India’s labour market undergoing structural transformation, latest survey data misinterpreted: SBI Research

India’s labour market undergoing structural transformation, latest survey data misinterpreted: SBI Research

India’s labour market is undergoing a deep structural transformation with self-entrepreneurship across all echelons and higher education emerging as key enablers, according to SBI Research. In a report, it argued Periodic Labour Force Survey (PLFS) survey data for the five-year period ended which revealed a significant decline has been ignorantly interpreted and the political slugfest around it was misplaced.

The recently released sixth annual PLFS report from the NSSO gauging unemployment rates across rural and urban areas for pan-India as also states with different levels revealed a significant decline in the unemployment rate from 6.1 per cent in FY18 to 3.2 per cent in FY23, with an accompanying increase in Labour Force Participation Rate from 36.9 per cent to 42.4 per cent, with the Female Labour Force Participation Rate far outstripping the overall gains.

“Unemployment is always a contentious and political issue, more so for developing economies, and it is no surprise that even as the unemployment rates in PLFS survey data for the 5-year period ended has revealed a significant decline, there is a plethora of misplaced and ignorant data interpretations in public domain, some political, some economic and laced with old fashioned rhetoric…regarding….for example, the jump in self-employed populace and youth unemployment,” SBI Research report said.

The report noted that interpreting the jump in self-employed populace within the employment estimates (57.3 per cent in FY23 now against 52.2 per cent in FY18) with the main traction coming from the rising share of household helpers evidentially has been wrongfully interpreted by labour economists and others as a signal of shrinking employment opportunities.

The fact, according to the report, is however the central tendency of self-employed in India’s labour force has always been trending much above 50 per cent, even during the 1980s and 90s to

2000s. Also, it argued that the government’s emphasis on entrepreneurship through Pradhan Mantri Mudra Yojana and even recent schemes post-pandemic like PM- SVANidhi for those at the bottom of the pyramid is imparting a structural transformation in labour markets in India.With primary subsistence needs like food, shelter, and medical needs being taken care of by the government through free ration for 80 crore people, PMAY and Ayushman Bharat, apart from additional state schemes, such people are making a clear trade-off between earnings and working in family enterprises.On the youth unemployment rate in the PLFS survey (between the age group of 15-29 years) which showed a decline from 12.9 per cent to 10 per cent for the three-year period ended FY23, it argued it was “cited wrongfully as a proxy” for shrinking unemployment opportunities.

“However, while there is a lot of noise about it being a barometer of serious youth unemployment, we believe it’s truly a reflection of

changing employment-education pattern, with the men/women remaining in the education system at least until the age of 23-24 years which used to be only up to 17 years earlier,” the SBI Research report noted.

It suggested that the time may have come again to tweak the benchmarking given to higher educational qualifications in PLFS as education is the most critical factor in deciding the unemployment rate.

“In the last three years, maximum deceleration in the unemployment rate is visible in the persons having education of secondary and above and one needs to calibrate the education/employment matrix rationally,” it noted.

PLFS surveys were initiated in 2017 to overcome the issues of the then-existing Employment and Unemployment survey (EUS-NSSO) like representation, periodicity, and timeliness and since then the annual surveys have been conducted and reports have been released.

The report provides unemployment rates for all-India and state-wise in both rural and urban areas with different levels of disaggregation like gender, age, etc. The estimate for the age group of 15-29 years is also given in the survey result.

The latest one released in October 2023 is the sixth annual PLFS report brought out by the NSSO.

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Author: Shirley