LABOUR FORCE PARTICIPATION RATE (LFPR)
1. Context
According to the latest data available from the Centre for Monitoring Indian Economy (CMIE), India’s labour force participation rate (LFPR) fell to 39.5% in the last financial year (2022-23) that ended in March. This is the lowest LFPR reading since 2016-17. The LFPR for men stood at a seven-year low of 66% while that of women was pegged at a mere 8.8%.
2. What is Labour Force Participation Rate (LFPR)?
- The labor force participation rate (LFPR) is a measure that refers to the percentage of the working-age population (typically defined as individuals aged 15 years and above) who are either employed or actively seeking employment.
- It is a commonly used indicator to understand the level of engagement of a country's population in the labor market.
- To calculate the LFPR, the number of individuals in the labor force (which includes both employed and unemployed individuals actively seeking work) is divided by the total working-age population and multiplied by 100 to express it as a percentage.
- The labor force includes people who are currently employed, as well as those who are unemployed but actively looking for work.
- It does not include individuals who are not in the labor force, such as students, retirees, homemakers, or individuals who are not actively seeking employment.
- The LFPR provides insights into the proportion of the population that is economically active, which is important for assessing the level of labor market engagement, estimating potential labor supply, and evaluating changes in workforce dynamics over time.
3. LFPR and Unemployment Rate in India
- Unemployment Rate: The percentage of people who are unemployed and actively seeking work.
- LFPR (Labour Force Participation Rate): The percentage of the working-age population that is either employed or actively seeking employment.
- Importance of Unemployment Rate: Commonly used to assess the stress in the job market.
- India's Unique Situation:
- Low LFPR: India's LFPR has been consistently lower than the global average.
- Falling LFPR: India's LFPR has been declining over time.
4. Significance of LFPR
- Developing Economy Concern: A low and falling LFPR is unfavorable for a developing economy like India.
- Lack of Job Opportunities: Workers may opt out of the labor force due to prolonged unemployment and discouragement.
- The unemployment rate alone is insufficient to gauge India's labor market situation.
- LFPR provides a more comprehensive understanding of labor market engagement and workforce dynamics.
5. Falling LFPR
- India's LFPR has been continuously decreasing since 2016-17.
- Reached its lowest level in 2022-23.
- Despite fast economic growth (e.g., GDP growth of 7.2% in 2022-23), LFPR has been declining.
6. Low Female LFPR
- Female LFPR in India has dropped to just 8.8% in FY23.
- More than 90% of working-age women in India do not actively look for jobs.
- Significantly lower LFPR among women indicates gender-related challenges in accessing and participating in the labor market.
7. Key Observations
- The falling LFPR contradicts the country's economic growth rate.
- Female LFPR is particularly concerning, with a vast majority of women not seeking employment.
- Low LFPR and low female LFPR signify potential issues with job availability, gender inequality, and labor market participation in India.
8. Comparison of Labor Force Participation Rates in India and Other Countries
- CMIE vs. ILO: CMIE's measure of assessing the Labor Force Participation Rate (LFPR) is more stringent than that of the International Labour Organization (ILO).
- India's LFPR: CMIE estimated India's LFPR at 40% for 2022, while the ILO pegged it at 49%. Both measures indicate a low LFPR compared to other countries.
- Higher LFPR in other countries: According to the ILO model, several Latin American and Asian economies have significantly higher LFPRs than India.
- Indonesia had an LFPR of around 67% in 2022, while South Korea and Brazil had rates as high as 63-64%. Argentina, Bangladesh, and the Philippines recorded LFPRs in the range of 58-60%. Sri Lanka had over 51% of its population in the labor force.
- In contrast, India had less than half of its working-age population either employed or actively seeking employment, according to the data.
|
For Prelims: Centre for Monitoring Indian Economy (CMIE), Labour force participation rate (LFPR), Gross Domestic Product (GDP), International Labour Organisation (ILO), and Unemployment rate.
For Mains: 1. What is Labour Force Participation Rate (LFPR) and discuss the factors that have contributed to the Low LFPR in India? (250 Words)
|
Previous year Question
|
1. Given below are two statements, one is labeled as Assertion (A) and the other as Reason (R). (UPPSC 2019)
Assertion (A): The labour force participation rate is falling sharply in recent years for females in India.
Reason (R): The decline in labour force participation rate is due to improved family income and an increase in education.
Select the correct answer from the codes given below:
Codes:
A. Both (A) and (R) are true and (R) is the correct explanation of (A)
B. Both (A) and (R) are true and (R) is not the correct explanation of (A)
C. (A) is true, but (R) is false
D. (A) is false, but (R) is true
Answer: C
2. Which of the following statements about the employment situation in India according to the periodic Labour Force Survey 2017-18 is/are correct? (UPSC CAPF 2020)
1. Construction sector gave employment to nearly one-tenth of the urban male workforce in India
2. Nearly one-fourth of urban female workers in India were working in the manufacturing sector
3. One-fourth of rural female workers in India were engaged in the agriculture sector
Select the correct answer using the code given below:
A. 2 only
B. 1 and 2 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: B
|
Source: The Indian Express
