Slight ease in lockdown gives hope to the desperate, improves employment

The count of the unemployed who were actively looking for jobs during the week of April 26 was around 76 mn. In the earlier weeks, it was close to 100 mn

During the week ended April 26, the unemployment rate was 21.1 per cent. This is substanti­ally lower than the 26.2 per ce­nt rate recorded in the preceding week. The latest weekly unemployment rate is also the lowest during the national lockdown.

However, the lower unemployment rate of the latest week is accompanied with a further fall in the labour participation rate. While the unemployment rate has been somewhat volatile as it bounced between 21 and 26 per cent during the lockdown period, the labour participation has declined in every week during the lockdown. The labour participation rate has dropped from 42.6 per cent in the week of March 22 which was just before the national lockdown to 35.4 per cent in the latest week ended April 26, that is, a 7.2 percentage point fall, implying that 7.2 per cent of the working age population have quit the labour markets during this lockdown.
 

The working age population is a little over a billion people in India. This implies that over 72 million people have quit the labour markets in a month.

The labour force during March 2020 was of the order of 434 million. This is likely to have dropped to 362 million. Of these, 21.1 per cent were unemployed. This suggests that the count of the unemployed who were actively looking for jobs during the week of April 26 was of the order of 76 million. In the earlier weeks, when the unemployment rate was higher at 26 per cent, the count of the unemployed was even higher — possibly close to 100 million. To place these values in perspective, note that the count of the unemployed in March 2020 was much smaller at 38 million.

We must pause to grasp the context and implications of these numbers. How do so many unemployed people locked in their homes say that they are looking for jobs in the current conditions? These people know that this is a national lockdown, which is being enforced vigorously. It is next to impossible for an unemployed person to find a job in these circumstances. Yet, nearly 100 million said they were actively looking for employment during such a period.

Usually, in labour market statistics, a person is considered unemployed only if she is willing to work and is unable to find any employment.

CMIE’s Consumer Pyramids Hou­se­hold Survey (CPHS) is a little more nu­anced in this respect. It distinguishes be­tween an unemployed person who is willing to work and is actively looking for a job against a person who is willing to work but is not actively looking for a job. The CPHS only considers the former as unemployed. In the CPHS, “willing to work” is a necessary but not a sufficient condition to be called unemployed. It is important to be actively doing something to get employment.

Now, read that 100 million unemployed in the third week or 76 million unemployed in the fourth week who were actively looking for jobs during a national lockdown. Anyone who is actively looking for employment in a vigorously enforced lockdown must be particularly desperate to get some employment. There must have been serious compulsions that could have driven a person to look for employment even in conditions that evidently offered no employment. The CPHS shows that the number of such people who were desperate to get some employment in highly adverse conditions was of the order of at least 85 million in the middle of the national lockdown.

The national lockdown did not just throw 72 million out of the labour force, but it also drove another 85 million to some kind of desperation to look for jobs in the midst of a national lockdown when none were available. This desperation suggests that people were highly vulnerable to a loss of livelihood caused by the national lockdown.

A relaxation of the lockdown or its withdrawal can immediately repair at least some of the damage caused to livelihoods. This is evident in the employment ratio, which improved in the week ended April 26.

It rose from a low of 26.1 per cent in the week ended April 19 to 27.9 per cent in the week of April 26. This was an unusually big jump in the employment rate.

It suggests that the partial relaxation of the lockdown from the week of April 20 did have an impact on employment. The impact of relaxations on agriculture in particular and in rural areas in general does reflect in the increase in the employment rate in rural India.

The employment rate in rural India shot up from 27 per cent in the week of April 19 to 29.4 per cent in the week of April 26. This also had a marginal spillover impact on urban India, which saw the employment rate rise from 24.5 per cent to 25 per cent.

Evidently, a withdrawal of the na­tio­nal lockdown can yield at le­ast some quick results on the livelihood front.

The author is managing director & CEO, Centre for Monitoring Indian Economy P Ltd