employment trends in india: a fresh look at past trends and recent evidence
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Employment Trends in India: A Fresh Look at Past Trends and Recent Evidence. Himanshu Fellow, Economics Centre de Sciences Humaines. - PowerPoint PPT PresentationTRANSCRIPT
Employment Trends in India: A Fresh Look at Past Trends and Recent Evidence
Himanshu
Fellow, Economics
Centre de Sciences Humaines
Workforce Participation Rates tend to decline over time in rural areas. The exceptions in this regard are 43rd round CDS estimates, 50th round and 61st round.
Rural Male WPR
4647484950515253545556
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Rural female WPR
18
20
22
24
26
28
30
32
34
36
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Urban WPR have remained stable for most period, except for sudden jumps in 50th and 61st round
Urban Male WPR
46.0
48.0
50.0
52.0
54.0
56.0
27 32 38 43 50 55 61
PS USL CWS CDS
Urban Female WPR
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
27 32 38 43 50 55 61
PS USL CWS CDS
Unemployment rate for rural males have been rising for most periods except for 50th round and 43rd round CDS. For females, they show fluctuations before 50th round but have been rising since then.
Rural Male Unemployment Rate
0
1
2
3
4
5
6
7
8
9
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Rural Female Unemployment Rate
0
2
4
6
8
10
12
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Urban male unemployment rates have been coming down over the periods with sharp fall for 50th round and increase during 55th round. However CDS estimates of 61st round show increase. For females, unemployment rates increase sharply in the 61st round.
Urban Male Unemployment rate
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
27 32 38 43 50 55 61
PS
USL
CWS
CDS
Urban Female Unemployment rate
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
27 32 38 43 50 55 61
PS
USL
CWS
CDS
The trend in LFPR is similar to the trend observed in the case of WPR for rural areas.
Rural Male LFPR
51.0
52.0
53.0
54.0
55.0
56.0
57.0
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Rural Female LFPR
20.0
22.0
24.0
26.0
28.0
30.0
32.0
34.0
36.0
27 32 38 43 50 55 61
PS USL CWS CDS(O) CDS(A)
Urban male LFPR has been stable till 43rd round, jumps sharply for 50th round and even sharper during 1999-2005. the trend for females is also similar
Urban Male LFPR
51.0
52.0
53.0
54.0
55.0
56.0
57.0
58.0
27 32 38 43 50 55 61
PS USL CWS CDS
Urban Female LFPR
11.012.013.014.015.016.017.018.019.0
27 32 38 43 50 55 61
PS USL CWS CDS
Percentage of Self-employed workers among total workers in rural areas was declining till 55th round but saw a reversal of the trend for 61st round. For females, the increase was sharp enough to nullify the decline till 55th round.
Self-employed (Rural Male)
54.0
57.0
60.0
63.0
66.0
32 38 43 50 55 61
SE
Self-employed (Rural Female)
56.0
57.0
58.0
59.0
60.0
61.0
62.0
63.0
64.0
65.0
32 38 43 50 55 61
SE
The reverse is true for casual wage labour in rural areas
Casual Labour (rural male)
25.0
27.0
29.0
31.0
33.0
35.0
37.0
32 38 43 50 55 61
CAS
Casual Labour (rural female)
30.0
32.0
34.0
36.0
38.0
40.0
42.0
32 38 43 50 55 61
CAS
Urban males also saw self-employment increase sharply at the cost of wage labour during 1999-2005. for females, the trend of increasing regular employment continued.
Employment Status (urban male)
36.0
38.0
40.0
42.0
44.0
46.0
48.0
32 38 43 50 55 61
0.02.04.06.08.010.012.014.016.018.0
SE
REG
CAS
Employment Status (urban female)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
32 38 43 50 55 61
0.0
5.0
10.0
15.0
20.0
25.0
30.0
SE
REG
CAS
Primary sector employment among rural male workers has been coming down steadily except for 50th round when there was almost stagnation. For females, 50th round actually saw primary sector employment increase. However, 61st round saw sharp non-farm diversification for both males and females.
Primary sector employment (rural male)
65
70
75
80
85
32 38 43 50 55 61
PRI
Primary sector employment (rural female)
82
84
86
88
90
32 38 43 50 55 61
PRI
Tertiary sector is the largest employer in urban areas with share increasing since 38th round. But saw a sharp fall in 61st round.
