Updated: August 4, 2021 7:45:37 am
The results of the latest annual report of the Periodic Labour Force Survey are surprising and instructive. The PLFS, conducted by the National Statistical Office, collects data on several metrics to present a comprehensive picture of employment in India, but, given its methodology, the data comes out with a considerable lag. This report pertains to the 12 months between July 2019 and June 2020. As such, it provides a glimpse into the state of unemployment both before the Covid pandemic and immediately after it.
The first thing to note is that the unemployment rate in India and its trend differ considerably depending on whether one chooses to use the “usual status” (unemployment over the past year) method or the “current weekly status (CWS)” (unemployment over the past week) method. According to the former, the unemployment rate declined — even as India’s economic growth rate was fast decelerating in this period — while the latter method suggests that unemployment levels remained close to an almost five-decade high. A similar divergence was seen in the other key metric — the labour force participation rate (essentially the percentage of people in the economy seeking work). India has one of the lowest LFPRs among comparable economies — almost 20 percentage points lower than the global average. If one looks at the CWS method, which is closer to the global norm, the official data suggests that the unemployment rate was close to 9 per cent while the unemployment rate among the youth (15 to 29 years of age) was 20 per cent, and this was the situation before the Covid disruption. In essence, it shows the extent of distress in the economy immediately before Covid. That, in turn, should put the news of economic recovery in perspective. Even if the economy were to regain the pre-Covid levels in terms of GDP, the extent of economic distress (in terms of unemployment) may not ease to a similar extent.
There is another reason why the unemployment rate may not fall commensurate with the rise in GDP. As can be seen in other large economies such as the US and China — both of which have recovered better (in terms of absolute GDP and GDP growth rate) from the Covid shock than most others — bringing down the unemployment rate may not be easy. That’s because the pandemic has fundamentally altered aspects of every economy’s functioning, often in ways that are not yet understood. The US, for example, has witnessed a growing mismatch between the skills that companies want and what workers offer. That is what explains the anomaly wherein both wage rate and unemployment rate are up in the US. Similarly, youth unemployment in China has stayed up, threatening consumer demand. Policymakers in India, too, need to be watchful. Growth alone is not enough if it comes without wellbeing (employment). If not addressed, high levels of unemployment will create both economic and social hurdles for growth.
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