UNIT 22 EMPLOYMENT AND Employment and

Unemployment: Policy
UNEMPLOYMENT: POLICY Challenges

CHALLENGES

Structure
22.0 Objectives
22.1 Introduction
22.2 Enumeration of Workers
22.2.1 Conceptual Framework of Key Employment and Unemployment Indicators
22.3 Labour Force and Work Force Participation Rates
22.4 Dimensions of Unemployment
22.5 Growth of Employment
22.6 Quality of Employment
22.6.1 Proportion of Workers in Organised and Unorganised Sectors
22.6.2 Proportion of Workers Engaged in Regular and Casual Labour
22.7 Employment Policy Framework
22.7.1 Report to the People on Employment
22.7.2 Issues of Concerns
22.8 Let Us Sum Up
22.9 Term-end Exercises
22.10 Key Words
22.11 References
22.12 Answers or Hints to Check Your Progress Exercises

22.0 OBJECTIVES
After going through this unit, you will be able to:
● know the various concepts used in the measurement of employment and
unemployment by NSSO and PLFS;
● explain the various dimensions of unemployment in India;
● examine the growth of employment in the post-reform period;
● assess the quality of employment; and
● suggest various measures towards employment policy framework.

22.1 INTRODUCTION
Engagement of a person in any economic activity is central to the concept of
identifying a worker. A worker is one who participates in any economic
activity. His or her human capital endowment is utilised by the society (or
131
Major Issues
Confronting
the economy) and in the process, he or she earns a living. All workers
U
Indian Economy constitute the workforce or the employed.

Those who are not workers are called non-workers. Some among the non-
workers may be seeking or looking for work or are available for work. Such
persons constitute the unemployed. The workforce and the unemployment
together make up the labour force. The entire population of any area, region
or country is, thus, made up of three components; the workforce (the
employed), the unemployed and the non-workers. The third component is
also referred to, for obvious reasons, as the population which is not a part of
the labour force. The first is engaged in economic activity and produces the
national product, the second is available for being engaged in such activity
but the economy is unable to utilise it and the third is not available for
utilisation in economic activity. Schematically, workforce can be illustrated
as follows:

Population

Labour Force Out of Labour

Foce
They are not available for utilisation
in Economic activity
Work Force The Unemployed
(The Employed)
Economy is unable to
utilise them

Utilised by the economy

for generating national
product

Fig. 22.1: Labour Force, Work Force and the Unemployed

How are the workers or the employed and the other two categories of people
in a given area – a region or a country, say India – identified and
enumerated? How are the workforce and the labour force measured? We
shall answer these questions in the next section.

22.2 ENUMERATION OF WORKERS

Now, let us discuss about the sources of data in India on workers. In India,
two main organisations which generate and compile data on workers are the
National Sample Survey Organisation (NSSO) and Office of the Registrar
General of Census. These two organisations generate quite a substantial data
on the workers, employment and unemployment, etc. on regular intervals for
the entire country. Among these two sources, NSSO provides more data on
employment and unemployment. For understanding and studying the data
132 given in National Sample Survey (NSS) Rounds, it is important to be well
aware of the concepts that were used in these data collection exercises. NSSO Employment and
Unemployment: Policy
used the concept of ‘Usual Principal Status’ (UPS) as a time reference period Challenges
for identifying workers. In more general terms, NSSO used three reference
periods to describe the activity status of a worker. These reference periods
are– a year, a week and a day.

Starting from 27th round during Oct, 1972-Sep, 1973, the quinquennial
employment-unemployment surveys (EUs) of the NSSO provided relevant
data on key features of the labour force as well as the status of the decent
work. These surveys continued till 68th round conducted during 2011-12.
Towards improving the existing system (quinquennial surveys– EUs) of
collecting data, the Periodic Labour Force Survey (PLFS) has been designed
to replace its previous quinquennial rounds on the employment-
unemployment situation and gather the annual estimates of the labour force
on employment and unemployment along with quarterly estimates for the
urban areas. These annual PLFS provide quarterly statistics for urban areas
on current weekly status (CWS) and annual estimates of employment
indicators both for rural and urban areas on CWS and usual status basis.

Since there has been a significant re-structuring of the previously existing

questionnaire, survey methodology and inquiry schedule, labour market
estimates by PLFS is not strictly comparable with NSSO-EUs. For
comparability, the results of PLFS with earlier rounds of NSSO surveys need
to be understood in the context with which the survey methodology has been
designed.

22.2.1 Conceptual Framework of Key Employment and

Unemployment Indicators
The Periodic Labour Force Survey (PLFS) gives estimates of key
employment and unemployment indicators like the Labour Force
Participation Rates (LFPR), Worker Populations Ratio (WPR),
Unemployment Rate (UR), etc. These indicators are defined as follows:

a) Labour Force Participation Rate (LFPR): LFPR is defined as the

percentage of persons in labour force (i.e., working or seeking or
available for work) in the population. Generally, by population we refer
people in the age group 15-60 years, the segment of the population which
can potentially work, the rest (children below 15 years and elderly above
60 years) are considered as the dependent population. Sometimes the
working-age population may be differently specified.
b) Worker Population Ratio (WPR): WPR is defined as the percentage of
employed among the persons in the labour force.

c) Unemployment Rate (UR): UR is defined as the percentage of person

unemployed among the persons in the labour force.

d) Usual Principal Status Unemployment (UPS): this is measured as the

number of persons who remained unemployed for a major part of the
year. The persons covered by the survey may be classified into those
working and/or available for work in their principal activity, and those
133
Major Issues
Confronting
working and/ or available for work in a subsidiary activity, that is, a
U
Indian Economy sector other than their principal activity. Hence, within the usual status
concept, the estimates are derived on the usual principal status as well as
the usual principal and subsidiary status basis. The usual status
unemployment rate indicates chronic unemployment, because all those
who are found usually unemployed in the reference year are counted as
unemployed. This measure is more appropriate to those in search of
regular employment, e.g., educated and skilled persons who may not
accept casual work. This is also referred to as ‘open unemployment’.

