Employment and unemployment are critical indicators of an economy’s health, reflecting the utilization of human resources. In the Indian context, these concepts are analyzed through the lens of the National Sample Survey Office (NSSO) and the Periodic Labour Force Survey (PLFS).
Core Concepts and Definitions
Employment is broadly defined as an activity from which a person derives an income or a means of livelihood. To understand the dynamics, specific metrics are used:
- Labour Force (LF): Includes individuals who are either working (employed) or actively seeking work (unemployed). It excludes students, homemakers, and those unable to work due to disability or age.
- Work Force (WF): The portion of the labour force that is actually employed at a given time.
- Labour Force Participation Rate (LFPR): The percentage of the total population that constitutes the labour force.
- Worker Population Ratio (WPR): The percentage of the total population that is actively employed.
- Unemployment Rate (UR): The percentage of persons unemployed among the persons in the labour force.
Classification of Employment in India
Employment in India is categorized based on the nature of the contract and the workplace environment:
Self-Employed vs. Hired Labour
- Self-Employed: Individuals who operate their own farm or non-farm enterprises. This accounts for the largest share of the Indian workforce (approx. 50-55%).
- Regular Salaried Employees: Workers who receive wages on a regular basis and usually have social security benefits.
- Casual Wage Labourers: Workers who are casually engaged in others’ farm or non-farm enterprises and are paid daily or periodic wages.
Formal vs. Informal Sector
- Formal Sector: Includes all public sector establishments and private sector establishments employing 10 or more hired workers. These workers enjoy social security benefits (PF, Pension, Gratuity).
- Informal Sector: Includes own-account enterprises and small private enterprises employing fewer than 10 workers. It is characterized by a lack of job security and social benefits.
Types of Unemployment in India
Unemployment in India is not a monolithic concept; it manifests in various structural and cyclical forms:
- Structural Unemployment: Arises from a mismatch between the skills workers possess and the skills demanded by employers. It is a major challenge in India’s manufacturing and tech sectors.
- Disguised Unemployment: Primarily found in the agriculture sector, where more people are engaged than required. The marginal productivity of the extra labour is zero.
- Seasonal Unemployment: Occurs when people are unemployed during certain parts of the year, common in agriculture and the tourism industry.
- Frictional Unemployment: The temporary period when a person is searching for a new job or transitioning between jobs.
- Cyclical Unemployment: Linked to the business cycle; it rises during economic recessions and falls during expansions.
- Educated Unemployment: A situation where individuals with academic qualifications are unable to find jobs suited to their skill levels.
Measurement Methods: NSSO Approach
The National Sample Survey Office uses three major approaches to measure employment and unemployment:
| Measurement Approach | Reference Period | Definition |
| Usual Status (US) | 365 Days | Relates to the activity status of a person for a relatively long period during the preceding year. |
| Current Weekly Status (CWS) | 7 Days | A person is considered employed if they worked for at least one hour on at least one day during the last 7 days. |
| Current Daily Status (CDS) | Each day of the week | Records the activity status of a person for each day of the reference week. It is the most accurate measure of underemployment. |
Key Labour Market Indicators (PLFS Data)
The Periodic Labour Force Survey (PLFS) provides updated data on the Indian labour market. Trends typically indicate:
- Gender Gap: Female LFPR remains significantly lower than male LFPR, though it has shown an upward trend in recent years due to increased rural participation.
- Sectoral Shift: A gradual shift of the workforce from Agriculture to Services and Construction, though Agriculture still employs the largest share (nearly 45-46%).
- Informalization: Despite economic growth, a vast majority of the Indian workforce (over 90%) remains in the informal sector.
Important Facts and Trivia for Prelims
- Okun’s Law: Defines the relationship between unemployment and losses in a country’s production (GDP).
- Phillips Curve: Traditionally suggests an inverse relationship between the rate of unemployment and the rate of inflation.
- Dependency Ratio: The ratio of the non-working population (children and elderly) to the working-age population (15-59 years).
- Jobless Growth: A phenomenon where the economy expands without a simultaneous increase in employment opportunities, often cited in the context of India’s 2000-2010 growth phase.
- National Career Service (NCS): A mission-mode project launched to bridge the gap between job seekers and employers using technology.
Major Government Initiatives
- MGNREGA: Guarantees 100 days of unskilled manual work to rural households.
- PMKVY (Pradhan Mantri Kaushal Vikas Yojana): Aimed at skill development to reduce structural unemployment.
- SVEP (Startup Village Entrepreneurship Programme): Focuses on creating self-employment opportunities in rural areas.
- E-Shram Portal: A centralized database of unorganized workers seeded with Aadhaar to deliver social security benefits.