EDITORIAL ANALYSIS : Living in denial about unemployment
Kartavya Desk Staff
Source: The Hindu
• Prelims: Current events of national importance(Different social service Schemes, unemployment, RBI, KLEMS, ASUSE, Centre for Monitoring Indian Economy (CMIE), MGNREGA etc
• Mains GS Paper II & III: Social empowerment, schemes for vulnerable sections, development and management of social sectors/services.
ARTICLE HIGHLIGHTS
• The Reserve Bank of India (RBI) report said that 8 crore jobs have been created in the last 3-4 years. Reports from financial institutions, such as Citigroup, pointed to inadequacy of employment generation in India.
• Reports from financial institutions, such as Citigroup, pointed to inadequacy of employment generation in India.
INSIGHTS ON THE ISSUE
Context
Unemployment:
• National Sample Survey Organization (NSSO) defines employment and unemployment on the following activity statuses of an individual: Working (engaged in an economic activity) i.e. ‘Employed’. Seeking or available for work i.e. ‘Unemployed’. Neither seeking nor available for work. The first two constitute the labor force and unemployment rate is the percent of the labor force that is without work.
• Working (engaged in an economic activity) i.e. ‘Employed’.
• Seeking or available for work i.e. ‘Unemployed’.
• Neither seeking nor available for work.
• The first two constitute the labor force and unemployment rate is the percent of the labor force that is without work.
• Unemployment rate = (Unemployed Workers / Total labor force) × 100
• Unemployment occurs when a person who is actively searching for employment is unable to find work.
• Unemployment is often used as a measure of the health of the economy.
• The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force.
Types of Unemployment in India:
Conflicting reports:
• RBI ‘Data Manual’ released ‘The India KLEMS Database: The dataset includes measures of: Gross Value Added Gross Value of Output Labour Employment Labour Quality Capital Stock Capital Composition The database covers 27 industries comprising the entire Indian economy.
• Gross Value Added
• Gross Value of Output
• Labour Employment
• Labour Quality
• Capital Stock
• Capital Composition
• The database covers 27 industries comprising the entire Indian economy.
• State Bank of India (SBI) report to counter the financial institutions’ reports: “Even if we exclude Agriculture, the total number of jobs created in manufacturing and services is at 9 crore during FY14-FY23 and 6.6 crore during FY04-FY14. Annual Survey of Unincorporated Sector Enterprises] survey: “The total labor force in India is at 59.7 crore, which is nearly equivalent to 8 crore as per
• Annual Survey of Unincorporated Sector Enterprises] survey: “The total labor force in India is at 59.7 crore, which is nearly equivalent to 8 crore as per
• Centre for Monitoring Indian Economy (CMIE), a private data-gathering agency: It publishes data on employment and unemployment For june july: The unemployment rate had risen to an eight-month high of 2% up from 7% in the previous month. This was contrary to the official narrative of massive employment generation.
• It publishes data on employment and unemployment
• For june july: The unemployment rate had risen to an eight-month high of 2% up from 7% in the previous month.
• This was contrary to the official narrative of massive employment generation.
Conflicting ground reports:
• Uttar Pradesh: About 47 lakh applicants appeared for an exam to select around 60,000 constables in.
• In 2022, 1.25 crore aspirants applied for the Railway Recruitment Board’s Non-Technical Popular Categories recruitment exam.
• Protests in Bihar, Uttar Pradesh and other States when the Agnipath scheme was announced in 2022.
#### KLEMS data:
#### ● It is “a comprehensive measurement tool to monitor and evaluate productivity growth in the Indian economy”.
#### ● It does not estimate employment but uses the official data available.
#### ● For labor input it uses the Employment and Unemployment Surveys (EUS) by the National Sample Survey Office (NSSO), conducted between 1983 and 2011-12, and the Periodic Labour Force Survey (PLFS).”
#### ● KLMS data is based on official data from the PLFS, the ASUSE survey, etc.
Why do different sources give widely varying estimates of employment?
• Highly complex structure of the Indian economy and the paucity of reliable data.
• India consists of the organized and the unorganized sectors: The data for the organized sector is available from statutorily published annual data. Unorganized sector employs 94% of the labor force. No other big country has such a huge unorganized sector for which data is sparse.
• Unorganized sector employs 94% of the labor force.
• No other big country has such a huge unorganized sector for which data is sparse.
• Unorganized sector consists of possibly 11 crore farms and 6.5 crore MSME units: Surveying them annually is difficult.
• The government is now committed to bringing out the ASUSE survey But ASUSE survey data in turn depend on data from the Census and the Urban Frame Survey (UFS). There has been no Census since 2011 and UFS data apparently pertain to 2012-17. Outdated data are being used.
