LIVING IN DENIAL ABOUT UNEMPLOYMENT

THE CONTEXT: Prime Minister Narendra Modi recently cited a Reserve Bank of India (RBI) report claiming that eight crore jobs were created in the last 3-4 years, countering the opposition’s narrative of high unemployment. This assertion comes amidst conflicting reports from various financial institutions and data sources, creating confusion about India’s employment situation.

THE ISSUES:

• Discrepancies in Employment Data Sources: Different sources provide varying employment estimates, leading to confusion. The RBI’s KLEMS database reported creating 4.7 crore new jobs in FY24 alone, with a total employment count reaching 64.3 crore in FY24 from 59.7 crore in FY23. The SBI report indicated that 8.9 crore jobs were created in manufacturing and services during FY14-FY23, compared to 6.6 crore during FY04-FY14.In contrast, the CMIE reported an unemployment rate of 9.2% in June 2024, up from 7% in May 2024.
• Complex Structure of the Indian Economy: India’s economy includes a vast unorganized sector, which employs 94% of the labor force. The unorganized sector comprises around 11 crore farms and 6.5 crore MSME units, making data collection challenging. The informal sector’s share of GVA was 18.2% in FY23, down from 25.7% in FY16, highlighting its vulnerability to economic shocks.
• Impact of Economic Shocks: Demonetization, GST implementation, and the COVID-19 pandemic collectively shaved off 4.3% of GDP from the informal sector, resulting in the closure of 6.3 million units and the loss of 16 million informal sector jobs. These shocks led to a decline in the informal sector’s real GVA, which contracted by 0.2% annually between FY16 and FY23.
• Differences in Definitions and Methodologies: The PLFS and CMIE use different definitions of employment. The PLFS includes individuals as employed even if they do not earn an income, while the CMIE counts only those who do. This leads to significant differences in labor force participation rates and unemployment figures. For example, the PLFS reported an unemployment rate of 3.1% in 2023, while the CMIE reported 9.2% in June 2024.
• Ground-Level Unemployment Situation: In February, 47 lakh applicants appeared for an exam to select around 60,000 constables in Uttar Pradesh. In 2022, 1.25 crore aspirants applied for the Railway Recruitment Board’s Non-Technical Popular Categories recruitment exam. The ILO’s India Employment Report 2024 indicated that the youth (15-29) unemployment rate increased from 5.6% in 2000 to nearly 18% in 2019, highlighting the severity of the issue.
• Government’s Denial of Data Issues: Officials have cited the KLEMS data from the RBI, which does not independently estimate employment, to support job creation claims. This has led to public confusion and frustration, as the employment situation appears more dire than official narratives suggest. Accurate and timely data collection is crucial for effectively addressing employment challenges, especially for the unorganized sector.

THE WAY FORWARD:

• Adopt International Standards for Employment Data Collection: The ILO has urged India to follow the standards laid down by the 19th International Conference of Labour Statisticians (ICLS-19), which recommends using short-term employment measures and focusing on paid work. For example, the United States and European Union countries use these standards to ensure consistency and reliability in their labor statistics.
• Strengthen Data Collection for the Unorganized Sector: Improve data collection methodologies for the unorganized sector by conducting more frequent and comprehensive surveys. The ASUSE survey should be conducted annually with updated sampling frames to reflect current economic conditions and structural changes. Countries like Brazil and Mexico have developed robust systems for collecting data on their informal sectors, including frequent surveys and administrative records to capture employment trends accurately.
• Implement Targeted Employment Policies: Develop and implement targeted policies to create jobs in high-growth sectors and regions with high unemployment rates. Germany’s “Industry 4.0” initiative and South Korea’s focus on technology startups have created jobs in high-growth sectors, contributing to economic stability and growth.
• Enhancing Social Security: Expand and streamline social security schemes to cover all workers, including those in the unorganized sector. South Africa’s Social Security System provides Comprehensive coverage, including unemployment insurance, disability benefits, and old age pensions. Brazil’s Bolsa Familia Program provides direct cash transfers to low-income families, reducing poverty and improving health and education outcomes.
• Leveraging the Demographic Dividend: Invest heavily in education and health to equip the workforce with the necessary skills and improve labor force participation. Significant investments in education and healthcare have contributed to China’s rapid economic growth and improved labor productivity. Singapore’s Skills Future Initiative Provides lifelong learning opportunities and skills training to ensure the workforce remains competitive in a rapidly changing economy.

THE CONCLUSION:

The conflicting employment data from various sources highlight the complexities and challenges of accurately measuring employment in India. While official reports suggest significant job creation, private data sources and ground reports indicate persistent unemployment. Addressing these discrepancies and improving data collection methodologies are crucial for formulating effective employment policies and ensuring economic growth translates into meaningful job opportunities.

UPSC PAST YEAR QUESTIONS:

Q.1 Most of India’s unemployment is structural. Examine the methodology adopted to compute unemployment in the country and suggest improvements. 2023

Q.2 The nature of economic growth in India is described as jobless growth. Do you agree with this view? Give arguments in favor of your answer. 2015

Q.3 While we found India’s demographic dividend, we ignore the dropping employability rates. What are we missing while doing so? Where will the jobs that India desperately needs come from? Explain. 2014

MAINS PRACTICE QUESTION:

Q.1 Discuss the reasons for the discrepancies in employment data reported by different sources in India. How do these discrepancies impact policy-making and public perception of employment issues?

SOURCE:

https://www.thehindu.com/opinion/lead/living-in-denial-about-unemployment/article68422652.ece