The sum and substance of the jobs data -Sonalde Desai
Rising unemployment must also be seen as a function of rising education and aspirations
The report from the Periodic Labour Force Survey (PLFS) is finally out, garnering a lot of attention based on selective reading of tables and spurring partisan debates. In particular, the staggering increase in the unemployment rate, from 1.7% in 2011-12 to 5.8% in 2017-18 for rural men and from 3.0% to 7.1% for urban men, has generated wide ranging hand-wringing. However, a more nuanced picture emerges if we are to look beyond the partisan debates to policy implications of the data on employment and unemployment. Three takeaway points from these data are of particular policy relevance.
First, while the unemployment rate is a frequently used measure of poor performance of the economy, under conditions of rising school and college enrolment, it paints an inaccurate picture. Second, the reported unemployment rate is dominated by the experience of younger Indians who face higher employment challenges and exhibit greater willingness to wait for the right job than their older peers. Third, the unemployment challenge is greatest for people with secondary or higher education, and rising education levels inflate unemployment challenges. These three conditions, taken together, suggest that part of India’s unemployment challenge lies in its success in expanding education while not expanding formal sector jobs.
Comparison of male employment and unemployment data from the National Sample Survey Office’s (NSSO’s) 68th round Employment survey conducted in 2011-12 and the new PLFS of 2017-18 illustrates each of these points. The unemployment rate is calculated by dividing the number of unemployed by the number in the labour forces, that is, the sum of employed and unemployed. This statistic ignores people who are out of the labour force — students, homemakers and the disabled.
Unemployment rate data
As long as the proportion of the population out of the labour force is more or less stable, the unemployment rate is a good indicator of the changes in the employment situation. However, India has seen massive changes in proportion of individuals enrolled in an educational institution over the past decade. For 15-19-year-old rural men, the proportion primarily engaged in studying increased from 64% to 72% between 2011-12 and 2017-18. As a result, while the proportion of the population aged 15-19 that is unemployed doubled from 3% to 6.9%, the unemployment rate tripled from 9% to 27%. Leaving the numerator (proportion of population unemployed) same while the denominator changes by removing students from the labour force can overstate job losses.
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