e) Usual Principal and Subsidiary Status Unemployment (UPSS): Here

person is considered unemployed, if besides UPS, those available but
unable to find work on a subsidiary basis during a year.

f) Activity Status-Usual Status: The activity status of a person is

determined on the basis of the activities pursued by the person during the
specified reference period. When the activity status is determined on the
basis of the reference period of last 365 days preceding the date of
survey, it is known as the usual activity status of the person.

g) Activity Status-Current Weekly Status (CWS): The activity status

determined on the basis of a reference period of last 7 days preceding the
date of survey is known as the current weekly status (CWS) of the
person.
h) Activity Status-Current Daily Status (CDS): The activity status
determined on the basis of a reference period of each day of the 7 days
preceding the date of survey is known as the current daily status (CDS)
of the person.
Creation of employment opportunities depends on the volume and
composition of economic activity in the economy, that is, the total output of
goods and services in the economy and its structure. The total output of
goods and services is called the Gross Domestic Product (GDP). Thus, levels
of employment in an economy depend on the size and composition of its
GDP. Factors that affect this basic relationship are: (i) the availability of
capital, (ii) the availability of skills and expertise among the employed
persons and (iii) the manner in which capital and labour (the number of
employed persons) combine to produce the output of goods and services. In
other words, a number of inter-dependent factors like material, financial and
human capital, knowledge and technology utilised, productivity of labour and
capital, and Government policies shape this relationship.

22.3 LABOUR FORCE AND WORK FORCE

PARTICIPATION RATES
As stated in the previous section, labour force refers to that segment of
population which supplies or offers to supply labour for production and
therefore includes both employed and unemployed persons.

134
Labour Force Participation Rate (LFPR) is a measure of the proportion of the Employment and
Unemployment: Policy
country’s population that is engaged actively in the labour market, either by Challenges
working or seeking work. It provides an indication of the size of the supply
of labour available to engage in the production of goods and services. The
gap between average annual growth of labour force and employment growth
provides hints towards increase/ decrease in the existing stock of unemployed
people. Work Participation Rate (WPR) is a measure of the proportion of the
country’s labour force who are engaged in work. It provides information on
the ability of the economy to generate employment.

Throughout the period between 1983 and 2018-19, male participation

remained higher both in labour and workforce. Using the usual principal and
subsidiary status (UPSS) criterion, labour force participation rate, recorded at
42.9 per cent in 1983, declined to 42.3 per cent in 1993-94, and again
declined to 37.5 per cent in 2018-19. Among women, rates were found to be
29.8, 29.0 and 18.6 per cent in the three years respectively. Female
participation per se in rural areas was much higher than in urban areas. Urban
male participation rates (both labour force and workforce) were higher than
rural male participation in 1999-2000, 2004-05, 2009-10 and 2018-19. (Table
12.1)

LFPR for rural males increased marginally in 2009-10 compared to 2004-05

while for urban males it actually declined. The most striking revelation of
NSSO’s 66th round survey is the significant fall in female work participation
rates (FWPR) between 2004-05 and 2009-10. Rural FWPR dropped to reach
20 per cent in principal status work (UPS) and 26 per cent in usual (principal
+ subsidiary) status work (UPSS) in 2009-10. However, it marginally
increased to 19.1 per cent in 2018-19. In urban areas too, FWPR has fallen
substantially from 13.5 per cent in 2004-05 to below 12 per cent in 2009-10
in the case of UPS employment and from close to 17 per cent to below 14 per
cent in UPSS during the same period (Mazumdar, 2011). With principal
status or main work/employment as well as subsidiary status or marginal
work having both lost ground, it appears that relatively more durable work as
well as shorter bursts of temporary employment have become less available
to women. Two possible explanations may be offered for this decline: firstly,
women have simply withdrawn from the labour market in India due to social
conservatism. Secondly, more women are pursuing higher education
resulting decline in women LFPR. However, decline in women LFPR across
all age groups indicates that there must be some other factors inhibiting
women from participating in the labour market. The decline in the LFPR for
women irrespective of age is possibly due to decline of overall employment
opportunities compelling the women for withdrawal from the labour market.

Thus, labour force participation rate as percentage of population has not

remained fixed over a period of time. There has been specific participation
rate changes overtime in response to economic, social and cultural factors.
This is particularly true for women and children. Most women from poor
households participate in the labour force, but they may withdraw from it
with increase in household income and then join again at much higher level
of income and also when they have acquired a certain level of education. So
135
Major Issues
Confronting
female labour force participation rate is observed to have a U-shaped
U
Indian Economy relationship with the per capital income level (India Labour and Employment
Report, 2012).

Table 22.1: Labour Force and Work Force Participation Rates (CDS
basis) (per cent)

1983 1993-94 1999-00 2004-05 2009-10 2017-18 2018-19

Labour force participation rates (LFPR)
Rural Male 52.7 53.4 51.5 53.1 53.6 54.9 55.1
Rural Female 21.9 23.2 22.0 23.7 19.7 18.2 19.7
Urban Male 52.7 53.2 52.8 56.1 55.6 57.0 56.7
Urban Female 12.1 13.2 12.3 15.0 14.1 15.9 16.1
Work Force participation rates (WFPR)
Rural Male 48.2 50.4 47.8 48.8 50.1 54.9 52.1
Rural Female 19.8 21.9 20.4 21.6 18.2 18.2 19.1
Urban Male 47.3 49.6 49.0 51.9 52.2 57.0 52.1
Urban Female 10.6 12.0 11.1 13.3 11.7 15.9 14.5
Source:
1) Various rounds of NSSO survey on employment and unemployment.
2) PLFS Report 2018-19 for 2017-18 and 2018-19.4

Check Your Progress 1

1) What are various measures of employment and unemployment?
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
2) Do you think that CDS criterion is the most inclusive measure of
unemployment? Why?
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
3) Differentiate between worker, non-worker and unemployed.
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
136
22.4 DIMENSIONS OF UNEMPLOYEMNT Employment and
Unemployment: Policy
Challenges
The unemployment rate is the ratio of the number of unemployed persons in
the labour force per thousand.

