Labour market recovery swift but partial and exhausting, says Mahesh Vyas, MD & CEO of CMIE

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Updated: September 25, 2021 8:39 AM

“The recovery seems exhausted because the incremental improvements have diminished drastically", Vyas said

labour market, partial recovery, Mahesh Vyas, MD & CEO of CMIE, labour force participation, rate, unemployment rate, 10,000 EVIn August 2021, the LPR at 40.5% was 2.1 percentage points lower than it was in 2019-20.

Labour market has registered a swift recovery after the draconian lockdown of April 2020 but the recovery has been partial and exhausting, Mahesh Vyas, MD & CEO, Centre for Monitoring Indian Economy (CMIE), wrote in a recent article. Even as unemployment rate has recovered — it was 7.6% in 2019-20 and in July-August 2021 it averaged at 7.6%, down from 23.5% in April 2020 — it may have settled at a high rate of 7-8%, Vyas noted.

“The recovery seems exhausted because the incremental improvements have diminished drastically. In the past 12 months since September 2020, the net cumulative increase in employment has been just 44,483. This is negligible just 0.04 million on a base of over 400 million jobs. There have been several large increases from one month to the next. But, these are lost in subsequent months,” Vyas wrote.

He saidthe partial nature of recovery is seen in the two other important ratios of the labour markets, the labour force participation rate (LPR) and employment rate. “In August 2021, the LPR at 40.5% was 2.1 percentage points lower than it was in 2019-20. The employment rate was 2.2 percentage points lower.

“These two ratios are more important than the unemployment rate. They had fallen dramatically upon the imposition of the lockdown and have recovered swiftly but, their recovery has remained partial 17 months after the first lockdown.”

Vyas said the recovery has also been discriminating against salaried employees and entrepreneurs. Job losses were concentrated among salaried employees. Employment in August 2021 was 5.7 million lower than it was in 2019-20. This involves an 8.8 million loss of salaried jobs and two million loss of employment to entrepreneurs. These losses were partially offset by a 4.7 million increase in employment in farming and 0.7 million increase in employment as daily wage workers & small traders.

“The recovery of the labour market is … highly skewed in favour of the rural markets. Of the 5.7 million jobs lost between 2019-20 and August 2021, 3.7 million were lost in urban India. Urban India accounts for 32% of all jobs but it suffered 65% of the job losses following the Covid-19 pandemic,” he noted.

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