addition (GVA) during the period in question. In the case of the tertiary sector, although the employment rate appears to be slow (from 23 percent in 2000 to 30 percent in 2022), its contribution to the GVA was remarkable over the years, from 44 percent to 53 percent. Compared to this, the performance of the secondary sector has been quite stagnant, both in terms of employment generation and in terms of VSHB. In this case, employment generation remained between 16 percent in 2000 and only 25 percent in 2022, while contribution GVA accounted for 29 percent in 2000 and 31 percent in 2022. The performance of the primary sector is gradually falls from both aspects, i.e. employment. generation and GVA. Employment generation was at the rate of 61 percent in 2000, which declined drastically to 45 percent in 2022. On the other hand, contributions to GVA also declined from 27 percent in 2000 to 16 percent in 2022. The report noted that there was a shift of workers from the agricultural to the non-agricultural sector during 2000-2019, resulting in a decline in agricultural output. But the trend was reversed during and after the pandemic period (2019-2022), mainly due to the return of workers to “survival activities in agriculture due to the lack of job opportunities outside the agriculture sector that was worsened by the pandemic”. economic slowdown.”