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Tuesday, June 28, 2022

Tackling India’s unemployment wave

🔴 Trishali Chauhan, Christophe Jaffrelot write: Across sectors, age groups and gender, there has been an increase in joblessness, which cannot be blamed solely on the pandemic

Written by Trishali Chauhan , Christophe Jaffrelot |
Updated: January 12, 2022 10:53:01 pm
Between 2019-20 and December 2021, the manufacturing sector has lost 9.8 million jobs; by contrast, agricultural jobs jumped by 7.4 million. (Illustration: C R Sasikumar)

Over the last few months, the Government of India and the mainstream media have highlighted the return of economic growth. However, very little attention has been paid to the job market. India’s unemployment rate has been soaring. It went up to 7.91 per cent in December 2021 from 6.3 per cent in 2018-2019 and 4.7 per cent in 2017-18, when the trend started to change — a sign that this phenomenon is not just due to Covid. In urban areas, this has gone up to 9.30 per cent in December 2021 from 8.09 per cent in January 2021. In rural areas, it has gone up to 7.28 per cent against 5.81 per cent.

Clearly, unemployment is more in the urban areas as compared to the rural areas. Between 2019-20 and December 2021, the manufacturing sector has lost 9.8 million jobs; by contrast, agricultural jobs jumped by 7.4 million. One probably needs to get back to the Raj years to see such a movement towards ruralisation: Workers are back in their villages even though urban jobs provide better wages.

The quality of jobs is also at stake. The percentage of salaried people has dropped from 21.2 per cent in 2019-2020 to 19 per cent in 2021, which means that 9.5 million people have left the salariat and become jobless or part of the informal sector. But the informal sector itself has shrunk, so much so that — to return to aggregate figures — the employed population, over the same period, has decreased from 408.9 million people to 406 million, at a time about 10 million young Indians were entering the job market. The age pyramid does not help, despite the belief in the so-called demographic dividend.

India’s Labour Force Participation (LPR) does not compare favourably with other emerging countries — a category that is vanishing quickly. According to the World Bank, it stood at 46 per cent in 2020 (it has not improved since then), while that of Brazil stood at 59 per cent, Chile’s at 57 per cent, China’s at 67 per cent, Ethiopia’s at 76, Ghana’s at 66, per cent, Indonesia’s at 66 per cent and Malaysia’s at 64 per cent.

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Certainly, there are variations among Indian states. As per CMIE data, the unemployment rate in December 2021 was the highest in Haryana (34.1 per cent), followed by Rajasthan (27.1 per cent), Jharkhand (17.3 per cent) and Bihar (16 per cent).

There are also variations age-wise. Based on the data from CEDA-CMIE (between January 2019 and July 2021), the year 2020-21 saw 42.4 per cent fewer 15-19-year-olds employed in comparison to 2019-20. The age group of 20-29-year-olds saw the average monthly employment numbers go down by 15.6 per cent.

In fact, according to the NSSO, in 2019, when India had the highest unemployment rate in the last 45 years, this rate was particularly high among India’s youth: 34 per cent for those between 20 and 24 years. For urban dwellers in this age group, this rate was 37.5 per cent. This figure is coherent with the CMIE figures: For the age group of 20-29 years old, the rate was around 28 per cent, meaning that nearly 30.8 million young people in this age group were jobless, compared to 17.8 million in 2017. An astonishing fact is that the more educated the people, the more unemployed they were — 63.4 per cent of graduates falling in the age bracket of 20-24 years were unemployed. This number has increased with time.

Variations according to gender are also important. Unemployment among women is higher than men, both in urban as well as rural areas. For women, the average unemployment was 14.28 per cent and for men, it was 7.88 per cent. Further, of the women willing to seek work in urban areas, 92.1 per cent don’t get any work. This count for rural women stands at 54.8 per cent.

To start with, the proportion of women who get employed and get paid is low and continues to decline over the years. This is happening even though more and more women are attending school and college in the country.

The absorption of women in the workforce, as compared to men, is much less for two main reasons. One, most women were involved in agricultural jobs in rural areas; the mechanisation of these jobs has had a huge impact on female labour force participation in the country. Two, India’s manufacturing sector is not labour-intensive. This has made it difficult to compensate women who got displaced from agricultural jobs.

There has been a lot of discussion about how women’s role as primary caregivers and ownership of domestic chores is a reason for the low participation of women in the workforce. The cultural norms and deep roots of patriarchy apparently limit women’s labour participation in India. In fact, young women tend to abstain from looking for a job when their own brothers cannot find one.

The employment scene will improve only if private investment picks up. At the moment, the situation is grim on that front. The investment rate is declining — almost in a linear manner — since 2011. It has dropped from 34.3 per cent then to 27 per cent in 2020. One of the reasons why companies do not invest is weak demand – which is partly due to joblessness — that dissuades enterprises from hiring more. This vicious circle is also fostered by growing inequalities, resulting in the shrinking of the middle class.

Unfortunately, investors will also be at an unfair disadvantage of more delicate access to credit in the coming weeks and months: Not only are Indian banks still badly affected by NPAs, but interest rates are bound to increase because of inflation — the rate has almost touched 5 per cent. In December, the State Bank of India raised its base rate for the first time in two years.

Unemployment in India has undeniably reached a critical stage and perhaps, raises serious questions on the quality of the economic recovery, which the third wave of the pandemic may affect anyway, making joblessness an even more acute problem.

This column first appeared in the print edition on January 12, 2022 under the title ‘Out of work’. Chauhan is an independent research scholar from Kings College, London. Jaffrelot is senior research fellow at CERI-Sciences Po/CNRS, Paris

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