STATE OF UNEMPLOYMENT
1. Context
Data from the Centre for Monitoring Indian Economy (CMIE) shows that India’s labour force participation rate (LFPR) has fallen to just 40% from an already low 47% in 2016. This suggests not only that more than half of India’s population in the working-age group (15 years and older) is deciding to sit out of the job market, but also that this proportion of people is increasing.
2. Labour Force
The labor force, also known as the workforce or labor pool, refers to the total number of people who are employed or seeking employment in a particular country, region, or economic sector. It includes both employed individuals and those who are actively seeking job opportunities.
The labor force consists of two main components:
- Employed: These are individuals who are currently working, either as full-time or part-time employees, in self-employment, or as casual laborers. They are actively engaged in economic activities and are contributing to the production of goods and services.
- Unemployed: These are individuals who are not currently employed but are actively seeking employment opportunities. They are willing and available to work but have not yet found suitable job opportunities.
3. What is LFPR (Labour Force Participation Rate)?
- LFPR stands for Labor Force Participation Rate. It is a key labor market indicator that measures the proportion of the working-age population that is actively engaged in the labor force, either by being employed or actively seeking employment.
- The labor force participation rate provides insights into the extent of labor market involvement among individuals who are of working age and capable of working.
- Labor Force: The total number of individuals who are either employed or actively seeking employment (i.e., the number of employed + the number of unemployed).
- Working-Age Population: The total number of individuals within a specific age group considered to be of working age, typically defined as those aged 15 to 64 years (the age range may vary in different countries).
- The LFPR is expressed as a percentage and provides valuable information about the proportion of the population that is contributing to the labor market.
- A high LFPR indicates a larger share of the working-age population is actively participating in the labor force, while a low LFPR suggests that a significant portion of the population is not actively involved in the labor market, which can have implications for economic growth and development.
- Changes in the LFPR over time can be influenced by various factors, including demographic trends, social norms, economic conditions, and government policies.
- Monitoring LFPR is essential for understanding labor market dynamics and making informed decisions related to employment policies and workforce development initiatives.
4. Significance of LFPR in India
The Labor Force Participation Rate (LFPR) holds significant importance in India for several reasons:
- Employment Analysis: LFPR helps in understanding the level of workforce engagement and the proportion of the working-age population that is actively participating in the labor market. It provides insights into the employment situation in the country.
- Unemployment Assessment: LFPR is an essential component in calculating the unemployment rate. By comparing the LFPR with the actual employment figures, one can determine the extent of unemployment in the economy.
- Demographic Trends: LFPR can highlight demographic patterns and changes in labor force behavior. For example, a rising LFPR may indicate greater economic opportunities for women, while a declining LFPR could suggest challenges in attracting youth to the workforce.
- Economic Growth: A higher LFPR can positively impact economic growth as it implies a larger workforce actively contributing to the production of goods and services. A productive workforce can boost overall economic output and development.
- Policy Formulation: LFPR data assists policymakers in devising appropriate strategies to address employment challenges. Understanding the labor market dynamics can aid in formulating policies to enhance job creation and workforce participation.
- Skill Development: Analyzing LFPR by education level or skill set can help identify skill gaps in the workforce. This information is crucial for designing skill development programs to align workforce capabilities with industry demands.
5. Importance of Employment Rate (ER) in Evaluating Labor Market Stress
- LFPR vs. ER: When LFPR is falling sharply, it's essential to consider the Employment Rate (ER) as an alternative indicator to understand labor market stress better.
- ER Definition: ER is the percentage of employed people in the working-age population, providing insights into the proportion of people with jobs.
- Capturing Labor Market Stress: ER considers the base of the working-age population and focuses on the number of employed individuals, offering a clearer picture of labor market stress during declining LFPR.
- ER Data Analysis: By examining ER data, it becomes evident that India's working-age population has been increasing. However, the number of employed individuals has decreased over time.
- Absolute Numbers: In December 2021, India's working-age population was 107.9 crore, of which only 40.4 crore had jobs (ER of 37.4%). Comparing this to December 2016, with 95.9 crore in the working-age group and 41.2 crore employed (ER 43%), a concerning trend emerges.
- Long-Term Impact: Over five years, while the working-age population increased by 12 crores, the number of employed individuals declined by 80 lahks, highlighting the severity of the employment challenge.
6. Why is India’s LFPR so low?
- The main reason for India’s LFPR being low is the abysmally low level of female LFPR.
- According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%. In other words, less than one in 10 working-age women in India are even demanding work.
- Even if one sources data from the World Bank, India’s female labour force participation rate is around 25% when the global average is 47%.
7. Reasons for Low Female Labor Force Participation in India
- Working Conditions: Women face challenges in seeking work due to unfavorable working conditions, including concerns about law and order, lack of efficient public transportation, violence against women, and societal norms that discourage women from working outside their homes.
- Measurement Issues: Capturing women's economic contribution is complex, as many women in India are primarily involved in household duties and caregiving for their families. Traditional economic measurements may not fully account for their significant contributions within their households.
- Job Opportunities: A lack of adequate job opportunities is another significant factor contributing to low female labor force participation. Limited access to suitable employment options hinders women from joining the workforce.
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For Prelims: Labor Force Participation Rate (LFPR), Employment Rate (ER), Centre for Monitoring Indian Economy (CMIE), and Labour Force.
For Mains: 1. Discuss the significance of the Labor Force Participation Rate (LFPR) as a critical labor market indicator in the context of economic development and policy formulation. (250 words).
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Previous year Question1. In India, which one of the following compiles information on industrial disputes, closures, retrenchments, and lay-offs in factories employing workers? (UPSC 2022)
A. Central Statistics Office
B. Department for Promotion of Industry and Internal Trade
C. Labour Bureau
D. National Technical Manpower Information System
Answer: C
2. Which of the following brings out the 'Consumer Price Index Number for Industrial Workers'? (UPSC 2015)
A. The Reserve Bank of India
B. The Department of Economic Affairs
C. The Labour Bureau
D. The Department of Personnel and Training
Answer: C
3. International Labour Organization's Conventions 138 and 182 are related to (UPSC 2018)
A. Child labour
B. Adaptation of agricultural practices to global climate change
C. Regulation of food prices and food
D. Security
Answer: A
4. 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
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Source: The Indian Express
