Unemployment steady, but poor job quality persists amid LFPR surge

The latest annual Periodic Labour Force Survey (PLFS) report for July 2023-June 2024, released this week, shows the unemployment rate remained at 3.2 per cent, the same as last year. However, the overall labour force participation rate (LFPR) under “usual status” for persons aged 15 years and above rose to a seven-year high of 60.1 per cent compared to 49.8 per cent in 2017-18. The female LFPR — rural and urban combined — also increased from a low of 23.3 per cent in 2017-18 to 41.7 per cent in the latest survey. The comparable number for males was 78.8 per cent. Labour-force participation increasing and unemployment remaining the same suggest that the economy is creating jobs. Yet, a number of factors constrain India’s labour market from realising its full potential. Despite an increase in employment generation, the quality of employment remains a matter of concern. The female unemployment rate, for instance, increased from 2.9 per cent in 2022-23 to 3.2 per cent in 2023-24.

While the increase in labour participation is encouraging, recent studies have noted that an uptick in the female LFPR could be distress-led. More women may be entering the labour force to support family incomes. Their share in regular-wage employment also remains stagnant at 15.9 per cent. At the same time, the share of women employed in regular salaried jobs in urban India has declined from 50.8 per cent in 2022-23 to 49.4 per cent in 2023-24. India has consistently been witnessing a surge in self-employment, with well over half the country’s workforce being employed as “own account workers and employers” and “helpers in household enterprises”. Over 58 per cent of workers under “usual status” were self-employed in 2023-24. In 2022-23 and 2021-22, the self-employment rates were 57.3 and 55.8 per cent, respectively. Worse, the rise in the self-employed category is driven mostly by those identified as “unpaid helpers in household enterprises”, who comprised 19.4 per cent of the workforce in 2023-24, up from 18.3 per cent in 2022-23 and 13.6 per cent in 2017-18. Clearly, the increase in self-employment and work in family enterprises highlights the lack of remunerative employment opportunities in the country. Employment in these categories usually does not come with any written job contracts and earnings are low.

The Indian labour market suffers from yet another deficiency. While the agriculture sector’s contribution to India’s gross domestic product at current prices is 18.2 per cent, it employed about 46.1 per cent of the workforce during 2023-24, a 30-basis-point increase over the previous year, indicating that job creation in the country is still far from adequate. In this, it must be noted, there are inter-state variations. Several high-income states like Kerala, Haryana, Punjab, and Tamil Nadu show a substantially lower share of agriculture in employment, with rates in the 22-28 per cent range, mostly comparable to upper-middle-income countries. Employment in agriculture must be commensurate with the sector’s contribution to the economy. The basic policy failure over the decades has been India’s inability to increase employment in low-skill manufacturing, which would have helped pull people out of agriculture. This would have boosted productivity and growth. The state of the labour market calls for increasing focus on manufacturing. A large number of people engaged in agriculture and self-employment with low earnings can increase both economic and social tensions in the country.