With the Periodic Labour Force Survey (PLFS) data on job seekers and workers now available on an annual basis since 2017-18 as against their earlier availability on a quinquennial basis, one key data constraint has moderated. The Centre for Monitoring Indian Economy (CMIE) has also been providing regular data on labour participation and employment rate for rural and urban areas for over a decade now.
At the global level, International Labour Organization provides data on unemployment on a comparable basis for all countries including India. The three sets of data on employment do not depict a uniform picture, partly due to coverage and partly due to the definition of unemployment. We propose to examine these data here.
An unemployed person as per ILO is one aged 15 or above, who simultaneously meets three conditions: being unemployed for a given week; being available to take a job within two weeks; having actively sought a job in the last four weeks or having found one starting in less than three months. Unemployment is when potential labourers of an economy are neither working nor actively searching for a job in the market.
NSSO’s approach
NSSO defines unemployment either on the basis of currently weekly status (CWS) or in terms of principal and subsidiary activity status (PS+SS). In CWS, a person is unemployed if he/she is not working for a day in the preceding week of the visit but seeking actively a job. In PS+SS, a person is unemployed if he/she is not working for a reasonable part of the year. The basic issue, however, is the treatment to the unpaid family workers.
CMIE estimates the size of the labour force and the unemployment rate in India by directly interviewing a large sample of randomly selected households and all members therein of over 15 years of age.
Face-to-face interviews are conducted with each household. Responses are sought to classify each eligible member of the surveyed households into any one of the following four statuses with respect to employment/unemployment as on the date of the survey: is currently employed; is not employed but is willing to work and looking for a job; is not employed, willing to work but is not looking for a job; and is not employed, not willing to work and not looking for a job.
The estimate of the labour force in PS+SS includes: (a) the persons who either worked or were seeking/or available for work for a relatively long part of the 365 days preceding the date of survey; and (b) those persons from among the remaining population who had worked at least for 30 days during the reference period of 365 days.
The estimate of labour force according to the current weekly status approach is derived by considering those who worked for at least one hour or were seeking/or available for work for at least one hour on any day during the seven days preceding the date of survey.
The differences in the way the labour force and the unemployed are defined in NSSO, CMIE are reflected in annual labour force rates and the rates of unemployment as indicated in the Table.
Even in case of NSSO, the labour force participation rate as per the CWS is lower than PS+SS and the differences have persisted over the years. Unemployment rate in CWS approach is consistently higher. Labour force participation rate in CMIE has been significantly lower compared with the NSSO CWS.
Further, while NSSO data show an increase in participation rate, CMIE shows it to be declining. Given the differences in the rates of unemployment, question may arise which number is closer to reality.
Before we make an assessment, it may be worthwhile to look at four observations based on PLFS 2022-23. First, on a current weekly basis, data show that more than 80 per cent of the workers were employed on all days. Workers who were unemployed for more than five days in a week were just 4.8 per cent of total workers.
Second, in terms of hours of work, all categories of workers reported working more than 42 hours a week and in the case of salaried persons it was close to 50 hours.
Thirdly, the family help was predominantly in agriculture, trade and eating joints and though they may have not been paid, they worked for most part of the week. In the case of self-employed persons, wages are implicit in operating surplus. CMIE does not recognise family help.
Fourth, PLFS has also ascertained additional hours of work, if that is available. The number of workers who reported for the availability for additional work was 8.9 per cent of total workers.
Contrary to Okun’s law
CMIE’s labour force participation rate (LFPR) has actually moderated, more so in the post-pandemic period. Notwithstanding the robustness of survey methodology, a near static workforce is contrary to the empirically tested Okun’s Law which establishes a relationship between unemployment and GDP growth. The post Covid period has witnessed a sharp recovery and without an increase in the number of workers, such an upsurge may be rather difficult to accept.
In view of this, PLFS unemployment data are considered by us as closer to reality, and actual unemployment may be close to 4 to 4.5 per cent of LFPR only.
The writer is former Secretary, Economic Affairs, and Singhi is former Senior Economic Adviser, Ministry of Finance. Views are personal