Surging labour force in economic activity with social security

cfoindia August 8, 2022

Despite black swan events, labour market indicators have exhibited V-shaped recovery between 2004-05 and 2022-23 with 2017-18 being the nadir. This has been possible due to Modi govt’s thrust on several areas.

One of the non-negotiable objectives of economic growth for a government would be increasing the participation rate of its citizens in the labour force. Persons who were either working (or employed) or seeking or available for work (or unemployed) constitute the labour force. Along with government’s welfare schemes and active economic management, the surge in labour force leads to increasing their standard of living, consumption and also savings possibly.

Highly tracked, measurable and quantifiable indicators for the labour market are labour force participation rate (LFPR) and related indicators would be worker population ratio (WPR) and unemployment rate (UR) which are obtained from regular surveys from National Sample Survey Office – NSSO.

Earlier, India had nine regular employment and unemployment surveys quinquennially beginning October 1972 to September 1973 and the last one during July 2011 to June 2012. Sensing the need for higher frequency of such data, an annual periodic labour force survey – PLFS was instituted beginning July 2017 to June 2018 and the latest annual PLFS, sixth in series, covered the period July 2022 to June 2023.

The six annual reports of PLFS present encouraging data for the Modi government in many respects. Unless stated otherwise, data for the employment indicators – LFPR, WPR and UR is for persons of age 15 years and above. First, LFPR has increased by 8 per cent from 49.8per cent in 2017-18 to 57.9 per cent in 2022-23. As per employment and unemployment surveys, the LFPR decreased by 7.8 per cent from 63.7 per cent in 2004-05 to 55.9 per cent in 2011-12.

Second, WPR – number of employed persons as aper centage of total population – has increased by 9.2 per cent from 46.8 per cent in 2017-18 to 56 per cent in 2022-23. In contrast, as per employment and unemployment surveys, WPR decreased by 7.5 per cent from 62.2 per cent in 2004-05 to 54.7 per cent in 2011-12. According to PLFS series and for all age groups, WPR in latest 2022-23 printed at 41.1 per cent which is atleast 13 year high. The same WPR as per last employment and unemployment survey in 2011-12 printed at 34-year low of 38.6 per cent.

Third and most tracked by political class apart from the policy makers is the unemployment rate. It has decreased by 2.8 per cent from 6 per cent in 2017-18 to 3.2 per cent in 2022-23. LFPR and WPR increased and UR decreased consistently between 2017-18 and 2022-23 and they were broad based too – rural male, rural female, urban male and urban female. This improvement in labour market indicators despite the increasing population suggests the abundance of income earning opportunities in a rising economy.

Because LFPR and WPR decreased by similarper centages between 2004-05 and 2011-12, the UR decreased by 10 basis points from 2.3 per cent to 2.2 per cent during the same period. Ironically, LFPR and WPR witnessed decline during the growth phase of Indian economy buoyed by the positive spill over effects of reforms undertaken during Vajpayee government. Due to mismanagement of Indian economy in the latter years of UPA and the negative spill over effects in the initial years of Modi government, labour market indicators deteriorated further from 2011-12 to 2017-18.

Fourth, India has religious pluralism and many social groups including scheduled castes and scheduled tribes. It must be of topmost priority for any government to ensure their increased participation through inclusive economic growth. The data from the PLFS annual reports vindicate the Modi government’s mantra of sabka saath, sabka vikas as all the social and religious groups witnessed improvement in the employment indicators (for all ages) across urban and rural areas and gender.

The fifth aspect is with respect to the distribution of workforce by broad status in employment – self-employed, salaried or casual labour. The workforce increased by an estimated 11.25 crore from 45.79 crore in 2017-18 to 57.05 crore in 2022-23. This puts to rest the criticism of jobless growth of Indian economy under Modi government.

Although, the percentage of regular wage or salaried – RWS workers decreased from 22.8 per cent in 2017-18 to 20.9 per cent in 2022-23, the count of RWS workers increased by an estimated 1.48 crore but as per EPFO, more than 5 crore jobs have been created between 2017-18 and 2022-23 implying 1 crore jobs have been created each year on an average due to formalization. There’s a need to reconcile the PLFS estimates and EPFO. The increased number of workers in self-employed category was aided by increase in credit dispensed to MSME’s, SHG’s and introduction of credit guarantee schemes like PM Mudra Yojana and PM Svanidhi.

Sixth, the distribution of workers across sectors witnessed a desirable shift to productive sectors between 2017-18 and 2022-23. With the surging workforce, the share of workers in industry sector increased from 24.8 per cent to 25.2 per cent driven by construction activities. It would have been desirable if it was driven by increase in share of manufacturing. On absolute basis, both the manufacturing and services sector have added more workers.

Seventh, unlike the past, various social security schemes like highly subsidised/free ration, Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana, Ayushman Bharat, Pradhan Mantri Shram Yogi Maandhan, Atal Pension Yojana are made available to the workers under self-employed and casual labour categories under Modi government.

Despite the black swan events of Covid, commodity and currency crises, labour market indicators have exhibited V-shaped recovery between 2004-05 and 2022-23 with 2017-18 being the nadir. This has been possible due to Modi government’s thrust on banking sector clean up, ease of doing business like GST and IBC as well as higher capital formation driven by housing for all, formalisation induced real estate activities and increasing capital expenditure by both union and state governments complemented by management on inflation, fiscal deficit and external sector fronts.

With Indian economy likely to attain $7 trillion size by 2030 and possibly witnessing the fastest growth rate until then, the labour market indicators would surely exhibit even better trajectory going forward.

Sandeep Vempati, an Economist & Columnist with Bharatiya Janata Party, penned this piece for Business Today.