Based on the Periodic Labour Force Survey (PLFS)- Annual Report (July,
2018 – June, 2019), the data relating to unemployment situation has been
incorporated in Table 22.2.

1) As per the latest Annual report (by the Periodic Labour Force Survey
2018-19) on the employment situation, the unemployment rate in India
was 5.8 per cent at the all-India level following the usual states criterion.
It was 5.6 per cent among males and 3.5 per cent among females in rural
areas while the rates were 7.1 per cent among males and 9.9 per cent
among females in urban areas.

2) Among the educated persons falling within the age group of 15 years and
above, unemployment rate was 11.2 per cent in rural areas and 10.8 per
cent in urban areas.

3) In 2018-19, the unemployment rate among rural male youth and rural
female youth (persons of age 15-29) was 16.6 per cent and 13.8 per cent
respectively. Unemployment rate among urban male youth and female
youth was much higher to the extent of 18.7 per cent and 25.7 per cent
respectively.

Thus, it is clear that unemployment rate is not only on the rise in the country
but is at an all-time high. It has been the highest since 1977-78 among the
males and highest since 1983 among the females in the rural as well as in the
urban areas. The unemployed persons in 2017-18 have more than doubled to
28.5 million from 10.8 million in 2011-12.
The key features of the unemployment situation in India (as given by the
PLFS 2018-19) are:
1) The rise in the unemployment rate has occurred across states. The states
which crossed 5 per cent unemployment rate are Goa, Manipur, Kerala,
Mizoram, Nagaland, Odisha, Uttar Pradesh, Arunachal Pradesh,
Himachal Pradesh, Jammu and Kashmir, and Rajasthan. Some of these
states namely Goa, Manipur, Kerala, Mizoram and Nagaland crossed
double digits rate of unemployment.

2) Regional variation in unemployment has declined since 2009-10

indicating convergence of unemployment rate across states.

3) The possible reason for high unemployment rate in the urban sector are
migration of surplus labour from the rural areas, which accelerates with
increase in connectivity between the two sectors. This leads to inference
that higher level of urbanisation correspondence to higher unemployment.

Further, availability of the consumption support schemes particularly in the

rural areas, rising opportunities for young educated and school dropout young
adults, higher wages due to MNREGA effect– have eased the situation of 137
Major Issues
Confronting
large-scale underemployment visible in terms of residual absorption of labour
U
Indian Economy in low productivity activities. This has resulted in higher rate of open
unemployment. Also, due to rise in the demand for education and skills,
many young boys and girls prefer to remain unemployed and keep searching
for suitable jobs. The rising urbanisation reflected in large scale emergence of
census towns in 2011 has made the unemployment rate more visible.

Table 22.2:Unemployment Rates (as percentage of Labour Force)

Year UPS UPSS CWS CDS

1972-73 3.80 1.61 4.32 8.35
1977-78 4.23 2.47 4.48 8.18
1983 2.77 1.90 4.51 8.28
1987-88 3.77 2.62 4.80 6.09
1993-94 2.56 1.90 3.63 6.03
1999-2000 2.81 2.23 4.41 7.32
2004-05 3.18 2.33 4.53 8.34
2009-10 2.50 2.00 3.60 6.60
Source: India Labour and Employment Report, 2012

Table 22.3: Unemployment Rate (as percentage of Labour Force)

2017-18 2018-19
Rural Urban Total Rural Urban Total
Male 5.8 7.1 6.2 5.6 7.1 6.0
Female 3.8 10.8 5.7 3.5 9.9 5.2
Person 5.3 7.8 6.1 5.0 7.7 5.8
Source: Periodic Labour Force Survey – Annual Report (July, 2018 – June, 2019)

The high incidence of unemployment among the educated in general and

women in particular reflects that the pace of creation of diversified
employment opportunities is lagging behind the pace of expansion of
education. The educational and training courses offered by the educational
and training system and their curricular content is becoming increasingly
irrelevant to the kind of employment opportunities being generated by the
economy. Gender discrimination in the labour market and at the workplace
also seems to be adding to the problem. These features of the unemployment
situation call for steps like: (i) expansion and diversification of the economy,
especially the rural economy, (ii) restructuring of the education and skill
development system to make it responsive to the world of work and (iii)
focus on removal of gender bias in the labour market, the workplace and in
skill development.

138
22.5 GROWTH OF EMPLOYMENT Employment and
Unemployment: Policy
Challenges
The available information relating to the growth of employment in India
during the last three decades is comprehensively summarised in Table 22.4
and 22.5 below:

Table 22.4: Average Annual Rate of Growth of Employment

Year Growth Rate

1983-1994 2.06
1994-2000 0.98
2000-2005 2.95
2004/05-2009-10 0.95
Source: Based on respective rounds of employment and unemployment survey reports

Table 22.5: Addition to Working Age Population (15 years and above)
and its Distribution

Period Addition Additions to LF, WF and EF as

to WAP Percentages to Additions in WAP
(mn)
LF WF EF Out of WF
and EF
Men & Women
1983-94 140.68 58.2 56.9 13.0 30.1
1994-2005 152.05 60.2 57.9 12.4 29.7
2005-12 137.63 14.5 14.7 30.3 55.0
2012-18 128.34 10.3 -4.8 22.1 82.7
Only Men
1983-94 72.82 80.8 79.4 15.2 5.4
1994-2005 78.65 77.7 75.7 12.2 12.1
2005-12 65.66 56.3 55.7 35.5 8.8
2012-18 64.97 48.8 24.1 23.0 52.9
Only Women
1983-94 67.85 34.0 32.8 10.6 56.6
1994-2005 73.40 41.4 38.8 12.6 48.6
2005-12 71.96 -23.7 -22.7 25.7 97.0
2012-18 63.36 -29.1 -34.4 21.2 113.2
WAP = working age population, LF = labour force, WF= workforce, EF= educational force
Source: Article From Jobless to Job-loss Growth Gainers and Losers during 2012-18
published in EPW, Vol. 4, No. 44, November, 9 2019.

