India’s Labour and Employment Sector

Udayan Hazarika

(The writer can be reached at [email protected])

The India Employment Report 2024, published in March this year, is an assessment of the performance of India’s labor and employment sectors, covering various aspects like India’s labor force, work force, unemployment scenario, etc. The report covers 22 years’ (2000–2022) of comparative analysis of the data in terms of employment and related issues. The report has highlighted several critical aspects of India’s employment sector. Against the backdrop of the COVID scenario, the overall increase in the labor force participation rate and work force, as indicated, appears to be a positive sign. The data utilized for this purpose are the data made available by the NSS for the periods under 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 (constituted by persons above 15 years of age) of a country at a particular period of time who are either engaged in some types of work and/or are waiting to be engaged. The LFPR as estimated for the year 2000 was 61.6 percent, which declined to 50.2 percent in 2019, i.e., in the pre-COVID period, but made a steady increase in 2022 with 55.2 percent during the post-COVID period. The greater the proportion of labor force participation rate, the greater is the expectation of expansion of employment leading to further expansion of economic activities, viz., production, trade and commerce, manufacturing, construction, and more specifically, the service sector. A similar trend can be observed in the case of the worker population ratio (WPR) as well. The 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. The available data shows that WPR was 60.2 percent in 2000 but fell to as low as 47.3 percent in 2019 and showed a steady increase in the post-COVID period to 52.9 percent in 2022. Another noticeable indicator is the open unemployment rate, which indicates those who are willing to work at a particular wage but, due to a lack of opportunities or the availability of jobs, are not getting recruited and are staying idle. So, they are the actual unemployed people in the economy. This ratio indicates the actual capacity of an economy to absorb its available manpower. The more this idle manpower is engaged in the economy for production or in services, the better will be the health of the economy. The lower the proportion of open unemployment, the greater the capacity of the economy to absorb its idle manpower. The overall open unemployment rate was as low as 2.0 percent during the period 2000–2012, which sharply increased to 5.8 percent in 2019 but steadily fell 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, a rise of 99.2 million in two decades. On the other hand, the increase in the work force during these two decades was only to the tune of 79.4 million persons, leaving a gap of 19.8 million persons, which is actually the size of the open unemployment during the period in question. In the next slab, i.e., between 2012 and 2019, the open unemployment grew by 18.6 million persons, while the employment generation was to the tune of 2.0 lakh, only leaving a huge gap of 16.6 million. In the third slab, i.e., between 2019 and 2022, the labour force increases from 466.5 to 544.5, giving an increment of 78 million people during the critical years of the pandemic, which is the size of the labour force. As against this, the labour force increase was to the tune of 71.9 million, up from 495.5 million to 567.4 million.

Let us have a look at the gender gap in the context of labor force participation rates. The male LFPR, as estimated for the year 2000, was more than 2.14 times (83.16 percent) that of the female LFPR (38.9 percent). This rate for males decreased by 8.1 percentage points to 75.5 percent in the year 2019. However, the fall in the case of female LFPR was greater, which was to the tune of 14.4 percentage points, from 38.9 percent in 2000 to 24.5 percent in 2019 . This trend, however, reversed during the period between 2019 and 2022, when male LFPR increased from 75.5 percent to 77.2 percent, ie, by a margin of only 1.7 percentage points, while female LFPR increased from 24.5 percent to 32.8%, ie, an increase of as much as 8.3 percentage points. This is quite a significant achievement within the category. But compared to the total strength of the male LFPR, the female LFPR was as much as 2.35 times stronger.

As regards employment across the major sectors of the economy, the study shows that in the period between the years 2000 and 2012, employment in the agricultural sector has contracted significantly to the extent of 0.39 percent. The situation was further aggravated during 2012 and 2019, when the rate of contraction of employment increased to (-) 2.55 percent. However, during the post-pandemic period, the sector saw a turnaround, with a growth in employment rate of 8.93 percent—the highest among all four sectors. The manufacturing sector contributed an employment rate of 2.89 percent during 2000–2012, which significantly contracted by 0.33 percent but returned with a positive rate of 3 percent during 2019–2022. The construction sector initially saw a significant return of 9.15 percent employment during 2002 and 2012. But thereafter, it fell to a mere 2.18 percent but again rose 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 sector-wise employment positions and the corresponding contribution of the sector to the gross value addition (GVA) during the period in question. In the case of the tertiary sector, although the employment rate appears to be sluggish (from 23 percent in 2000 to 30 percent in 2022), its contribution to GVA was outstanding across the years, from 44 percent to 53 percent. Compared to this, the performance of the secondary sector was rather stagnant, both in terms of employment generation and GVA. In this case, employment generation remained between 16 percent in 2000 and only 25 percent in 2022, while GVA contribution accounted for 29 percent in 2000 and 31 percent in 2022. The performance of the primary sector is gradually falling on both counts, i.e., employment generation and GVA. The employment generation was to the tune of 61 percent in 2000, which sharply fell to 45 percent in 2022. On the other hand, contributions to GVA also fell from 27 percent in 2000 to 16 percent in 2022. The report noted that there was a shift of workers from the agricultural sector to the non-agricultural sector during 2000–2019, resulting in a fall in agricultural production. But the trend was reversed during and after the pandemic period (2019–2022), mainly due to the return of the workers to “subsistence activities in agriculture due to the lack of work opportunities outside the agriculture sector that was exacerbated by the pandemic-related economic slowdown.”