Tertiary employment (urban male)
54
55
56
57
58
59
60
61
32 38 43 50 55 61
TER
Tertiary employment (urban female)
30
35
40
45
50
55
32 38 43 50 55 61
TER
The decline in tertiary sector employment is balanced by a huge increase in secondary sector employment, which was otherwise declining till 55th round
Secondary sector employment (urban male)
32.5
32.9
33.3
33.7
34.1
34.5
32 38 43 50 55 61
SEC
Secondary sector employment (urban female)
28
29
30
31
32
33
32 38 43 50 55 61
SEC
Why do 43rd round daily status estimates behave differently?
43rd round CDS employment estimates in rural areas appear out of place compared to estimates from CWS, PS and Usual status.
More importantly, the fact that CDS estimates for 43rd round are very close to CWS estimates for this round raise suspicion on the official estimates of 43rd round CDS.
In general CDS and CWS estimates will never be close because of the way these are collected.
Unit level data suggest that the official estimates are probably wrong
The corrected estimates as obtained from unit records fit in line with the expected trend.
For 50th round, the large increase in LFPR and WPR and sharp fall in unemployment rates appear suspicious.
This round also shows abnormal trends in terms of employment status and industrial distribution.
For example, 50th round shows almost no non-farm diversification while all other rounds show non-farm diversification.
This round also shows abnormal fall in share of regular employment
Such large increase during initial years of reform where even the government conceded that employment may fall, appears suspicious
What happened during 50th round?Basically a change in method of classifying usual status activity
In the earlier NSS quinquennial surveys the identification of usual status involved a trichotomous classification of persons into 'employed', 'unemployed' and 'out of labour force' based on the major time criterion. In the 50th round, the procedure prescribed was a two stage dichotomous procedure which involved a classification into 'labour force' and 'out of labour force' in the first stage and the labour force into 'employed' and 'unemployed' in the second stage.
More specifically, the change meant the following
Number of Months in Activity
Labour Force Not in Labour Force
Principal Usual Activity Status
by 50th Round Person Employed Unemployed
A 5 4 3 Employed
B 4 5 3 Unemployed
C 4 3 5 Employed
D 4 1 7 Out of Labour Force
Note: In case of C as per the procedure followed in past rounds, he would have been categorised as not in labour force whereas he/she is now categorised as employed.” [Instructions to NSS investigators for 50th Round of EUS, Section Five, Item: 5.4.11]
Changes regarding weekly and daily status in the 50 th round
In the earlier surveys, the current weekly status (CWS) of a person was first assigned on the basis of the response to the questions relating to his participation in gainful activities (non-gainful activities) and thereafter the daily time disposition data was collected only for those in the labour force as per the CWS. In the 50th round, the daily time disposition was collected for all the persons surveyed and the CWS was determined based on the time disposition data so collected, without probing any further on this point.
Estimates from the 61st round
61st round estimates are also different from the general trend but so far there is no evidence that this could be result of any change in methodology.
These are in fact also supported by trends from the intervening annual rounds.
However, Sundaram and Tendulkar have argued that these annual rounds after 55th round are probably giving estimates which are biased and suffer from large RSE and non-sampling errors.
However, in a curious argument they also suggest that the rural estimates of 59th round are less biased and hence probably right. But the urban are biased and have large non-sampling errors.
Unni and Raveendran are not convinced by these estimates and suggest that the 55th round was an underestimate because it was not a normal agricultural year?
However, these trends are consistent with actual events in rural and urban areas and the trends after 50th round are comparable to each other.
The decline in wage employment was mainly in the agricultural sector. However, the increase in self-employment was seen for both agriculture as well as non-agriculture. But within non-farm, rural growth was higher than urban growth, while it was reverse in the previous period
Employment Growth rates
-4 -2 0 2 4 6 8
Agricultural Self EmploymentAgricultural Wage Employment
Total agricultural employmentNon-agricultural Self employment
Non-agricultural Wage employmentRural non-agricultural employment
Urban non-agricultural employmentSecondary sector employment
Tertiary sector employmentTotal non-agricultural employment
Total Employment
1999-00 to 2004-05
1993-94 to 1999-00
But why should increase in LFPR and WPR be viewed with suspicion?
Basically two reasons:1. The first relates to the demographic pattern. LFPR and WPR
can increase simply because the share of working population in the total population increases. That is, even if all the age groups maintain their respective LFPR and WPRs, the overall LFPR and WPR will increase simply because the weight of high LFPR and WPR age group increases.
2. Educational attendance, which drives down WPR and LFPR especially among young
3. The net impact may depend on the balance of these two if nothing else happens.
Income effect?