1) The ability of Indian economy to absorb the incremental working age

population into workforce has been declining since 2004-05. The period 139
Major Issues
Confronting
between 2012 and 2018 has shown a negative trend. During this period,
U
Indian Economy existing workers equivalent to close to 5 per cent of the incremental
working age population lost their jobs. During two decades (i.e., 1983-84
- 2004-05) 57 per cent to 58 per cent of those coming to working age
population were absorbed into the workforce. This proportion fell close
to 15 per cent during the next seven year period (2004-05 – 2001-12) and
during the period (2011-12 – 2017-18) it turned out negative.
2) During the first two decades (1983-2005) only 12 per cent to 13 per cent
of the addition to the working age population (15 years and above) found
themselves in educational force. This proportion increased to 30 per cent
by 2012. However, during last 6 years’ period (2012-18) this share came
down to 22 per cent. Putting together those in workforce and those in
education, we find that 70 per cent of the incremental working age
population during 1983-94 as well as 2004-05 but this decreased to 45
per cent during 2005-12 and then 17 per cent during 2012-18. This
shows that ability of the economy to absorb addition to the working age
population either in employment or in education has practically declined
since 2005 but more sharply since 2011-12. This also indicates that
potential demographic dividend by way of an increasing share of
working age population in the total population has not been translated
into actual demographic dividend (Kamnan and Ravindran, 2019).
3) During 2005 to 2012 and 2012-2018, there has been a net loss of
women’s labour force as well as workforce. The process appears to have
accelerated during the latter period as compared to the former one.

4) Despite a higher share of young women from additional working age

population taking to education, the share of those outside the workforce
and educational workforce has been increasing so alarmingly that it has
now reached 113 per cent of the addition to their working age
population.

5) Those with higher education have gained in employment significantly

among all social groups. Women from the ST group are the biggest
gainer followed by both men and women from the SC group.

6) There has been a sharp decline in the growth rate of employment (UPSS)
from 2.06 per cent per year in the period 1983 to 1993-94 to only 0.98
per cent in the period 1993-94 to 1999-2000. Although this deceleration
in employment is accompanied by an equally sharp decline in the rate of
growth of labour force from 2.29 per cent in the period 1987-88 to 1993-
94 to only 1.03 per cent in the period 1993-94 to 1999-2000, yet the
growth rate of employment has been less than the growth rate of the
labour force. This indicates an increase in the unemployment rate.
7) Employment growth during 1999-2000 to 2004-05 has accelerated
significantly as compared to the growth witnessed during 1994-2000.
During 1990-2000 about 47 million work (CDS basis) opportunities
were created compared to only 24 million in the period between1993-94
and 1999-00. Employment growth accelerated from 0.98 per cent per
140 annum to 2.95 per cent per annum. However, since the labour force grew
 at a faster rate of 2.84 per cent than the workforce, unemployment rate Employment and
Unemployment: Policy
also rose. The incidence of unemployment on CDS basis increased from Challenges
7.31 per cent in 1999-00 to 8.28 per cent in 2004-05.

8) The employment growth during 2004-05 to 2009-10 was significantly

lower than during 1999-00 to 2004-05. The pattern of employment
growth reveals absolute decline in rural female’s employment. In this
period, both in rural and urban areas slowdown in employment growth
for male has occurred. The sharp absolute decline for rural females and
slight absolute increase for urban females is observed.
9) There have been significant changes in the sectoral pattern of
employment. The proportion of the work force engaged in the primary
sector declined by 12 per cent between 1983 and 2004-05 and it showed
faster decline between 2004-05 and 2009-10. Between 2009-10 and
2017-18, the share of employment in primary sector further declined to
44.6 per cent. Similarly, in the Secondary sector also, the share of
employment increased from 21 per cent in 2009-10 to 24.4 per cent in
2017-18. However, the Tertiary sector has performed very well in
employment as its share jumped from 25 per cent (2009-10) to 31.0 per
cent (2017-18). This marks an important phase of structural
transformation for the Indian economy, in which, the share and number
of workers in agriculture has been declining with corresponding rise in
employment in non-farm sectors. Among the non-firm sectors, service
sector is primarily driving the employment growth during 2009-10 and
2017-18.

Table 22.6: Changes in Sectoral Shares of Employment (UPSS)

(Percentages)

Primary Secondary Tertiary All

Rural 1983 81.80 8.60 9.50 100.00
2004-05 73.00 13.20 13.80 100.00
2009-10 68.60 16.70 14.70 100.00
Urban 1983 15.60 32.60 51.80 100.00
2004-05 9.40 33.30 57.30 100.00
2009-10 8.10 33.80 58.10 100.00
Total 1983 68.90 13.30 17.80 100.00
2004-05 57.00 18.20 24.80 100.00
2009-10 53.80 20.90 25.39 100.00
2017-18 44.6 24.4 31.0 100.00

Check Your Progress 2

1) What are the implications of decline in women LFPR?
…………………………………………………………………………….
…………………………………………………………………………….
……………………………………………………………………………. 141
Major Issues
Confronting
2) Do you think that higher growth necessarily helps in expanding
U
Indian Economy employment growth?
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
3) State the various dimensions of deterioration in the quality of
employment in India.
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
4) Give an account of changing sectoral shares of employment in the Indian
economy.
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….

