October 22, 2023

Periodic Labour Force Survey and Youth Employment Trends

Sanjay Roy

THE Periodic Labour Force Survey quarterly bulletin released by the National Statistical Office, Government of India on October 9 for the quarter April-June 2023 has attracted media attention for a 0.1 percentage point increase in worker population ratio (WPR) and 0.3 percentage point increase in labour force participation rate (LFPR) for the working age population in the urban segment compared to the previous quarter. WPR indicates the proportion of population employed in a particular reference period which was 45.2 per cent in the previous quarter and increased to 45.5 per cent in the April-June quarter.

The LFPR measures the proportion of reference age population who are in the labour market comprising of people who are employed, unemployed or actively seeking for employment. Employment or unemployment rate is measured on the basis of people within the labour force, or the proportion of people employed or unemployed out of the total number of actively employed or seeking for jobs. This means that unemployment rate may fall even if the actual number of unemployed people does not decline if the denominator increases or the number of people within the labour market increases. Therefore, assessing labour force participation rate is important while assessing employment situations.

PLFS quarterly bulletins are supposed to provide quick estimates of employment and unemployment indicators of urban India.  According to the recent bulletin, LFPR for working age population, that is above 15 years of age, for male remained unchanged at 73.5 per cent compared to previous quarter, for females it has increased from 22.7 per cent to 23.2 per cent. The worrying fact which seems to be continuing for quite some time is the decline in LFPR for the age group 15-29, the youth of India. For males it has come down from 57.6 per cent to 57.2 per cent and for females it declines from 19.3 per cent to 19.2 per cent. Apparently this is a marginal decline but this is in continuation with a secular decline in youth labour force participation rate since the middle of the last decade.

India is in the midst of the demographic phase when the proportion of young within the population is higher and this will continue for another two three decades. In such a demographic stage, since the proportion of dependent population by age is less, there used to be greater possibility of higher growth and prosperity if the youth bulge can be productively used. By employing greater number of younger people into productive work, a country can effectively reap the demographic dividend. In case of India, on the contrary, the proportion of younger people of the age 15-24 are increasingly out of the labour force. In fact, according to CMIE only one-fifth of the people between this age group are either employed or seeking for jobs, the rest 80 per cent are actually out of the job market. According to the ILO estimation, youth labour force participation rate in India stands at 28.1 per cent. In comparable developing countries, youth LFPR is much higher. According to ILO, youth LFPR is 56 per cent in Brazil, 48 per cent in China or 45.8 per cent in Indonesia. In Argentina or Bangladesh this rate ranges between 35-40 per cent. In case of India for the whole year 2022-23 according to PLFS that considers youth between 15-29 years, that is wider age range compared to CMIE, the LFPR in urban India turned out to be 40.7 per cent according to usual status of employment. If we consider youth of 15-24 age group, they account for a little higher than the quarter of the working age population but their share within the labour force is roughly 18.1 per cent. Even the recent PLFS bulletin shows that for the April-June 2023 quarter, the average LFPR by current weekly status for the working age population of urban India has been 48.8 per cent and for the age group 15-29 it turns out to be much lower 39.3 per cent.This indicates that more than half of the working age population that is above the age of 15 is out of the labour force and within the youth defined by 15-29 age group roughly 60 per cent do not participate in the labour market. This simply indicates that India is not capable of employing more than half of its labour force and 60 per cent of the youth in a phase when the proportion of younger population is much higher.

More so even those who are participating in the labour force, unemployment rate is much higher for the younger population. Only 32.3 per cent of the younger population are employed in some work or the other. A large portion is in low paid wage work in the informal sector and others been equally divided between self-employment and salaried regular jobs. In 2022-23 according to CMIE estimates, the average unemployment rate in India was 7.5 per cent, which in itself was very high but unemployment rate within the age group 15-24 was as high as 45.4 per cent, meaning more than six times the general unemployment rate. According to the current weekly status (CWS) approach defined by PLFS, a person is considered as unemployed in a week if the person didn’t work even for one hour on any day during the reference week but sought or was available for work at least for one hour on any day during the reference week. This implies that a person being employed for at least one hour in the entire week during the survey was marked as employed and even by such a broad definition 6.6 per cent of the working age population were unemployed while unemployment rate within the age group 15-29 was 17.6 per cent. The overall unemployment rate is lower than the previous quarter which was 6.8 per cent but youth unemployment rate has increased from 17.3 per cent in the last quarter to 17.6 per cent in April-June 2023.

The annual PLFS report of 2022-23 also shows the extent of precarity within the regular workers in India. Within the regular waged/salaried employees, 58.6 per cent of the workers do not have any written job contract, in other words, denied of the minimum legal recognition of their existence as workers. In the urban segment, such workers account for 56 per cent of the total waged and salaried employees. Out of the regular wage/salaried employees 46.8 per cent are not eligible for any paid leave and 53.9 per cent are not eligible for any sort of social security benefits. The annual PLFS report records the average earnings of casual labour and self-employed work in different quarters. On an average, the wages of casual workers per day increased from Rs 398 in January-March 2023 to Rs 403 in April-June 2023 which is a marginal rise of 1.26 per cent and for self-employed work during the two reference period the gross monthly earnings in rupees increased from 12,972 to 13,347, an increase of 2.9 per cent in nominal terms. But during the same reference period the average CPI inflation was 4.6 per cent, which means that the real income of the working people actually declined during this period.

Therefore, the current scenario of employment-unemployment in India can be summed up as a situation of rising precarity, falling real wages and a massive exclusion of young labour force from the working population. Unemployment rate is at very high levels given the fact that India’s unemployment rate used to be around 2-3 per cent in the past decades which is currently 7.5 per cent. Generally, unemployment rate in developing countries used to be low because people can’t afford to remain unemployed as there is no social provisioning of sustenance and are forced to accept work at lower wages and of precarious conditions. In such a scenario, high unemployment rate particularly for the youth being six times higher than the average unemployment rate is a major concern. More importantly with the gradual adoption of new technology if the young work force is not adequately trained through public provisioning of low cost quality education and skills, the potential demographic dividend will turn out to be a disaster.