Employment Paradox – Part 2

Unemployment remains a challenge for India. MOSPI has a nice summary documenting the unemployment situation from 1972-73 to 2011-12. When you think about India’s unemployment problem, don’t just look at the percentage. Also, look at the sheer size of unemployed people.

MOSPI has put it in the following way while commenting on 2009-10 and 2011-12 unemployment situation.

“…. Although the unemployment rate may be lower than what is prevailing now in developed economies, the number of unemployed is significant in absolute terms. During 2004-05, the number of unemployed people was 11.3 million, which declined to 9.8 million in 2009-10 but again increased to 10.8 million in 2011-12 under usual status (ps+ss) (UPS(adj)”.

There are series of public interventions to improve the employment scenario. What would have happened without those? Much worse. However, the challenge is far from over.

I was trying to figure out where India stands in terms of other countries in terms of employment and unemployment. I took the G-20 list and dropped European Union from that as I just wanted to compare countries. Data is taken from World Development Indicators (WDI) database and it is for the year 2019. WDI picked up most of the indicators from ILO and put it as ‘modeled ILO estimate’. ??I have inserted a row showing India’s rank amongst these 19 countries. If a data point is missing for a country, then the rank simply shows India’s position amongst the countries for which data is available.

While the table is self-explanatory, I have also put the long-definition of each variable as given in WDI at the end. The last two column in the table is vulnerable employment to total employment and wages and salaried workers to total employment. It requires a little bit elaboration.

What is vulnerable employment? As per the WDI meta data – ‘Vulnerable employment is contributing family workers and own-account workers as a percentage of total employment’. Why it is called vulnerable employment? Refer to this ILO link and the conversations therein. It is mentioned that -

“We define workers in vulnerable employment as the sum of own-account workers and contributing family workers. They are less likely to have formal work arrangements, and are therefore more likely to lack decent working conditions, adequate social security and ‘voice’ through effective representation by trade unions and similar organizations. Vulnerable employment is often characterized by inadequate earnings, low productivity and difficult conditions of work that undermine workers’ fundamental rights.”

ILO also recognizes that it is an imperfect measure of vulnerability. It says – “Although this is true in general terms, it is important to keep in mind that some employees do lack basic elements of decent work (such as not being covered by social security and/or social dialogue) while some own-account workers and contributing family workers are not in a precarious or vulnerable situation. Thus, while the share of own-account workers and contributing family workers is a valuable and reasonable proxy to measure vulnerability, it is nevertheless an imperfect one.”

India’s share of vulnerable employment is quite high. It is 73.8% of total employment. Even if you look at three rounds of recent Periodic Labour Force survey (PLFS) data of India for the year 2017-18, 2018-19 and 2019-20, on an average, 52% are in self-employment and 24% are casual workers. In the 52% of self-employment, a very small fraction is ‘Employer’ – 4.15% of self-employed. 69.35% are own account workers and 26.5% are unpaid family worker.

Who is own account worker? As per PLFS – “Self-employed persons who operated their enterprises on their own account or with one or a few partners and who, during the reference period, by and large, ran their enterprise without hiring any labour were considered as own-account workers. They could, however, have had unpaid helpers to assist them in the activity of the enterprise.”

Who is a casual labour? Again referring to PLFS, it is “A person who was casually engaged in others’ farm or non-farm enterprises (both household and non-household) and, in return, received wages according to the terms of the daily or periodic work contract, was considered as a casual labour.” Do you get into a written contract with a daily wage laborer? Most often not. It can be a verbal contract at best.

In the table, you can see Wages and salaried workers to total employment is very low in India (24.2%) in comparison to G-20 countries. Who is Wage and Salaried worker? WDI meta data suggests – “Wage and salaried workers (employees) are those workers who hold the type of jobs defined as "paid employment jobs," where the incumbents hold explicit (written or oral) or implicit employment contracts that give them a basic remuneration that is not directly dependent upon the revenue of the unit for which they work.” In India’s PLFS context, ?it is regular wage /salaried employee with activity status code as 31, 71, 72. It is around 24% of total workers and remained so in the last three rounds of PLFS survey.

In my next post, I will try to explain some of these terms as well as other labour statistics. In the meantime, you can refer to chapter-2 of PLFS document .

In summary, possibly the only way to address the unemployment issue is to help the private sector grow, to make MSMEs more vibrant, Agriculture more market oriented and devising a social security measure to take care of any transitional pain.

Definitions as given in WDI

GDP per capita, PPP (constant 2017 international $): GDP per capita based on purchasing power parity (PPP). PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates. An international dollar has the same purchasing power over GDP as the U.S. dollar has in the United States. GDP at purchaser's prices is the sum of gross value added by all resident producers in the country plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in constant 2017 international dollars.

Employment to population ratio, 15+, total (%) (modeled ILO estimate): Employment to population ratio is the proportion of a country's population that is employed. Employment is defined as persons of working age who, during a short reference period, were engaged in any activity to produce goods or provide services for pay or profit, whether at work during the reference period (i.e. who worked in a job for at least one hour) or not at work due to temporary absence from a job, or to working-time arrangements. Ages 15 and older are generally considered the working-age population.

Female share of employment in senior and middle management (%): The proportion of females in total employment in senior and middle management. It corresponds to major group 1 in both ISCO-08 and ISCO-88 minus category 14 in ISCO-08 (hospitality, retail and other services managers) and minus category 13 in ISCO-88 (general managers), since these comprise mainly managers of small enterprises.

Self-employed, total (% of total employment) (modeled ILO estimate):Self-employed workers are those workers who, working on their own account or with one or a few partners or in cooperative, hold the type of jobs defined as a "self-employment jobs." i.e. jobs where the remuneration is directly dependent upon the profits derived from the goods and services produced. Self-employed workers include four sub-categories of employers, own-account workers, members of producers' cooperatives, and contributing family workers.

Share of youth not in education, employment or training, total (% of youth population):Share of youth not in education, employment or training (NEET) is the proportion of young people who are not in education, employment, or training to the population of the corresponding age group: youth (ages 15 to 24); persons ages 15 to 29; or both age groups.

Unemployment with advanced education (% of total labor force with advanced education): The percentage of the labor force with an advanced level of education who are unemployed. Advanced education comprises short-cycle tertiary education, a bachelor’s degree or equivalent education level, a master’s degree or equivalent education level, or doctoral degree or equivalent education level according to the International Standard Classification of Education 2011 (ISCED 2011).

Unemployment, total (% of total labor force) (modeled ILO estimate):Unemployment refers to the share of the labor force that is without work but available for and seeking employment.

Vulnerable employment, total (% of total employment) (modeled ILO estimate):Vulnerable employment is contributing family workers and own-account workers as a percentage of total employment.

Wage and salaried workers, total (% of total employment) (modeled ILO estimate):Wage and salaried workers (employees) are those workers who hold the type of jobs defined as "paid employment jobs," where the incumbents hold explicit (written or oral) or implicit employment contracts that give them a basic remuneration that is not directly dependent upon the revenue of the unit for which they work.

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