Why in news?

The Periodic Labour Force Survey (PLFS) for July 2023 to June 2024, released in September 2024, shows no significant change in the unemployment rate. There is a slight increase in the share of workers in agriculture, while the manufacturing sector shows no growth in job creation.

What’s in Today’s Article?

• About Unemployment (Meaning, Types, etc.)
• Measuring Unemployment (Methods, NSSO, CMIE, Challenges, Govt. Initiatives, etc.)
• News Summary

What is Unemployment?

• Unemployment occurs when individuals who are capable of working, actively seeking work, and willing to work at prevailing wages are unable to find jobs.
• It is an important indicator of the economic health of a country, reflecting the level of economic activity, productivity, and social well-being.

Types of Unemployment:

• Cyclical Unemployment: This occurs due to the ups and downs of the economy. During economic downturns, demand for goods and services decreases, leading to job losses.
• Structural Unemployment: This happens when there is a mismatch between the skills of the workforce and the needs of the industry. Technological changes often lead to structural unemployment.
• Frictional Unemployment: This type is temporary and occurs when individuals are transitioning between jobs, entering the workforce for the first time, or re-entering the workforce.
• Seasonal Unemployment: Certain industries, like agriculture or tourism, experience fluctuations in employment due to seasonal variations in demand.
• Disguised Unemployment: This occurs when more people are working than actually needed, especially in agriculture, where productivity remains low despite a high number of workers.

Measuring Unemployment in India:

• Government of India employs various methods and surveys to measure unemployment.
• Key agencies responsible for unemployment data collection and analysis include the Ministry of Statistics and Programme Implementation (MoSPI), National Sample Survey Office (NSSO), and the Centre for Monitoring Indian Economy (CMIE).

National Sample Survey Office (NSSO) Surveys:

• The NSSO uses two primary measures to classify the working status of individuals:
  • Usual Principal and Subsidiary Status (UPSS):
    • The UPSS classifies an individual's principal status-whether employed, unemployed, or out of the labor force-based on the activity they spent the most time on in the previous year.
    • An individual who works in a subsidiary role for at least 30 days within the year is also counted as employed under this measure.
    • For example, someone unemployed for five months but working for seven months would be classified as employed, whereas someone unemployed for nine months but working for three months would still be counted as employed according to UPSS.
  • Current Weekly Status (CWS):
    • The CWS method adopts a shorter reference period of one week.
    • An individual is counted as employed if they worked for at least one hour on any day during the seven days preceding the survey date.
    • As a result, unemployment rates under CWS are typically higher than those measured by UPSS, as the probability of finding work over a week is lower compared to an entire year.

Centre for Monitoring Indian Economy (CMIE):

• The CMIE is an independent private limited entity that serves both as an economic think-tank as well as a business information company.
• CMIE provides high-frequency data on unemployment through its Consumer Pyramids Household Survey (CPHS).
• This data is updated regularly and offers insights into unemployment trends on a monthly basis.

Key Unemployment Indicators Used in India:

• Unemployment Rate (UR): The percentage of the labor force that is unemployed and actively seeking employment.
• Labor Force Participation Rate (LFPR): The percentage of the working-age population that is either employed or actively seeking employment.
• Worker Population Ratio (WPR): The proportion of the working-age population that is employed.

Challenges in Measuring Unemployment in India:

• Informal Sector Dominance: A large portion of India’s workforce is employed in the informal sector, making it difficult to capture accurate employment data.
• Underemployment and Disguised Unemployment: Many employed individuals work below their skill levels or in low-productivity jobs, masking the true extent of unemployment.
• Data Frequency and Timeliness: There is often a lag in data collection and reporting, making it challenging to get a real-time picture of unemployment.

Government Survey Reveals Unchanged Unemployment Rate Despite Sectoral Shifts:

• The Periodic Labour Force Survey (PLFS) for July 2023 to June 2024, released by the Labour Bureau, shows that the unemployment rate in India remains stagnant, with no significant improvement in job creation, particularly in the manufacturing sector.
• Although there is a slight increase in the workforce distribution in agriculture, the manufacturing sector continues to struggle with employment growth.
• The Labour Force Participation Rate (LFPR) has increased, rising from 50.7% in 2017-18 to 63.7% in rural areas and from 47.6% to 52.0% in urban areas.
• Female participation has notably improved, with the LFPR for women rising from 23.3% in 2017-18 to 41.7% in 2023-24.
• However, experts highlight that the increase in employment is mainly due to unpaid family labor in agriculture, which has grown for the fourth consecutive year.
• Despite the rise in participation, the unemployment rate remains concerning.
• In rural areas, it decreased from 5.3% in 2017-18 to 2.5%, while in urban areas, it fell from 7.7% to 5.1%. The overall unemployment rate is stable at 3.2%, similar to last year.
• Experts warn that the employment scenario remains grim, with a lack of job growth in key sectors like manufacturing, which has not shown significant recovery over the past decade.