The much awaited results of the 66th NSSO quinquennial round of the Employment-Unemployment survey are out. The initial reactions to the results of the survey have been quite extreme. One set of reactions has turned the spotlight on employment generation and has criticised the slowdown in the work force growth rate in the 2004-05 to 2009-10 period as being indicative of policy failure. The other set of reactions has questioned the methodology of data collection for the survey, stating that the informal sector employment, especially for females, has not been captured.

Undoubtedly the work force (i.e. the total number of employed persons) is an important parameter and has fittingly received a lot of attention. On the contrary, the labour force (i.e. the total number of people who are seeking employment), an equally important parameter, has been largely ignored in discussions. Since the ?labour force? is the total of which the ?work force? is a part, any changes in the former are bound to impact the latter. This is an extremely important feature which must be kept in mind before drawing inferences about the work force from the surveys.

In a distinct break from the past, the labour force declined, albeit marginally, from 470.14 million in 2004-05 to 469.87 million in 2009-10. In the two previous periods of 1993-94 to 1999-2000 and 1999-2000 to 2004-05, it had increased by 25 million and 63 million, respectively. This decline has come as a surprise since in the period 2004-05 to 2009-10, not only was the population growing at a compound annual growth rate (CAGR) of 1.44%, the economy was also doing well, with a CAGR of 8.5%. Besides, the withdrawals consist almost completely of females. The recent period between the 61st and 66th NSS rounds also witnessed a slowdown in additions to the work force. In the five year period of 1999-00 to 2004-05, 60 million jobs were created against which the next five years?2004-05 to 2009-10?witnessed an addition of just about a million jobs. A segment-wise break up shows trends which more or less mirror those of the labour force, with an addition of 22 million males to the work force accompanied by a decline of 21 million females from the work force. While the male addition to the work force was fairly evenly distributed between rural and urban areas, the decline in the female work force was mainly concentrated in the rural areas.

Notwithstanding the slowdown in employment creation, the total number of unemployed declined from 11.15 million in 2004-05 to 9.7 million in 2009-10. Even as a proportion of the labour force, the unemployed declined from 2.37% in 2004-05 to 2.06% in 2009-10. On the face of it, this is puzzling. With such a large slowdown in employment generation, how could the total number of unemployed decline?

The answer clearly lies in the fact that the actual labour force has declined. In this context it is important to understand why a larger number of people, especially the rural females, did not choose to offer themselves for work.

There are several reasons for people opting out of the labour force. In the 66th round, about 707 million people did not offer themselves for work as against 625 million in the 61st round. The largest share, at 44%, was that of people who opted out of the labour force to pursue education, 31% opted out for attending to domestic activities, 15% were in the 0-4 age group and the remaining categories (disabled, pensioners etc) added up to a 10% share.

India is studying?Sarva Shiksha Abhiyan, mid-day-meal and the right to education seem to be working. In the period 2004-05 to 2009-10, 313 million people opted out of the labour force to study as against 267 million in the previous five years, 1999-2000 to 2004-05. The second largest category was of those who opted out of the labour force to attend to domestic duties including activities like weaving, tailoring and gathering firewood for free for the household. In 2004-05, this category constituted 170 million persons, which rose quite sharply to 220 million in 2009-10, growing at a CAGR of 5.3%. Predictably, these withdrawals have been almost completely by the females, the rural female withdrawals being higher than that of urban females. This is interesting, since 2009-10 was a drought year and the agricultural growth rate was 0.4%. The third largest category of non-participants in the labour force is of children in the 0-4 age group. In 2004-05, the share of this group was at 18.2% while in 2009-10 it had declined to 15%. Even in absolute terms, the total number in this category declined from 113 million in 2004-05 to 105 million in 2009-10. Is this indicative of a demographic trend? This may well be the case, since the recently released census data shows a decline in the share of the 0-6 age group from 16% to 13% in the period 2001-2011.

In the period 2004-05 to 2009-10, about 21 million people moved out of agriculture, leading to a drop in its employment share from 56.5% in 2004-05 to 51.76% in 2009-10. Since 1993-94, this is the largest decline both in absolute and relative terms. The declining share of the work force in agriculture was mainly picked up by the secondary sector, whose proportionate share increased from 18.71% in 2004-05 to 21.89% in 2009-10.

The NSSO survey provides a categorywise disaggregation of the work force. The three categories are?self-employed (SE), regular wage and salaried (RWS) and casual labour (CL). The total work force in the self-employed category declined from 259 million in 2004-05 to 233 million in 2009-10. The work force in the casual labour category increased from 130 million in 2004-05 to 151.6 million in 2009-10, while that in the RWS segment, which proxies for organised sector employment, increased from 70 million to 75.3 million. The survey also provides data on employment generation under MGNREGA*?a flagship programme of the government. In 2007-08, a total of 1.6 million person days of employment were created under MGNREGA with almost equal number of jobs being created for men and women. In 2009-10, the employment in terms of person-days had gone to 2.48 million?a CAGR of 24%. Here, again, the male-female employment ratio remained practically equal.

There is clear evidence of increased remuneration to labour in the current survey. In the RWS category the recent period 2004-05 to 2009-10 witnessed large wage increases cutting across all segments?rural-urban and male-female. The CAGR of these wage increases was the highest at 15% in the case of urban females and the lowest at 11.4% for rural males.

The 66th round results have recorded many positive developments in the period 2004-05 to 2009-10:

n Absolute unemployment declined by 1.8 million. Relative unemployment (as a proportion of labour force) fell from 2.37% in 2004-05 to 2.06% in 2009-10.

n Evidence of increasing number of people choosing to opt out of the labour force to educate themselves and improve their skill sets?the right course for India to leverage the demographic dividend.

n The work force is shifting out of agriculture?a sector known for supporting high levels of disguised unemployment. The declining share of the work force in agriculture was mainly picked up by the secondary sector, whose proportionate share increased from 18.71% in 2004-05 to 21.89% in 2009-10.

n A significant increase in wages across the board. MGNREGA appears to have driven up private sector remunerations for men and women. This increase in incomes has possibly led to large withdrawals of women from the labour force.

However, the 66th round results do leave us with an unanswered question. How do we explain a decline in the labour force in a period where both population and GDP were growing strongly?

(This paper is an abridged version of Where is the Missing Labour Force? published in Economic & Political Weekly, Vol. no. 39 (September 24-30, 2011.)

C Rangarajan is chairman of the Economic Advisory Council to the Prime Minister, Padma Iyer Kaul is executive director in the Pension Fund Regulatory and Development Authority and Seema is the deputy advisor in the Economic Advisory Council to the Prime Minister

* Workers here are categorised in the casual labour segment. Information here is on the basis of ?Current Weekly Status?