But interestingly, the CMIE study makes out that there is the odd case of the labour participation rate that declined in September. This fell from 41 per cent in August to 40.7 per cent in September. This is odd because if the employment rate goes up and the unemployment rate goes down, it creates room for an expansion of the labour force and therefore also the labour participation rate. We can visualise the increase in employment rate as an absorption of the unemployed which leads to a fall in the unemployment rate. A logical outcome of this migration of the unemployed into jobs is that it should attract more people to look for jobs. It should increase the labour force. But, this is not what happened in September. The labour force shrunk and therefore, the labour participation rate fell., mentions the CMIE study.
The labour participation rate in September at 40.7 per cent was 199 basis points lower than the average labour participation rate of 42.7 per cent in 2019-20. Its tapering in September, though marginal, after significant gains in the past three months should worry us because there is much room to cover yet, in the recovery process. Remaining 200 basis points lower than in the previous year after six months of lockdown robs India once again of the potential it has in its young labour force. This is a significant finding. In fact, the CMIE findings cast doubts about the Finance Ministry’s claim about v shaped recovery which is taking place. The situation is still very fluid and the employment situation has to face many more obstacles for a real recovery.
The labour participation rate has been falling systematically since 2016-17 when it was 46.1 per cent. In 2017-18, the year that showed the full impact of the November 2016 demonetisation and the July 2018 introduction of GST, the LPR fell by 256 basis points. Then it slid by 77 basis points in 2018-19 and then again by 14 basis points in 2019-20. The two shocks of demonetisation and GST delivered within 8 months of each other had a lasting impact on the LPR. The lockdown, it looks like, could deliver a similar blow to it., the CMIE study feels.
The LPR mentions how many of the working age population are willing to be employed. If this proportion keeps falling as it evidently is, it does not bode well for India’s growth story. It renders all stories of a revival in the economy as a myth. This is a very strong observation made by the CMIE and the Narendra Modi government has to explain what factors they are taking into account in claiming that the things are finally looking up and the growth will follow.
From a growth perspective it is important that a good proportion of the working age population is willing to work and then a good proportion of them actually gets employment. The proportion that gets employment is called the employment rate. The employment rate tells us how many of the working age population are actually employed.
The employment rate has been falling in line with the fall in the labour participation rate. It fell from 42.7 per cent in 2016-17 to 41.6 per cent in 2017-18 and then even more sharply to 40.1 per cent in 2018-19 and then to 39.4 per cent in 2019-20. Between 2016-17 and 2019-20, the employment rate fell by 329 basis points. In September 2020, the employment rate stood at 38 per cent. It was 144 basis points lower than it was in 2019-20.
For reference, according to modelled ILO estimates globally, 57.2 per cent of the working age population is employed. By the same model India’s employment rate was 47 per cent and South Asia was 48 per cent. Pakistan was at 50 per cent, Sri Lanka at 51 per cent and Bangladesh at 57 per cent. India has a long way to go to catch up with global standards and also with its immediate neighbours. China is way ahead at 65 per cent.
AS the CMIE sees it, the continued absence of employment as an important macro-economic indicator in policy making even after decades of decline in employment is extraordinary. Employment has failed to find a place in policy making in spite of continued political protests on lack of employment and demands for reservations. Reservation of jobs now invariably face roadblocks from the judiciary. And, reservations is a zero-sum game. It is better that India adopts employment rate targeting. (IPA Service)
EMPLOYMENT MARKET IN INDIA SHOWING CONFLICTING TRENDS IN COVID ERA
MODI GOVT HAS NO JOB GENERATION TARGET ORIENTED POLICY
Satyaki Chakraborty - 2020-10-12 10:29
The employment market in India after nearly seven months of varied phases of lock down and the surge in covid pandemic, is showing conflicting signs. Labour market statistics improved somewhat in September 2020. The unemployment rate fell sharply from 8.4 per cent in August to 6.7 per cent. In September 2020.The opening of the economy in truncated form, led to the n return of many workers and employees to the establishments which were closed for long or worked partially. This is the lowest unemployment rate in 18 months. More importantly, the employment rate scaled up to almost 38 per cent from 37.5 per cent in August. This is its highest level since the lockdown. It has more than recovered from its small fall last month. These are big and welcome gains, says the latest study of the Centre for Monitoring Indian Economy (CMIE).