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Context: In March 2022, India’s labour participation rate (LPR) fell to 39.5% from 39.9% in February, according to a report by the Centre for Monitoring Indian Economy (CMIE).
This is lower than the rate during the country’s second COVID-19 wave in June 2021, when it was 39.6%.
Labour participation rate is a measure of the country’s working-age population, which is either working or actively seeking work.
And an LPR of 39.5% means that over 60% of the employable workforce are not even looking for work.
An increasing number of people no longer looking for work is the biggest economic crisis in a country, which has been wanting to reap its demographic dividend.
What is the stance of Min of Labour on this situation?
Union Ministry of Labour and Employment on April 26 denied reports of the decrease in LPR and called the “inference” that half of the working age population has lost hope for work “factually incorrect”.
– The ministry added: The authentic data source of employment / unemployment indicators in India are released by the Union Ministry of Statistics and Programme Implementation (MoSPI) through Periodic Labour Force Survey (PLFS). According to PLFS, LPR has increased steadily from 49.8% in 2017-18 to 53.5% in 2019-20.
But, the data is from the most recent PLFS which was done in the period of July 2019 to June 2020. It does not capture the increase in unemployment in the aftermath of the pandemic.
|The overall labour participation rate dropped from 46% to 40% between 2017 and 2022, according to CMIE’s data.|
What are the characteristics of this category of population not getting jobs?
A large part of this dejected population have some degree of education, as per economists and labour experts. The CMIE surveys cover the population within the age group of 15-64.
The number of those who are completing education is growing and this demographic of youth over 15-29, who are joining the labour force in larger numbers are not finding work.
What are the reasons for a low LPR?
Lack of jobs: When people do not get a job of desirable status, or they understand that the job market is so bad that even after struggling they are not able to get anything, they tend to withdraw from the labour market. This is called Discouraged Drop out.
They are tired, and gradually it has an impact on the psychology of people.
Closure of micro and small enterprises like tailoring, beauty parlours, stationary shops, among others during the COVID-19 pandemic has also resulted in people quitting the labour force.
Decline in female labour force: There has been a steady decline in India’s female labour force, which is one of the major reasons cited for low LPR.
– Female LPR was just 9.2% in 2021-22, compared to 15% in 2016-17, according to CMIE data.
– Reasons like safety, workplace being far from home, transportation, discrimination against women become more apparent in a market where job opportunities are already shrinking.
Disguised unemployment: Employment opportunities have decreased, and poor quality employment is replacing better quality employment. A lot of people have also moved from regular and even casual employment to some form of self-employment, like agriculture. For instance:
– Non-agricultural jobs fell by a 16.7 million in March 2022, while this was offset by a 15.3 million increase in employment in agriculture.
– Such a large increase is usually seen during the harvest season when demand for agricultural labourers rise, but is unusual for the month of March when harvest was still a month away.
– Economists have termed this increase as “disguised unemployment”, in which people, mostly members of a family who were earlier employed elsewhere, now do unpaid family labour in their farms.
COVID: The trend in decrease in LPR existed before the pandemic as well but the crisis has made the situation worse
Source: This post is based on the article “Denied & discouraged: Why youths not looking for jobs can be a crisis for India” published in DTE on 28th Apr 22.