By Dr Sarbapriya Ray, Dr Ishita Aditya A man willing to work and unable to find work is perhaps the saddest sight that fortune’s inequality exhibits under the Sun — Thomas Carlyle, Scottish historian and philosopher. The transformation brought about by the pandemic has had an enduring impact on our social and economic lives. Economic […]
By Dr Sarbapriya Ray, Dr Ishita Aditya
A man willing to work and unable to find work is perhaps the saddest sight that fortune’s inequality exhibits under the Sun — Thomas Carlyle, Scottish historian and philosopher.
The transformation brought about by the pandemic has had an enduring impact on our social and economic lives. Economic activity and consumer base have severely reduced after the Omicron variant. In any economy, an increase in unemployment trims down collective spending power, slows the economy and most significantly, increases the susceptibility of households to deal with economic ups and downs.
The unemployment rate in urban India was 7.7% in January-April 2021, as against 12.42% in the same period of 2020, which immediately preceded the period when Covid-19 first knocked the country. Overall, male and female unemployment rates (8.4% and 22.6% respectively) declined noticeably in May-Aug, 2021 as compared with pre-Covid Jan-Apr, 2020 (10.8% and 25.9% respectively).
Structural Damage
However, the recent encouraging signs are that the unemployment rate declined from 7.8% in October 2021 to 7% in November 2021 while the employment rate rose by a very small amount from 37.28% to 37.34%. This translated into employment increasing by 1.4 million, from 400.8 million to 402.1 million in November 2021. Unfortunately, the despairing trend is that the unemployment rate in India touched a four-month high in December 2021, and reached 7.9%, according to the Centre for Monitoring Indian Economy (CMIE). The urban unemployment rate rose from 8.21% in November 2021 to 9.3% in December 2021, while the rural unemployment rate was up from 6.44% to 7.28% and rural employment stood at 7.3%.
One discontent in the November 2021 data related to structural damage in the trend seen in the employment data. Employment is falling in urban areas at a faster pace than in rural areas. As a result, the share of urban employment has been falling. According to the CMIE, during 2016-17 through 2018-19, urban employment accounted for 32% of the total employment in India.
Urban jobs possibly offer better wages and have a greater share of the organised sectors. Their decline implies a decline in the overall quality of jobs in India. In November 2021, while India generated 1.4 million additional jobs, employment in urban regions fell by 0.9 million. This was compensated by a 2.3 million increase in rural jobs.
Another frustration in the November employment data is the drop in salaried jobs and a fall in the count of entrepreneurs. Salaried jobs fell by 6.8 million whereas entrepreneurs declined by 3.5 million. These were compensated by an 11.2 million increase in employment among daily wage labourers and small traders. “This again points to deterioration in the quality of employment. Salaried jobs, at 77.2 million, were 9.7% lower in November 2021 than they were in November 2019,” Mahesh Vyas, Managing Director and CEO, CMIE, said.
Lagging LPR
A society where a sizable proportion of the adult population adhere to the labour force and more or less, all those who are having been connected to the labour force are effectively employed, is considered a healthy society, free from economic vulnerability. The labour force participation rate is a measure of the proportion of a country’s working-age population.
The Labour participation rate (LPR) fell from 40.41% in October to 40.15% in November. This is the second consecutive month of a fall in the LPR. The fall suggests that the recovery in the LPR from its recent drop to 39.6% in June 2021 following the second wave of the pandemic has run out of steam. And, a secular decline may set in again. This is what had happened after the recovery from the first wave. LPR crashed from nearly 43% before the first wave to about 36%. It recovered quickly to 41% and then lost steam. Then, it started sliding slowly to hover just above 40% before the second wave dragged it below 40% during the quarter ended June 2021. The LPR recovered steadily in the second quarter of the fiscal to reach 40.7% by September 2021. But then it slid back to 40.4% in October and then to 40.2% in November. The two pandemic shocks have lowered the LPR structurally. And, the declining trend has continued at the lowered levels.
India now has an LPR which is close to 40% compared with about 43% before the pandemic. According to the World Bank, the modelled ILO estimate for the world LPR in 2020 was 58.6%. The same model places India’s LPR at 46%. India is a large country and its low LPR drags down the world LPR as well. There are only 17 countries worse than India on LPR. Most of these are middle-eastern countries such as Jordan, Yemen, Algeria, Iraq, Iran, Egypt, Syria, Senegal and Lebanon. Some of these are oil-rich and others are hindered by civil discord. India neither has the privileges of oil-rich countries nor the civil disturbances that could keep the LPR low. Yet, it suffers an LPR that is as low as seen in these countries. Of all the dissatisfaction in the employment data, the enduring fall in the LPR should be considered as the most problematic.
The female labour participation rate in urban India fell to a record low of 7% in May-Aug, 2021. Female participation rate in both rural and urban India is very low — a perpetual problem.
Young Unemployed
A society that cannot afford productive employment to those who look for it, is susceptible. Unemployment among those having only fresh secondary/higher secondary or fresh graduation degree is more prominent, which stood at 16.54%, 15%, 14.3% and 15.5% during the quarters between 2020 and Aug, 2021. These particular classes of people find it difficult to get jobs once they lose jobs because of a lack of adequate training and experience.
The Indian economy has begun to get well from the shock of the global health crisis. Therefore, in such a situation, the reversing trend puts the country in a tricky position to provide help for those who have lost their jobs.
While speaking at the 2021 Yidan Prize Summit, Nobel laureates Abhijit Banerjee and Esther Duflo rightly added that education is important for a democracy as it allows people to get full access to society’s resources and make them participants in various societal activities, but poverty cannot be alleviated just by educating people as education may become meaningless if labour market does not provide jobs.
(Dr Sarbapriya Ray is Associate Professor, Department of Commerce, Vivekananda College, Thakurpukur. Dr Ishita Aditya is Associate Professor, Dept of Political Science, Bejoy Narayan Mahavidyalaya, Hooghly, Kolkata)