Unemployment in India: Real problems of country’s job market are being ignored

Published: October 22, 2018 4:21 AM

The GDP growth rate fell post-2012, the investment-to-GDP rate fell, capacity utilisation fell to 70% in industry, the plant load factor in energy plants fell to 60%, and credit offtake fell. Under these circumstances, it is not surprising that job growth rate fell, and not just for women.

job sector, job marketIllustration: rohnit phore

For many months, a fiery debate is raging about jobs generally, and more recently about the declining female labour force participation rate (LFPR) in India (Surjit Bhalla, PM Economic Advisory Council, and Mahesh Vyas of CMIE). Given that the government’s National Sample Survey 2017-18 on jobs has not yet been released, there are sufficient reasons to believe the estimates based on equally large sample surveys like the government’s Annual Labour Force Survey (LB) 2015-16 and that of the CMIE’s Consumer Pyramids Household Survey (CPHS) 2016-18. Not believing them is like flying in the face of facts.

Figures based on these data may slightly be over or underestimated, nevertheless they provide the direction of change.

Apart from the falling female labour participation, the major issues that should bother the policymakers include (1) the structural transformation process, which began after 2004-05 periods, but has stalled since 2011-12; and (2) rising youth unemployment, particularly among educated boys and girls. But first let us discuss the female LFPR.

The reasons for falling female LFPR

The female LFPR has been falling since 1977-78, and continued to fall to 2015-16. As CMIE surveys rightly report, the decline has been sustained since 2016. Why the female LFPR has been declining (and continues to do so) has already been answered by many scholars and researchers. There are deep structural forces at play.

First, female enrolment at secondary level (15-16 year olds) rose to 85% within a matter of five years (to 2015). Second, as these older girls entered secondary school, younger sibling care in the family had to be now performed by adult women rather than the eldest girl in the household; hence, the mothers had to fall out of the labour force. Third, a rise in household income with rapid growth reduced female LFPR (the ‘income effect’). Fourth, with mechanisation growing in agriculture, the demand for female labour fell as many activities mechanised were performed by women. Finally, a very important reason for rural female LFPR falling after 2004-05 was the decline in household level animal farming, which has traditionally been performed by women.

However, a further decline of women LFPR is not desirable. Hence, urgent measures should be taken to improve female work participation. But the important point is that falling female LFPR has, in recent years, especially since 2011-12, been occurring within a context of slowing non-agricultural job growth generally. Just as girls got more and more educated, job growth fell—thus girls are becoming disheartened workers. But as CMIE data finds, it is not only girls who are becoming disheartened workers.

Growing youth unemployment

Equally tragic is the mounting unemployment among educated youth. The mounting educated youth (age group 15 to 29 years) unemployment in recent years is an outcome of the slow growth of jobs. At the all-India level, the unemployment rate among youth with secondary education increased from 2.6% to 3.2% between 2011-12 and 2015-16 (see graphic), and for those with higher secondary education increased from 3.3% to 4.4%. If you had a graduate degree (general), it increased from 5.8% to 8.4%, and with a postgraduate degree (general), it rose from 5.7% to 8.5%. Although the overall unemployment rate among those with less-than-graduate-level technical education declined from 8.5% to 5.5% (which is a good sign), the unemployment rate among youth with graduate-level technical education increased from 5.5% to 11% (see graphic). This should be a cause for concern.

The last but the worst thing that we have explored using both NSS and LB data is the stalling of the structural transformation process. While between 2005 and 2012 the number of youth (and adults) engaged in agriculture had fallen for the first time in India’s history, the opposite happened after 2012. About 24 million youth joined the agriculture sector during 2011-12 and 2015-16 (even as agricultural output growth slowed). This could be purely distress-driven, owing to unavailability of jobs in non-farm sectors. At the same time, the number of youth in the manufacturing sector declined by 3 million. This should be a subject of current debate—but is not.

Post 2012, we find that both construction and services sectors have registered growth of jobs. Youth employment in construction (non-manufacturing) increased by 4.6 million during 2011-12 and 2015-16. However, the overall growth of construction jobs declined from 3.5 million per annum (during 2004-05 and 2011-12) to only about 1 million (during 2011-12 and 2015-16), reversing the structural transformation process again.

The overall employment growth in services improved from 2.8 million per annum (during 2004-05 and 2011-12) to 3.4 million (during 2011-12 and 2015-16). About 3.9 million youth per annum entered the services sector. However, the growth of jobs in this sector cannot be considered as a progressive development, because a large proportion of them (about 74%) were engaged in low-paid informal jobs without any social security (46% as self-employed, 10% as casual workers, and about 18% regular workers).

The underlying economic reasons for these trends (the stalled transformation, falling non-agricultural job growth, falling female LFPR despite India becoming the fastest-growing large economy in the world) have been well known. The GDP growth rate fell post-2012; the investment-to-GDP rate fell; capacity utilisation fell to 70% in industry; the plant load factor in energy plants fell to 60%; and credit offtake fell. Under these circumstances, it is not surprising that job growth rate fell, and not just for women.

By Santosh Mehrotra and Jajati Parida. Mehrotra is Professor of Economics, and Chairperson, Centre for Informal Sector and Labour Studies, JNU, Delhi. Parida is Assistant Professor at the Central University of Punjab, Bathinda

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