Generating employment

Claudia Goldin's work can guide India

The latest annual Periodic Labour Force Survey (PLFS) for July-June 2022-23, released on Monday, showed that the overall unemployment rate under the so-called usual status dipped to a six-year low of 3.2 per cent. Other things being equal, the dip in the unemployment rate, along with the increase in the labour force participation rate, suggests that the economy is creating jobs, though the quality of employment can always be debated. The labour force participation rate for people above 15 years has increased from the low of 49.8 per cent in 2017-18 to 57.9 per cent in the latest survey. The numbers also improved on “current weekly status”. In the context of quality, the picture leaves a lot to be desired. In the non-agricultural sectors, for instance, the percentage of people employed in proprietary and partnership setups, which are considered informal, had increased from 71.4 per cent in 2020-21 to 74.3 per cent in the latest survey. Even as the situation has improved somewhat, nearly 60 per cent of employees had no written job contracts. Employment in the informal sector is usually in small enterprises, which lack scale, and wages as a result are low.

While India faces a number of long-term issues in employment generation — both in terms of quantity and quality — one of the major pain points has been the low female labour force participation rate. Incidentally, the latest PLFS data was released on the day Claudia Goldin of Harvard University was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, or the Nobel Prize in Economics, for “advancing our understanding of women’s labour market outcomes”. According to the latest PLFS survey, the labour force participation rate for women — urban and rural combined — for the age group of 15 years and above increased from 23.3 per cent in 2017-18 to 37 per cent in 2022-23. The comparable number for males in the latest survey was 78.5 per cent. While the increase in participation should, in principle, be encouraging, a recent study noted that an uptick in the female labour force participation rate could be a result of distress. More women may be entering the labour force to support family income, hit by the pandemic.

The policy challenge for the government thus is not only to generate more gainful employment but also to create conditions that encourage greater female labour force participation. An increased participation would help boost productivity and growth. In this context, while Prof Goldin’s groundbreaking contributions cover 200 years of US history, it has useful lessons for all countries, including India. For instance, she has established that economic growth does not on its own reduce the gender gap in the labour market. Further, emphasis on female education will not automatically reduce the gender gap if social or institutional barriers keep women away from the labour market. The impact of parenthood is also big in more gender-conservative societies. Besides, women’s expectations about the future play a key role. Thus, the foremost task for Indian policymakers is to create more gainful employment, preferably in the formal sector, which would encourage more women to participate in the labour market. India’s services-dominated economy is perhaps better positioned to attain this. Addressing issues related to the social environment, including women’s safety, too, will help create enabling conditions for women to participate in the labour force.