Explained: The fall in unemployment rate in the 2020-21 labour survey, what it means

As per the current weekly status (reference period of one week) — contrary to perceived expectations of a likely hit on jobs — unemployment rate eased to 7.5 per cent in 2020-21 from 8.8 per cent. But there is a catch: while the overall employment situation showed improvement, the rise was seen mostly in low-quality, unpaid work.

The headline numbers

The headline employment numbers show an improvement in the employment situation.

The unemployment rate of 4.2 per cent in 2020-21, the lowest since the first PLFS showed an unemployment rate of 6.1 per cent in 2017-18. According to the report, the labour force participation rate (LFPR), or those working or seeking or available for work in the labour force, was the highest in four years at 39.3 per cent in 2020-21, as was the worker population ratio (WPR) at 36.3 per cent. WPR is defined as the percentage of employed persons in the population.

The unemployment rate was higher for males in rural areas than females. In rural areas, the unemployment rate was 3.9 per cent in 2020-21, while that for females was 2.1 per cent. In urban areas, the unemployment rate for females was 8.6 per cent, while that for males was 6.1 per cent.

Rise of agricultural share, unpaid work

While the overall employment situation showed improvement, the rise was seen in low-quality, unpaid work.

Employment in the unpaid self-employed category continued to show an increase in 2020-21 by rising to 17.3 per cent from 15.9 per cent in 2019-20 and 13.3 per cent in 2018-19. Rural unpaid employment also showed increase to 21.3 per cent in 2020-21 from 20.0 per cent in the previous year, while that for urban areas increased to 6.3 per cent from 5.7 per cent.

Unpaid self-employment for females increased to 42.8 per cent in rural areas in 2020-21 from 42.3 per cent a year ago, while that for rural males increased to 11.0 per cent from 10.4 per cent.

In urban areas, unpaid self-employment for females showed a significant increase to 12.4 per cent in 2020-21 from 11.1 per cent in 2019-20, while that for males increased to 4.5 per cent from 4.1 per cent.

The PLFS data shows that the share of the labour force engaged in agriculture continued to show a rise in 2020-21, increasing to 46.5 per cent from 45.6 per cent in 2019-20 and 42.5 per cent in 2018-19 — a reversal of the decades-long decline in the labour force participation in agriculture.

This suggests that the movement of labour out of agriculture, which had gathered pace post 2004-05, seems to have been stymied by the economic slowdown and the pandemic. The reverse migration of labour from cities to villages would have only increased the pressure on agriculture to absorb the workers.

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The increase in share of agricultural employment was seen more for urban areas than rural areas. In urban areas, male employment in agriculture increased to 5.3 per cent in 2020-21 from 5.0 per cent in 2019-20, while that for females increased to 10.4 per cent in 2020-21 from 8.2 per cent.

In rural areas, both males and females recorded a slight moderation in agricultural employment to 53.8 per cent and 75.4 per cent, respectively, from 55.4 per cent and 75.7 per cent in the previous year.