Issues in the Indian Labor Market: Insights from PLFS Survey.

AuthorSundar, K.R. Shyam
PositionPeriodic Labor Force Survey


The Committee on Experts on Unemployment Estimates chaired by Prof. Dantwala set up by the erstwhile Planning Commission in the early 1970s studied the detailed dimensions of employment and unemployment in the labor market in India and recommended the standard indices to measure employment and unemployment for the pre-liberalized Indian economy. These measures were implemented in the National Sample Surveys (NSS) by NSS Organization (NSSO) till the 68th round (2011-12) with a few amendments. The NSSO data base formed the basis for active policy intervention in the Indian labor market for long. Since 2014 with the assumption of power by the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) at the Centre, the NSSO data base was challenged on various grounds: the quinquennial NSS fails to reflect the dynamics of employment correctly and does not adequately capture the new kinds of jobs that are being created in the modern and the conventional service sectors, such as jobs in the gig economy and other modern services (both personal and social) and there is a need for a statistical system to capture the changes taking in the short term. Considering the importance of the availability of labor force data at more frequent time intervals (say, for every quarter), on the recommendation of the National Statistical Commission (NSC), the Ministry of Statistics and Program Implementation (MOSPI) constituted a Committee on Periodic Labor Force Survey (PLFS) to develop the survey methodology including the sample design for generating monthly/quarterly labor market data. After a good deal of delay and procrastination the NDA government has after its thumping victory in the recent general elections released the full PLFS report on 31st May, 2019.

The report defines that if a person is employed or seeking work for more than half the time ("majority time") during the preceding 365 days before the date of the survey then his or her "usual status" is that he/she belongs to the labor force; but if the person does not succeed in getting work for more than half the time then he or she is considered of "usual status unemployed". All individuals who are outside of the labor force, according to this definition, are unemployed, but if they have worked for not less than 30 days during the reference year they are classified as "subsidiary status" workers. The total labor force then is defined as "Usual Status (Principal Status plus Subsidiary Status, PS+SS)" workers. If a person has worked or sought work for at least one hour on at least one day during the 7 days preceding the date of survey then his or her is current weekly status (CWS). In the subsequent sections, we make analysis of labor market profile and working conditions in the post-reform period on the basis of the data presented in this report.

Labor Force Participation

The labor force participation rate (LFPR) is defined as the percentage of persons in the labor force among the persons in the population. It is a broad indicator widely used to assess the number of people who are actively engaged in market activities for their livelihood. During 2017-18 labor force participation rate is significantly lower for females than for males in both rural and urban areas. According to the usual status (PS+SS), 54.9 percent of rural males and 18.2 percent of rural females were in the labor force and 54.4 percent of rural males and 16.1 percent of rural females were in the labor force according to CWS approach. In urban areas, about 56.7 percent of males and 15.3 percent of females were in the labor force. On either estimate female labor supply is abysmally low. More worryingly, the female LFPR in the rural areas by both usual status and CWS status declined steeply over the period 2004/05-2017/18; in terms of usual status, from 33.3 percent to 18.2 percent and 28.7 percent to 16.1 percent respectively (Table 1). At the same time, quite surprisingly, the male LFPR remained almost constant ranging from 54 to 57 percent depending on the measure and area (urban or rural).

During the period between 2004-05 and 2011-12 and 2011-12 and 2017-18, among persons of age 15-29 years (the younger cohort constitutes 27 percent of India's population), the LFPR among males and females in both rural and urban areas declined (Table 2). But the extent of decline was higher in rural areas than in urban areas for both males (almost twice in rural than in urban) and females (over six times in rural than in urban). The LFPR among 15 and above age group witnessed a sharper decline among males (9.5 percentage points) and females (24.8 percentage points) in rural than for them in urban (4.7 and 4.0 percentage points respectively) areas during 2004/05- 2017/18. A sharp decline in the labor force participation rate in all categories shows that the economic agents especially in the rural areas and females are less willing to enter the labor market either for want of jobs or because they want to pursue education or because neither option was attractive.

Worker-Population Rate

Worker-Population Rate (WPR) is the percentage of persons employed among the population. The WPR and LFPR are of course closely related. For a developing country like India WPR appears to be a robust metrics to examine the dynamics of labor market activities given the unlimited supply of low skilled workers. The WPR for all persons in both rural (about 34 percent) and urban areas (about 35 percent) was quite close (Table3).

In both rural and urban areas, WPRs for females were considerably lower than those for males. In rural areas, WPRs for males and females were 51.7 percent and 17.5 percent respectively while in urban areas WPRs for males and females were nearly 53 percent and 14.2 percent respectively. The profile is the same when we look at WPR by CWS data also (see Statement 9:55 in the Report). It clearly shows that female population was outpacing the number of jobs created for them in both rural and urban areas. As compared with growth in female population the rate of growth of number of jobs for women workers is shrinking and will eventually push them to the margin of vulnerability. The rate of decline in WPR for both male and female workers during 2004-05 to 2017-18 in the rural areas was far higher than that for them in the urban areas, though the decline was marginal (by 2.9 percentage points) for rural male workers as compared to the steep fall for rural female workers (15.2 percentage points).

More worryingly, the WPRs for the youth cohort from 53.3 percent in 2004-05 to 31.4 percent in 2017-18. Seen at a disaggregate manner, the decline was sharper in the rural areas for both males and females while it was so only in the case of urban males (Table 4). The decline...

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