22.6 QUALITY OF EMPLOYMENT

Broadly, quality of employment can be judged on the following basis:
• Proportion of workers in organised and unorganised sectors
• Proportion of workers engaged in regular and casual labour

22.6.1 Proportion of Workers in Organised and Unorganised

Sectors
Increasing share of employment in unorganised sector reflect deterioration in
the quality of employment because workers’ earnings, regularity of
employment, work environment and social security vastly differ between
organised and unorganised sectors. Workers in organised sector have better
wages and salaries, job security, reasonably decent working conditions and
social protection against risks such as sickness, injuries, disability and death
arising out of hazards, accident at works, separations and old age. Those in
the unorganised sector apart from insecurity of job generally have no
protection against these risks, have low earning, often lower than the modest
statutory minimum wages and have no regularity. An increase in the share of

142
unorganised employment obviously means an overall deterioration in the Employment and
Unemployment: Policy
quality of employment. Challenges

An important aspect related to quality of employment is the large size of

unorganised sector as against organised sector in the total employment. The
size of the organised sector characterised by higher earnings and job security
has declined from 17 per cent in 2011-12 to 13.2 per cent on 2017-18.
Corresponding share of workers in unorganised sector increased from 83 per
cent in 2011-12 to 87 per cent in [Link] are 92.4 per cent informal
workers (with no written contract, paid leave and other benefits) in the
economy. There are also 9.8 per cent informal workers in the organised
sectors indicating the level of outsourcing. These are possibly the contract
workers.

Even the organised sector is increasingly moving towards informal

employment. The entire employment in the unorganised sector is informal as
is clear from the following table.

Table 22.7: Distribution of workers by types of employment and sector

2011-12 2017-18
Worker Unorganised Organised Total Unorganised Organised Total
Informal 82.6 9.8 92.4 85.5 5.2 90.7
Formal 0.4 7.2 7.6 1.3 7.9 9.3
Total 83.0 17.0 100.0 86.8 13.2 100.0

Source: Computed from NSS 68th unit level data on employment unemployment,
2011-12 and Periodic Labour Force Survey, 2017-18

It is significant to note that the informality is generally linked to economic

activity with low productivity and low-income generating prospectus. Given
the heterogeneity of informal employment, there is a need to formulate
specific policy sets to find solution to informality traps.
Further it is relevant to mention that quality of life and formal employment
are positively correlated with each other. The countries with very high HDI
are having more than 80 per cent of their workers in formal employment.
Most of the countries, with high HDI, are also having 60 to 80 per cent of
their workers in formal employment. This proportion ranges between 40 to
60 per cent in most of the medium HDI countries. Compared to it, less than
20 per cent of the workers are in formal employment in almost all the
countries with low HDI. Thus, social security and quality of life are closely
related with each other, higher the social security coverage higher is the
quality of life, as reflected by HDI.

22.6.2 Proportion of Workers Engaged in Regular and

Casual Labour
Another dimension of deterioration in the quality of employment can be
examined in terms of low earning, irregularity and uncertainty of work
availability, poor condition of work and lack of social protection and
143
Major Issues
Confronting
vulnerability to the risks and hazards. This in turn is seen in the increase in
U
Indian Economy the casualisation of the work force.

The Indian employment market is moving from regular towards casual

employment. From 1983 to 2017-18, people have moved from self-
employment to regular salaried employment and casual employment. The
proportion of casual workers in total workers increased from 24.03 per cent
in 1983 to 25 per cent in 2017-18, while the proportion of self-employed
declined from 58.84 per cent to 52.2 per cent and the proportion of regular
salaried employees increased from 17.14 per cent to 22.8 per cent during the
same period.
Casualisation of employment does not assure adequate days of employment
and income to meet the basic necessities of labour households. This along
with low wage rates adversely affects growth rate of average daily wage
earnings of the casual labour depriving them of fulfilling the basic needs.

Table 22.8: Distribution of Workers by Category of Employment

Year Nature of Employment

Self employed Regular/Salaries Casual
1983 58.84 17.14 24.03
1993-94 57.31 16.35 26.34
1999-2000 55.19 17.52 27.29
2011-12 52.00 18.00 30.00
2017-18 52.20 22.80 25.00
Source: 1) Different Quinquennial survey reports of NSSO till 2011-12
2) Periodic Labour Force Survey (PLFS): Annual Report (July 2018-June 2019).

22.7 EMPLOYMENT POLICY FRAMEWORK

India’s growth strategy adopted during the planning period has played a
significant role in impacting the employment situation in the country. For
instance, the Second Five Year Plan (1955-6 to 1959-60) involved adopting
an import-substituting industrialisation strategy, with a focus on heavy-
industry. This could not be, by definition, a strategy for rapid absorption of
surplus labour in agriculture. The result was as surplus workers migrated
away from agriculture in search of non-agricultural work, they were
inevitably absorbed intraditional services in both rural and urban areas. If not,
they were absorbed in unorganised manufacturing in micro-enterprises
employing less than 10 workers, where no social insurance was available. In
addition to this, government reserved manufacture of consumer products of a
non-durable nature for the small-scale sector, which began with a few
products and reached 836 in 1990. Since medium-sized firms or large
corporates were disallowed from entering this sector, the small enterprises
had no incentive to grow and absorb more workers in their manufacturing
units, thus exacerbating a problem resulting from the heavy industry first
strategy.
144
The employment situation is also impacted by the plethora of central and Employment and
Unemployment: Policy
state government labour laws. On the one hand, hardly any labour laws were Challenges
applicable to the small enterprises. On the other hand, the larger enterprises,
whether medium or large, became gradually subject to a number of laws
passed by state or central governments, which protected the workers in the
organised sector. While social insurance (in the form of employee provident
fund and health insurance) was mandatory, the growing number of laws
covering organised workers meant that employers tended to adopt
technologies that often limited the number of workers. The number of central
government laws related to labour alone amounted to 45 (in 2014, though
after repeal of some the number fell to 35 by 2018), which are often
inconsistent with each other, and tend to grow in their coverage as the size of
enterprises increases. On top of these 35, there are state-specific labour laws
that organised segment firms in industry or services have to comply with. The
reaction of employers was inevitable: the fewer the workers, the better it is
from their perspective. Organised sector jobs grew slowly, and most non-
agricultural employment continued to grow in the always unorganised sector
in micro-enterprises, with workers employed without any hope of social
insurance.

