Employment Trends in India | 16 May 2024

Source: IE

Why in News?

India has been witnessing a significant surge in employment in recent years, with the creation of over 80 million additional jobs between 2017-18 and 2022-23.

• This rapid growth has sparked a debate, with narratives emerging around the underlying causes and the sustainability of this trend.

What are the Key Trends in Employment Growth?

• Historical Growth: Analysis using National Sample Survey Office (NSSO) data from 1983 to 2023 shows consistent growth in principal employment across all sub-periods.
• Consistent Growth: Principal employment, which measures those working for the bulk of the year, has grown consistently since 1983.
  • Principal employment refers to the main job worked for the majority of the year, while subsidiary employment is typically part-time, of shorter duration, and in addition to the main job.
  • Every sub-period under consideration has seen growth in principal employment, with no instances of jobless growth.
• Significant Increase (2017-2023): The period from 2017-18 to 2022-23 saw the fastest increase, with about 80 million additional jobs, translating to an annual growth rate of 3.3%.
• Labour Market Indicators:
  • Despite long-term deterioration since 2000, recent years have seen improvements in key labour market indicators such as labour force participation rate, workforce participation rate, and unemployment rate.
    • These improvements coincided with economic distress periods, notably before and during the Covid-19 pandemic.
• Broad-Based Growth: Employment growth has been well-distributed across rural and urban sectors, and various industries (manufacturing, agriculture, construction, services).
• Women and Older People: The employment growth has been highest for women, at over 8% annually.
  • Employment among those aged 60 and above has also grown at around 4.5% annually.
  • There are various reasons for this trend, including increasing distress, improved access to resources like water and energy, and greater flexibility in care-related work.
    • The employment of older people has been increasing since the 1980s, possibly due to longer lifespans.
• Employment Condition Index:
  • The index is based on seven labour market outcome indicators, including the percentage of workers in regular formal work, casual labourers, self-employed workers below the poverty line, work participation rate, average monthly earnings of casual labourers, the unemployment rate of educated youth, and youth not in employment and education or training.
    • The "employment condition index" has improved between 2004-05 and 2021-22.
    • However, some states (Bihar, Odisha, Jharkhand, UP) have remained at the bottom throughout this period.
    • Other states (Delhi, Himachal Pradesh, Telangana, Uttarakhand, Gujarat) have stayed at the top.

How has Employment Quality Evolved?

• Rise in Informal Employment:
  • Around 50% of jobs in the formal sector are informal.
  • Approximately 82% of the workforce is engaged in the informal sector.
  • Nearly 90% are informally employed.
• Dominance of Self-Employment:
  • A large part of the employment growth (44 million) is in the form of own-account workers and unpaid family workers.
    • This could be a result of government schemes like Pradhan Mantri MUDRA Yojana (PMMY), which have provided significant funding to this segment
  • Self-employment is the primary source of employment, constituting 55.8% in 2022.
  • Casual employment (hiring employees on a work-as-needed basis) accounts for 22.7%, and regular employment for 21.5%.

What is the Trend in Wages and Salaries?

• Aggregate wages and salaries have seen relative stagnation in recent years.
• From 2017-18 to 2022-23, the average annual growth of salaries and wages was 6.6% in nominal terms but only 1.2% after accounting for inflation.
• While there is no apparent wage distress, there is also no significant improvement in living conditions.
  • Possible reasons include the dampening of wages due to a large influx of workers and stagnating labour productivity.

What are the Trends in Youth Employment?

• Youth employment and underemployment increased between 2000 and 2019 but declined during the pandemic years.
  • However, unemployment among youths, especially those with secondary-level or higher education, has intensified over time.
• In 2022, the share of unemployed youths in the total unemployed population was 82.9%, and the share of educated youths among all unemployed people increased to 65.7% from 54.2% in 2000.
• The unemployment rate among educated youths was six times greater for those with secondary education or higher (18.4%) and nine times higher for graduates (29.1%) than for persons who could not read or write (3.4%) in 2022.
  • This was higher among educated young women (21.4%) than men (17.5%), especially among female graduates (34.5%) compared to men (26.4%).

What are the Concerns Regarding Employment in India?

• Growth of Informal Sector: While the economy is growing, many new jobs are informal, lacking security, benefits, or minimum wage.
• Quality of Jobs for Youth: Though the unemployment rate might not be high, youth employment is often of poorer quality.
  • This means young people might be over-educated for the available jobs or find themselves in precarious situations like the gig economy.
  • Challenges for gig or platform workers include lack of job security, irregular wages, and uncertain employment status.
• Gender Gap: Women's participation in the workforce hasn't grown as expected. Many end up in unpaid family work or low-paying self-employment instead of formal jobs.
• Skill Mismatch: The education system might not be aligned with the current job market needs.
• Formalisation Challenges: A significant portion of the Indian workforce remains in the informal sector.
  • This translates to lower tax revenue for the government and limited social security benefits for workers.
• Job Automation: As with many countries, automation poses a threat to certain sectors in India. This can lead to job displacement in industries like manufacturing.
  • The rise of artificial intelligence (AI) may impact employment, particularly in the outsourcing industry in India, where some back-office tasks could be taken over by AI.
• Vulnerability to Economic Shocks: Many of the workforce relies on informal or casual employment. This makes them highly vulnerable to economic downturns or external shocks, as seen during the Covid-19 pandemic.
• High Demand for Government Jobs: There is a significant demand for government jobs due to the lack of job creation in the private sector.
  • This situation underscores the appeal of stable employment provided by the government.

Way Forward

• Promote Formalisation: Implement strategies to incentivise informal workers to transition to the formal sector, drawing on lessons from Peru's National Strategy.
  • Peru's Policy Frameworks for Transition to Formality (FSPs) and National Action Plans on Business and Human Rights (NBA and NAP) involve stakeholders in a decentralised approach, including the state, businesses, academia, workers, civil society, and indigenous peoples.
  • Streamline the registration process for small businesses in the informal sector. This encourages them to formalise, bringing them under the umbrella of labour laws and social security benefits.
• Targeted Programs for Marginalised Groups: Implement more targeted skill development programs for individuals from marginalised communities, similar to SMILE initiative.
  • This ensures inclusivity and empowers these communities to participate actively in the workforce.
• AI and Automation Reskilling: Prepare the workforce for the rise of automation by providing training programs in areas like AI, robotics, and data science.
  • This allows workers to adapt and contribute to the evolving job market.
• Social Security Portability: Design a portable social security system that caters to the needs of gig workers and those transitioning between formal and informal sectors.
• Entrepreneurship and Innovation: Establish industry-specific startup incubators and accelerators.
  • Encourage the growth of angel investor networks that provide early-stage funding for promising startups.
• Remote Work Opportunities: Encourage companies to leverage technology and offer remote work arrangements. This expands job opportunities for individuals living outside major cities and promotes a better work-life balance.