• But ASUSE survey data in turn depend on data from the Census and the Urban Frame Survey (UFS).
• There has been no Census since 2011 and UFS data apparently pertain to 2012-17.
• Outdated data are being used.
• In the absence of current data, earlier data should be acceptable. But 2016-2024 was an abnormal period with four shocks to the economy: demonetisation in 2016 Introduction of the Goods and Services Tax The Non-Banking Financial Companies crisis COVID-19 pandemic. When shocks occur, use of pre-shock data for sampling creates problems due to structural changes. These shocks specifically impacted the unorganized sector, the one that the ASUSE survey seeks to estimate. Many units closed down due to lack of working capital. People migrated, the size of towns and villages changed. A sample based on the 2011 Census would not be appropriate. Closures will not be captured and only the surviving units will be a part of the sample. The ASUSE 2024 Report says, “… 16,382 FSUs (8,495 in rural and 7,887 in urban) have been surveyed The total number of establishments surveyed has been 4,58,938 (2,58,296 in rural areas and 2,00,642 in urban areas). ASUSE 2022-23 gives an estimate of 50 crore establishments” The rural-urban ratio and the ratio of smaller and larger units would have changed. This could give an upward bias to the number of establishments and their employment.
• But 2016-2024 was an abnormal period with four shocks to the economy: demonetisation in 2016 Introduction of the Goods and Services Tax The Non-Banking Financial Companies crisis COVID-19 pandemic.
• demonetisation in 2016
• Introduction of the Goods and Services Tax
• The Non-Banking Financial Companies crisis
• COVID-19 pandemic.
• When shocks occur, use of pre-shock data for sampling creates problems due to structural changes. These shocks specifically impacted the unorganized sector, the one that the ASUSE survey seeks to estimate. Many units closed down due to lack of working capital. People migrated, the size of towns and villages changed. A sample based on the 2011 Census would not be appropriate. Closures will not be captured and only the surviving units will be a part of the sample.
• These shocks specifically impacted the unorganized sector, the one that the ASUSE survey seeks to estimate.
• Many units closed down due to lack of working capital.
• People migrated, the size of towns and villages changed.
• A sample based on the 2011 Census would not be appropriate.
• Closures will not be captured and only the surviving units will be a part of the sample.
• The ASUSE 2024 Report says, “… 16,382 FSUs (8,495 in rural and 7,887 in urban) have been surveyed The total number of establishments surveyed has been 4,58,938 (2,58,296 in rural areas and 2,00,642 in urban areas). ASUSE 2022-23 gives an estimate of 50 crore establishments”
• The total number of establishments surveyed has been 4,58,938 (2,58,296 in rural areas and 2,00,642 in urban areas).
• ASUSE 2022-23 gives an estimate of 50 crore establishments”
• The rural-urban ratio and the ratio of smaller and larger units would have changed. This could give an upward bias to the number of establishments and their employment.
• This could give an upward bias to the number of establishments and their employment.
Government Initiatives:
Way Forward
• PLFS official data source differs greatly from the CMIE data. Differences in definitions, such as who is counted as employed.
• Differences in definitions, such as who is counted as employed.
• The CMIE adopts the International Labour Organization definition and counts only those who get an income from work as employed. PLFS counts those who are working even if they do not get an income from it. Those giving free labor or those who sit in fields that have no work get counted as employed by PLFS.
• PLFS counts those who are working even if they do not get an income from it.
• Those giving free labor or those who sit in fields that have no work get counted as employed by PLFS.
• Last few years PLFS has given around 50%-55% labor force participation, while CMIE says the figure stands at 40%-45%. There is a huge difference of about 90 million between the two.
• There is a huge difference of about 90 million between the two.
• PLFS counts the disguised unemployed and the under-employed. PLFS shows that almost no one is unemployed CMIE tells us how many have simply given up looking for work. That is also unemployment, which the official data do not recognise.
• PLFS shows that almost no one is unemployed
• CMIE tells us how many have simply given up looking for work.
• That is also unemployment, which the official data do not recognise.
• The ground-level situation of unemployment is apparent from the frequent reports about the youth struggling to get work and facing issues in examinations.
• The employment challenge can no longer be met only through more rapid GDP growth. A separate policy focus is needed on employment in addition to the focus on GDP growth.
• A separate policy focus is needed on employment in addition to the focus on GDP growth.
• Employment policies will need both demand side and supply side components. For example: In India firms find it easier to automate due to a lack of adequate skilled labor
• For example: In India firms find it easier to automate due to a lack of adequate skilled labor
QUESTION FOR PRACTICE
How globalization has led to the reduction of employment in the formal sector of the Indian economy? Is increased informalization detrimental to the development of the country?(UPSC 2016) (200 WORDS, 10 MARKS)