Consequently, in the earlier plan documents, calculations were made as to

how much additional employment was needed to absorb the unemployed and
under-employed and the growth in the labour force. In the draft of the Fourth
Year Plan 1969-1974 (Govt. of India, 1969), the employment issue just
occupied 3 pages in a Forth Year Plan document of 350. However, it was
clear that even rapid growth of the small modern sector could not create
enough jobs for a large and growing population. Without large scale creation
of employment, the benefits of economic growth would not reach the
population as a whole.
Suggestion of Dandekar and Rath in 1971 that high rates of poverty in India
need to be addressed through a massive programme of public works which
would create employment and public assets, essentially in rural areas, gave
rise to the Maharashtra Employment Guarantee Programmes in 1970 and
later on a much larger scale to NREGA in 2005. Since that time the need to
address the employment deficit has been constantly present in economic
analysis in India. During 1970s and 1980s, a variety of special programmes
to promote employment were introduced. These include Indira Gandhi’s 20-
point programme– Integrated Development Programme (IRDP), which was
applied across the country in 1980s. Due to rise in demand for labour on
account of spread of the green revolution, efforts were made by the Planning
Commission to reinforce employment intensive agriculture through strategic
investment. However, the main focus was on growth and not on employment.
Raj Krishna, a renowned economist argued that 6.5 per cent growth rate
would be enough to absorb the backlog of unemployment and similar
arguments were put forwarded to support the economic reforms of early
1990s.

Economic acceleration of the 1990s failed to deliver the expected increase in

employment and jobless growth became the common talking point. Overall
145
Major Issues
Confronting
job creation was slow after the economic reforms except during a short
U
Indian Economy period between 1999 and 2004. This trend continues right upto the present,
since the most recent data show negative employment elasticity for the
economy as a whole in the period from 2011-2012 to 2017-2018 and for
several key sectors including agriculture and manufacturing.

In view of the above, employment continues to be high on the policy agenda

reflected from labour law reforms and the various policy initiatives by the
Government like Skill India, Start Up India, reorientation policies for
MSMEs growth, Pradhanmantri Kaushal Yojna for skill formation, Mudra
Yojana, Pradhan Mantri Rojgar Protsahan Yojana (PMRPY), SAMADHAN
(Software Application for Monitoring and Disposal, Handling of
Apprehended/Existing Industrial Dispute), Shram Suvidha Portal to bring
transparency and accountability in enforcement of labour laws and easecompl
exity of compliance, Pradhan Mantri Shram Yogi Maandhan Yojana (PM-
SYM) for old age protection and social security of unorganised workers and
so on.

Besides, the Ministry of Labour and Employment, one of the oldest and
important Ministries of the Government of India, is functioning to ensure
improving life and dignity of labour force of the country by protecting and
safeguarding the interest of workers, promotion of their welfare and
providing social security to the labour force both in Organised and
Unorganised Sector by enactment and implementation of various Labour
Laws, which regulate the terms and conditions of service and employment of
workers. The State Governments are also competent to enact legislation, as
labour is a subject in the Concurrent List under the Constitution of India.

22.7.1 Report to the People on Employment

The annual reports provide a framework to understand the contemporary
employment scenario. They focus on key issues of generation of quality
employment for the people seeking work. The issue of providing decent
work, particularly to those who are excluded and marginalised in the labour
market is a central concern of these reports. The reports highlight that
employment growth along with equity and distributive justice can be a
powerful instrument for achieving faster, inclusive and sustainable growth.

Report to the People on Employment (2010)

The 2010 report views employment as a primary means through which

citizenship is made real for the people, the way in which the people acquire a
stake in society, overcome the insecurities of old age and ill health and ensure
a better future for children. One of the central ideas of the report is– high
economic growth and growth of quality employment reinforce each other.
Recognising low level of earnings and poor working conditions of casual
labourers and a part of self-employed workers, the report argues for
increasing the share of organised sector employment in total employment of
the country, particularly in the manufacturing and service sectors.

The report firmly puts on the agenda to best utilise the ‘demographic
146 dividend’ by focusing on generating gainful employment for youth, in
general, and young women, in particular. The report notes that given very Employment and
Unemployment: Policy
low proportion of skilled workers at present, a suitable and workable Challenges
framework to enhance the employability of workers is essential. The same
can be achieved by providing training to workers at various levels with
emphasis on recognising local skills and certifying informally acquired skills
along with the expansion of skill development institutions. The report also
argues for rationalisation of labour laws and broadening the ambit of labour
reforms for achieving equitable employment growth. It sets out short-term
and medium-term strategies to ensure gainful employment opportunities for
all the working people with particular emphasis on the disadvantaged
sections.

Report to the People on Employment (2011)

The report notes that the unemployment rate in India has declined during the
period 2004-05 to [Link] has been a positive change in the quality of
employment during the period 2004-05 to 2009-10 as most of the
employment growth has been contributed by growth in principal status
workers. There also has been an increase in proportion of regular wage
workers in the total workforce. Analysis of the sectoral distribution of
workers shows a declining trend incase of the primary sector, nearly stagnant
in manufacturing sector and an increase in the share of service sector.

The report highlights the vital role that the service sector can play in
generating productive employment in future. The report, however, notes the
dualistic nature of service sector employment with high income and better-
quality jobs limited to a small section of the workforce while the vast
majority remains trapped in low-wage income and relatively insecure
occupations. Hence, the report stresses the vital role of skill upgradation and
targeted social security provisions to reduce this dualism.

