State of (un)employment in India

State of (un)employment in India

Subject : Economy

Section :Unemployment

Context: According to Centre for Monitoring Indian Economy (CMIE)  India’s labour force participation rate (LFPR) has fallen to just 40% from an already low 47% in 2016. This suggests not only that more than half of India’s population in the working-age group (15 years and older) is deciding to sit out of the job market, but also that this proportion of people is increasing.

Concept :

Labour force: According to the CMIE, the labour force consists of persons who are of age 15 years or older, and belong to either of the following two categories:

• are employed
• are unemployed and are willing to work and are actively looking for a job

Labour Force Participation Rate: It is the percentage of people in the labour force (those who are working or seeking or available for work) in the population.

Worker Population Ratio is the percentage of employed people.

Unemployment rate shows the percentage of people unemployed among the labour force.

Unemployed: A person who is unable to get work for even an hour in the last seven days despite seeking employment is considered unemployed.

What is the significance of LFPR in India?

• Typically, it is expected that the LFPR will remain largely stable. As such, any analysis of unemployment in an economy can be done just by looking at the UER.
• But, in India, the LFPR is not only lower than in the rest of the world but also falling. This, in turn, affects the UER because LFPR is the base (the denominator) on which UER is calculated.
• The world over, LFPR is around 60%. In India, it has been sliding over the last 10 years and has shrunk from 47% in 2016 to just 40% as of December 2021.

This shrinkage implies that merely looking at UER will under-report the stress of unemployment in India.

Why is India’s LFPR so low?

• The main reason for India’s LFPR being low is the abysmally low level of female LFPR. According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%. In other words, less than one in 10 working-age women in India are even demanding work. Even if one sources data from the World Bank, India’s female labour force participation rate is around 25% when the global average is 47%.

Why do so few women demand work?

• Working conditions are far from conducive for women to seek work — such as law and order, efficient public transportation, violence against women, societal norms etc discourage women from taking up jobs.
• Not formally capturing women’s contribution to the economy since a lot of women in India are exclusively involved within their own homes (caring for their family) of their own volition.
• Inadequate job opportunities for women.