Beyond Periodic Labour Force Survey numbers, labour outlook is bleak

As we know, in the duration of the survey, the rural economy was in somewhat better shape than the urban economy, following a couple of good monsoons and harvests.

The findings of the Periodic Labour Force Survey (PLFS) for the period between July 2019 and June 2020 are somewhat perplexing in that they paint a far more positive picture of the state of unemployment in the country than one might have imagined. As has been well-chronicled, the 12 months to June 2020 were a trying time for the Indian economy, a time of poor growth. Yet, when measured by the ‘usual status’ method or the worker’s ability to find work over the preceding 365 days, the rate of unemployment had fallen to 4.8% in FY20 from 5.8% in FY19. However, based on the current weekly status (CWS) method, or the last seven days preceding the date of the survey—a method that economists prefer—unemployment remained high, at 8.8% in FY20, much the same as in FY18. That seems a lot more credible. Nonetheless, given the severe distress all around, one would have expected to see an increase in the numbers of unemployed by more than the reported 4 million. Worryingly, the share of salaried and regular-wage employees who were not eligible for any social security benefit rose to 54.2% in FY20, from 49.6% in FY18. That is a sad commentary on the state of our workers. Indeed, we are not doing enough to skill our workforce because a stunning 86% of those aged between 15-59 did not receive any vocational training during the year.

To be sure, the survey has a slight rural bias; 55% of the households surveyed were in rural India. As we know, in the duration of the survey, the rural economy was in somewhat better shape than the urban economy, following a couple of good monsoons and harvests. In urban India, sectors such as IT, e-commerce and financial services were the only ones hiring in large numbers. Given the levels of self-employment are much higher in rural India (at above 50%, compared with 31% in urban India), it is possible people managed to occupy themselves gainfully. It is also true that those in the lower income groups are almost never unemployed since they cannot afford not to earn. Nonetheless, given how growth had all but collapsed in Q4FY20, it is somewhat mystifying unemployment wasn’t higher.

As economist Himanshu had pointed out post the June 2020 quarterly release, the unemployment rate had more than doubled in that time, compared to the rate in the January-March period. While one in five persons above the age of 15 was without work, every third person in the 15-29 age group was jobless. With shops, malls, offices, schools and other establishments shut, people were not getting enough work. The number of hours worked in a week by people across categories—casual labour, self-employed, etc—fell sharply, to 37 hours in the June 2020 quarter, from 47.8 hours in the October 2019 quarter.

Things have only gotten worse since then with millions more out of work. Mahesh Vyas, CEO & MD, CMIE, estimated the net number of jobs lost post the pandemic at about 5.5 million in March 2021, with salaried workers in rural India hit the most. While it is true that as unlocking and vaccination progress, we will see the several low-income jobs, especially across the services sectors, coming back, India Inc is hiring in very small numbers and the MSMEs sector has been ravaged. It is now pointless talking about whether India will grow at 6% or 7%; the question is how many Indians will earn a living at decent wages in the years to come. That number may be smaller than it has been in the past.