India’s Employment Problem and Bad Statistics

General Studies Paper 2

Context: The Indian definition of employment does not meet international standards.

Need of obtaining employment statistics

• The global recession of 2008 profoundly affected high-income countries and cast its shadow on countries and sectors closely linked to the global economy.
• In this context, international labour statisticians urged countries to obtain employment statistics that would
  • examine and monitor “conditions of work” and
  • construct measurements “useful for labour-management negotiations”.
• This required good estimates of underemployment resulting in advocacy for a short measurement periodto reduce recall bias and limiting focus on activities for pay or profit.

Issues with obtaining employment statistics in India

• Unmatching definition:
  • The Indian definition of employment does not meet international standards. This has resulted in strong recommendations from international bodies to revise India’s definition of who is employed and who is not.
• Validity of International standards for India:
  • The International Labour Organisation (ILO) has urged India to follow the standards laid down by the 19th International Conference of Labour Statisticians (ICLS-19), held in 2013.
    • The question is, are these recommendations appropriate for a transitional economy, in which a large proportion of the population continues to engage in agriculture, often supplemented by casual wage work.
  • Two major recommendations of ICLS-19 are: 
    • Employment data should rely on short-term measures of employment, in most cases, a 7-day measure, capturing employment during the preceding week;
    • It should measure all types of work, including unpaid work, but define a person as being employed only if he or she is engaged in producing goods or services for pay or profit.
      • This distinction between work and employment may have critical implications for the measurement of progress towards SDGs.

Challenges for India

• Excluding production of goods or services for own use:
  • Exclusion of production of goods or services for own use was possibly put in place due to a conviction that countries were inflating employment rates for excluded groups, particularly women, by counting distress work instead of providing paying jobs.
  • This would reduce the proportion of individuals defined as being employed by as much as 50 per cent in some conditions. Which could also be the case with India.
• Relying on a one-week reference period:
  • The recommendation to rely on a one-week reference period is even more likely to affect this classification.
  • A vast proportion of rural Indians engage in multiple activities combining farm work with work in construction,MGNREGS work, or other work in nearby towns.
  • However, when it is time to sow or harvest, they devote all their time to farming.
    • When surveys occur during this period, many individuals would be classified as farmers, and based on IHDS estimates, 45 per cent may be classified as producing only for home consumption.
  • Thus, they would not be counted as employed even if they are engaged in income-producing activities during other parts of the year.

Reasons for India’s declining employment

• Opting out of work: 
  • The sharp fall in India’s labour force participation rate (LFPR) suggests that despite India’s young population, many have simply opted out of the labour force, perhaps feeling let down by the absence of remunerative, productive jobs.
• Women face more issues: 
  • The situation is even more dire for women who had a considerably lower participation rate to begin with.
  • India’s female labour force participation is not only lower than the global average, but also lower than countries like Bangladesh.
• Less Jobs: 
  • Post-pandemic, people unable to find jobs remain high among those looking for jobs. Also, the unemployment rate is higher among the younger and more educated.
• More Informal Sector Jobs: 
  • While there are signs of increasing formalisation as indicated by the EPFO data, a substantial share of the labour force continues to remain employed in the informal sector, lacking a safety net.

Way ahead

• Changing definitions would underestimate the strength of the Indian economy and not serve any policy purpose.
• Despite this potential for an artificial decline in employment, the advocacy from international bodies for adopting ICLS-19 recommendations remains strong.

Unless the statistical system develops the self-confidence to assertively engage with international organisations, is willing to adopt global best practices where it makes sense and resists pressure to do so when it does not serve policy needs, it will continue to be held in low esteem nationally and internationally.