Then there is the income effect which ST argue was responsible for
driving down the LFPR and WPR during 50-55th round. That is LFPR declines when income improves and conversely, may
increase if income declines. This appears plausible for 61st round. There was overall deceleration in agricultural output. It was also accompanied by sharp fall in prices of agricultural products Moreover wage rate growth collapsed for both casual and regular
workers In other words, agrarian crisis could have pushed some people in the
labour force
By age group: the growth in labour force for 25-59 age-group for males appears consistent with their increased share in population. However, 1999-05 also shows increase in labour force for 5-25 age-group which was showing decline in earlier period or growing slower. Same is true for old age population.
Change in workers (in millions)
-4
-2
0
2
4
6
8
10
12
14
16
5--24 25-59 60 &Above
5--24 25-59 60 &Above
Rural Urban
Male 93-00
Male 99-05
Female 93-00
Female 99-05
Break up by land owned classes throws up another interesting fact: for males, the increase is higher for the land-less but for the females it is actually happening in households which own more than 1 acre of land.
WPR by land owned in rural areas
15202530354045505560
Land
less
0.01
to0.
40
0.41
to1.
00
1.01
to2.
00
2.01
to4.
00
4.00
and
abov
e
Land
less
0.01
to0.
40
0.41
to1.
00
1.01
to2.
00
2.01
to4.
00
4.00
and
abov
e
Male Female
1993-94
1999-00
2004-05
Break up by industry and land size class also suggests that the shift towards non-farm employment is essentially due to the shift of land-less and marginal land owning classes.
Industrial distribution of workers by land owned class
30405060708090
100
Landle
ss
0.0
1 t
o0.4
0
0.4
1 t
o1.0
0
1.0
1 t
o2.0
0
2.0
1 t
o4.0
0
4.0
0 a
nd
above
Landle
ss
0.0
1 t
o0.4
0
0.4
1 t
o1.0
0
1.0
1 t
o2.0
0
2.0
1 t
o4.0
0
4.0
0 a
nd
above
Male Female
1993-94
1999-00
2004-05
But within non-farm employment, percentage of informal employment has increased substantially including among regular workers.
Percentage Informal sector employment by status and sector
30405060708090
100110
Sel
f-em
ploy
ed
Reg
ular
Cas
ual
Tota
l
Sel
f-em
ploy
ed
Reg
ular
Cas
ual
Tota
l
Rural Urban
1999-00
2004-05
Nonetheless, total non-farm employment which was almost stagnant in the 1990s saw employment increasing very sharply during 1999-05.
NON-AGRICULTURE EMPLOYMENT
80.0
100.0
120.0
140.0
160.0
180.0
200.0
220.0
Jan-8
3
Jan-8
6
Jan-8
9
Jan-9
2
Jan-9
5
Jan-9
8
Jan-0
1
Jan-0
4
millions
UPS US (PS+SS) CWS CDS
Casual wage rate growth decelerated for all categories and all sexes
Growth rate of casual wages
0
1
2
3
4
5
6
Agriculture Non-agriculture Agriculture Non-agriculture
1993-94 to 1999-00 1999-00 to 2004-05
Male
Female
Persons
Even for regular wages, the only class which saw positive increase was graduates and above. All others saw real wages decline
Growth rate of regular real wages
-3-2-101234567
1993-94 to 1999-00 1999-00 to 2004-05 1993-94 to 1999-00 1999-00 to 2004-05
Rural Urban
Not literate
Primary
Secondary
Graduates
All
This is also seen from the ASI data for the factory sector, where the growth of worker wages which increased slowly in nominal prices but has seen decline in real terms for both rural and urban areas. However, it is also seen that managerial emoluments which were growing at more or less similar rate before the reforms increased faster than worker wages after reforms and the gap has been increasing faster since 1999-00.
0.0
75.0
150.0
225.0
300.0
375.0
450.0
525.0
1981
-82
1983
-84
1985
-86
1987
-88
1989
-90
1991
-92
1993
-94
1995
-96
1997
-98
1999
-00
2001
-02
2003
-04
w orker w ages/day managerial emoluments/day
ASI data also shows that the percentage of wages and profits in Net Value Added in the factory sector was fairly stable in the 1990s. But after that, percentage share of profits almost doubled. Moreover, the decline in wage share during 1999-05 was despite NVA/worker almost doubling during the same period.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1981
-82
1982
-83
1983
-84
1984
-85
1985
-86
1986
-87
1987
-88
1988
-89
1989
-90
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
Wages/NVA Profits/NVA
has Indian Economy become more Lewisian?It appears so: Non-farm employment, led by manufacturing,
increased substantially at almost constant wages.
Wage share has declined and profit share increased allowing the capitalist class to invest more, also reflected in the growing investment rate
This was also facilitated by the weakening of trade unions and workers bargaining power.
But is it sustainable?