The report analyses the structural inequality in the labour market and access
to quality employment. One of the key inequalities is the high concentration
of socially disadvantaged groups (SC, ST and OBC) among casual workers.
Access to quality employment being highly correlated with educational status
and skill endowment, socially disadvantaged groups with high rates of
illiteracy and lack of industry relevant skills face greater barriers to access
productive employment.
Key medium-term strategies and targets include: Focus on self-employed and
casual workers for improving livelihood; Enhance the scope of employment
in the organised sector; Enhance regular employment for less advantaged
groups and in poorer states; Comprehensive coverage of unorganised sector
workers under social security schemes; Rationalisation and simplification of
labour regulations and broadening the ambit of labour reforms, Promote
diversification of rural workforce to off-farm and non-farm activities; Target
regions with concentration of vulnerable social groups such as ST, SC,
minorities, women, illiterate and less skilled for active labour market
policies; Detailed skill mapping mechanism to be evolved, Credible and
independent accreditation and certification process to be created; Up-
gradation of all training providing institutions and strengthening delivery
147
Major Issues
Confronting
through public private partnership (PPP) mode; Creating large number of
U
Indian Economy skill development institutions and pool of trainers to expand the outreach of
skill development initiative; Setting up of Sector Skills Council;
Development of National Vocational Qualification Framework; and Creating
a credible Labour Market Information System.

22.7.2 Issues of Concern

There are several issues of concern which need to be addressed:

1) Until recently the overall unemployment rate remained fairly low and
showed no long-term trend. The quality of employment in terms of
higher daily unemployment rate among casual workers and higher level
of unemployment among educated youth, especially among young
women was the major problem. The lack of productive, regular jobs has
emerged as deterioration in the quality of employment. There has been a
substantial increase in real wages and incomes in the informal activities
since 1980s indicating rise in productivity with persistence of dualism.
However, for 2017-18 Periodic Labour Force Survey shows a sharp rise
in open unemployment reflecting slow employment creation since 2012.
This high unemployment appears to be associated with deficiencies in
both the level and the pattern of demand in the economy.
2) Employment is not homogenous. There is a whole spectrum of jobs of
different types some much more productive or desirable than others.
There is a need of high productivity jobs in modern economic sectors.
The policy of promotion of entrepreneurship through Mudra Yojana and
focus on MSMEs need to be strengthened. In other words, employment
problem is a problem of composition of employment at overall level.

3) Employment deficits are not easy to measure, even conceptually. The

classical definition of open unemployment captures only apart of the
problem. Whether our concept of employment is well adapted to analysis
of today’s economy? Whether it captures gender differences, primary
and secondary activities, desirable and undesirable work or new types of
employment in the economy. For having clear understanding of these
issues, broader notion of work is needed (Gerry Rodgers, 2020).

4) Even within the narrow concept, employment creation is the result of

complex economic and social process and overall employment
elasticities are inadequate to reveal these processes of employment
generation. A negative employment elasticity means little at its own
(Gerry Rodgers, 2020).

5) A new strategy focussing change in economic policy framework from a

supply side one to a demand side one is required. This would call for a
focus on the rural economy, strengthening the productive capacity of
small enterprises in both rural and urban areas and strengthening the
education, health and related sectors especially in the rural economy. The
various schemes launched under the programme Atama Nirbhar Bharat
appears to be right initiative in this direction.
148
It is, therefore, imperative that the growth strategy gets appropriately tuned to Employment and
Unemployment: Policy
the third policy option i.e., altering the pace and composition of industrial Challenges
growth and create greater space for agriculture not only as a traditional
reservoir of labour for industrialisation, but also as a sector with greater
flexibility to absorb labour and generate broad based or extensive growth
(Bhaduri, 2006; p.85). This of course, is not the same as ‘agriculture first’
strategy advocated earlier by a number of scholars (Johnston and Maler,
1961; Maler, 1976). Here, the emphasis is not on sectoral priority. The idea
is ‘to combine the advantages of industrialisation and inclusive growth with
extensive growth in agriculture achieved through better labour absorption and
a higher participation ratio’ (Bhaduri, 2006; p.85). The central thrust here is
that ‘besides the issue of sectoral balance in any developmental strategy, the
scope for increasing labour periodicity through reorganising agriculture, as
different from shifting a part of the labour to other sectors, should be
thoroughly assessed and explored. This substantiated by and a renewed
recognition of the potential for surplus labour absorption and increase in
labour productivity in agriculture and rural sector, quite apart from the
strategy for inter-secoral shift of workforce (Bhaduri, 2006; p.84). The
Green Growth perspective may further enhance the potential of the primary
sector to absorb productive labour by reversing the process of factor
substitution that was mentioned above.
It is, therefore, argued that a balanced approach such as this may open up a
number of avenues for reorganising production and consumption, essentially
by harping on the demand side dynamics that leads to significant increase in
effective demand in the domestic market. It is at this juncture, one may find
a substantial space for convergence between the perspectives on employment,
environment and social dimensions as suggested by the sustainable
development framework (Shah, 2011).

Check Your Progress 3

1) Discuss different policy measures undertaken by the government to deal
with the issue of unemployment in the Indian economy.
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
2) Which measures would you like to suggest to generate employment
opportunities for those already unemployed?
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
149
Major Issues
Confronting
3) State the central ideas of the Report to the People on Employment 2010.
U
Indian Economy
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….
…………………………………………………………………………….

22.8 LET US SUM UP

The population of any area, region or country is made up of three
components: employed, unemployed and non-workers. Employed and
unemployed together make up of labour force. Three reference periods (i.e. a
year, a week and a day) identify the nature and extent of employment and
unemployment in the economy. Based on these three reference periods, three
approaches are adopted in estimating the status of employment and
unemployment – Current Daily Status (CDS), Current Weekly Status (CWS)
and Usual Principal Status (UPS). Several key employment and
unemployment indicators include Labour Force Participation Rates (LFPR),
Worker Populations Ratio (WPR), Unemployment Rate (UR), etc. Labour
force participation rate as percentage of population has been fluctuating over
a period of time. From 1983 till 2018-19, the LFPR for male (urban as well
as rural) and urban female has increased while the rate has declined for rural
female. While in terms of WFPR, the rate has increased for male (both urban
and rural) and urban female, while it has decreased for rural female.
As per the Periodic Labour Force Survey 2018-19, the unemployment rate for
both males and females is not only on the rise in the country but is at an all-
time high. Besides this, the ability of the economy to absorb addition to the
working age population either in employment or in education has practically
declined since 2005. Also, the economy is suffering from the loss of
women’s labour force and work force. As regards the sectorial pattern of
employment, the proportion of workforce engaged in primary sector has been
falling, whereas, there has been rise in the share of workforce engaged in the
secondary and the tertiary sector. An increase in the share of unorganised
employment is another issue the Indian economy is facing. In addition to this,
there has been increase in the casualisation of the work force as reflected by
the rise in the proportion of the workers moving towards casual employment.

