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Tuesday, Dec 06, 2022

India’s employment problem predates Covid. The pandemic has deepened the faultlines

The heightened demand for work under MGNREGA, despite large parts of the economy having recovered to their pre-pandemic levels, suggests continuing economic distress.

The employment crisis in India predates Covid. However, several fault lines have been deepened by the pandemic.

In an attempt to counter the Opposition’s claims on the politically sensitive issue of unemployment, Finance Minister Nirmala Sitharaman argued in the Lok Sabha on Thursday that unemployment in the country had actually declined to pre-pandemic levels. As per the periodic labour force survey, urban unemployment during January-March 2021 had declined to the pre-Covid level of around 9 per cent, after peaking at 20.8 per cent during the first wave. Various other estimates also seem to suggest that the level of unemployment in the country has in fact fallen back to pre-Covid levels. As per CMIE, the unemployment rate in January 2022 stood at 6.57 per cent, down from the peak of 23.52 per cent in April 2020. It had stood at 7.76 per cent in February 2020 prior to the pandemic. However, does this fall in the unemployment rate indicate an easing of the labour market distress? Does it reflect an expansion of more productive forms of employment? And if so, does it suggest a healing of the scars induced by the pandemic?

The employment crisis in India predates Covid. However, several fault lines have been deepened by the pandemic. First, India has witnessed a decline in the labour force participation rate. This implies that many have simply opted out of the labour force, perhaps put off by the absence of jobs. Second, unemployment rates are significantly higher among the youth, and the more educated sections. As per surveys, the unemployment rate in the 15-29 age group stood at 22.9 per cent in January-March 2021. Third, while there are signs pointing towards an increase in the formalisation of the labour force (though this employment is more likely to be concentrated among low-income jobs in the larger industrial regions), there is also the casualisation of employment to contend with. Casual wage labour employment lacks the social security framework that formal employment provides. Fourth, considering current per capita income levels, few can afford to stay unemployed for long. Many will simply opt for less productive jobs at lower wages. This implies that a downward trending unemployment rate may not be an accurate gauge of labour market distress. The heightened demand for work under MGNREGA, despite large parts of the economy having recovered to their pre-pandemic levels, suggests continuing economic distress.

The recent protests in the states of Uttar Pradesh and Bihar, by those who had appeared for the non-technical popular categories exam conducted by the Indian Railways, are indicative of this growing mismatch between the demand and supply of jobs. So are the demands by various caste groups for increasing reservation in public sector employment and expanding their scope to encompass the private sector. At their core, they indicate the lack of adequate and remunerative employment generation in the country, and the inability of the government to facilitate the creation of a labour-intensive manufacturing sector that can absorb the surplus labour force in agriculture and the millions entering the labour force each year. This is the biggest issue confronting the government.

This editorial first appeared in the print edition on February 12, 2022 under the title ‘The jobs crisis’.

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First published on: 12-02-2022 at 03:55:58 am
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