Employment continues to be high on the policy agenda reflected from labour

law reforms and the various policy initiatives by the Government. Also,
Ministry of Labour and Employment is functioning to ensure improving life
and dignity of labour force of the country. Nevertheless, the complexity
associated with the issue of employment need to considered while framing
the employment policy framework.

150
22.9 TERM-END EXERCISES Employment and
Unemployment: Policy
Challenges
1) Distinguish between labour force and work force. How are the
employed workers identified and enumerated in India? Also examine the
dimensions of unemployment in India.

2) State the various dimensions of deterioration in the quality of

employment in India. Also examine the policy implications of slowdown
in women’s workforce participation rate.

3) Critically evaluate the employment policy embodied in the eleventh Five

Year Plan. Also state the conditions necessary for the success of this
policy.

22.10 KEY WORDS

Underemployment : Underemployment means people who are

employed for only part of a day or part of the
week and unemployed for the remainder of the
day or the week. This is underemployment that
is visible.
Incidence of : It is the share of the total unemployed persons
Unemployment in total labour force, expressed in percentage
terms.
Human Capital : Human Capital Endowment is the capability,
Endowment innate and acquired, of a person to earn income
for living, which is over and above the costs
involved in carrying out that effort.
Own-account Worker : Own-account worker is another name for self-
employed workers.
Usual Principal Status : An activity on which, a worker is engage for a
Activity (UPS) relatively longer period during one year,
preceding the date of survey.
Employment Elasticity : The ratio of employment growth to the growth
of National Income.

22.11 REFERENCES
1) Annual Report to the People on Employment (2010). Ministry of Labour
and Employment. Government of India, Retrieved from
[Link] sites/default/ files/First%20 Annual%20
Report_to_People%20 Employment. pdf

2) Second Annual Report to the People on Employment (2011). Ministry of

Labour and Employment. Government of India, Retrieved from https://
[Link]/sites/default/files/Second%20Emp%20Report%
20FINALFG_0.pdf
151
Major Issues
Confronting
3) Arup Mitra and Jitender Singh. (2019). Rising Unemployment in India:
U
Indian Economy A Statewise Analysis from 1993-94 to 2017-18. Economic and Political
Weekly, Vol LIV No 50, December 21, 2019.

4) Gerry Rodgers. (2020). Labour and Employment in India: A 50-year

Perspective. Indian Journal of Labour Economics, 63, pp 1-19.
[Link]

5) Ghosh, Ajit K. (2011). ‘The Growth-Employment Interaction in a

Developing Economy,’ V.B. Singh Memorial Lecture delivered in the
53rd Annual Conference of The Indian Society of Labour Economics
held in Udaipur.

6) Ghuman, R.S. (2011). ‘Development Paradigm and Need for Social

Protection for Workers; Global and Indian Scenario, Keynote paper on
the Theme Social Protection for Workers in India presented in the 53rd
Annual Conference of The Indian Society of Labour Economics held in
Udaipur.

7) Himanshu, (2011). ‘Employment Trends in India: A Re-examination’,

Economic and Political Weekly, Vol. XLVI, No. 37, pp.43-59

8) IHD (2012). India Labour and Employment Report, Oxford University

Press, New Delhi

9) K P Kannan and G Raveendran. (2019). From Jobless to Jobloss Growth:

Gainers and Losers during 2012-18. Economic and Political Weekly, Vol
LIV No 44, November 9, 2019.

10) MazumdarIndrani, Neetha N. (2011). ‘Gender Dimensions: Employment

Trends in India, 1993-94 to 2009-10, Occasional Paper No. 56, CWDS,
New Delhi

11) NCEUS (2010). ‘Report on Conditions of Work and Promotion of

Livelihoods in Unorganised Sector’, Academic Foundation, New Delhi.
12) NSSO, (2011). Key indicators of Employment and Unemployment in
India, 2009-10, Government of India, New Delhi

13) Periodic Labour Force Survey (PLFS): Annual Report (July 2018-June
2019). Ministry of Statistics and Programme Implementation, National
Statistical Office, Government of India, New Delhi.

14) Shah Amita, (2011). ‘Environment, Employment and Labour: Pathways

to Sustainable Development’, Keynote Paper on the Theme of “Labour
and Environment” presented in the 53rd Annual Conference of The
Indian Society of Labour Economics held in Udaipur.

15) S V Ramana Murthy (2019). Measuring Informal Economy in India-

Indian Experience. Retrieved from
[Link]
forum/[Link]

152
22.12 ANSWERS OR HINTS TO CHECK YOUR Employment and
Unemployment: Policy
PROGRESS EXERCISES Challenges

Check Your Progress 1

1) Employment and unemployment are measured by several criteria viz, (i)
Usual Principal Status, (ii) Usual Principal and Subsidiary Status, (iii)
Current Weekly Status (CWS), (iv) Current Daily Status

2) Yes, because it gives the estimate of the extent of under-utilisation of the

labour force in terms of number of days. It is, therefore, made up of both
open unemployment and visible under-employment.

3) One who participates in any economic activity is a worker. One who is

not available for any worker is a non-worker. Unemployed is a worker
who seeks or looks for work or is available for work.

Check Your Progress 2

1) See Section 22.4 and 22.5
2) No, the decade of 1990s and 2000s have witnessed high growth without
corresponding growth of employment.
3) Increasing share of unorganised sector in employment, higher proportion
of casual workers in employment, rising number of workers, etc.
4) See Section 22.5

Check Your Progress 3

1) See Section 22.7
2) See Section 22.7
3) See Sub-section 22.7.1

153