Employment rate to rise by 6% in FY24: RBI data
Why in news- According to Reserve Bank of India data, the country’s employment rate grew 6 percent in the financial year ending March 31, 2024, against 3.2 percent in 2022-23.
UPSC Syllabus:
Prelims: Economy
Mains: GS-III: Economy
Key points of RBI data
• RBI’s India KLEMS [Capital (K), Labour (L), Energy (E), Materials (M) and Services (SS)] database, which measures productivity at the industry level, showed that employment in the country is expected to increase by 4.67 crore to 64.33 crore (provisional) in FY23-24 from 59.67 crore in 2022-23.
• The data covers 27 industries covering the entire Indian economy.
• The data also provides these estimates at broad sectoral levels (agriculture, manufacturing, and services) and in India.
• It includes measures of Gross Value Added (GVA), Gross Value of Production (GVO), Labour Employment (AL), Labour Quality (LQ), and Capital Stock (K).
• As per the Periodic Labour Force Survey (PLFS) released in May 2024, the unemployment rate (UR) in urban areas declined from 6.8 percent during January-March 2023 to 6.7 percent in January-March 2024 for persons aged 15 years and above.
• Female unemployment declined from 9.2 percent in January-March 2023 to 8.5 percent in January-March 2024.
• Periodic Labour Force Survey (PLFS) data showed that the labor force participation rate (LFPR) in urban areas increased from 48.5 percent in January-March 2023 to 50.2 percent during January-March 2024 for persons aged 15 years and above.
• Worker Population Ratio (WPR) for persons aged 15 years and above increased from 45.2 percent in January-March 2023 to 46.9 percent in January-March 2024.
• The female worker population ratio in urban areas increased from 20.6 percent in January-March 2023 to 23.4 percent during January-March 2024, reflecting an overall upward trend in WPR.
• According to the India Employment Report 2024, India has one of the lowest female labor force participation rates (LFPR) in the world.
• Female LFPR declined by 14.4 percentage points between 2000 and 2019 (compared to 8.1 percentage points for men).
• This trend reversed thereafter, with female LFPR increasing by 8.3 percentage points between 2019 and 2022 (compared to 1.7 percentage points for male LFPR).
• The LFPR of women (32.8%) in 2022 was 2.3 times lower than that of men (77.2%).
Definition of Unemployment
• Unemployment is when a person is not able to find work despite actively seeking employment.
• Unemployment is often used as a measure of the health of the economy.
Different Types of Unemployment
1. Frictional Unemployment
Definition: Short-term unemployment that occurs when people are between jobs or entering the labor force for the first time.
Examples: Recent graduates looking for their first job, or individuals who have left their job and are seeking new opportunities.
2. Structural Unemployment
Definition: Long-term unemployment caused by changes in the economy, such as technological advances or changes in consumer demand, that alter the structure of the labor market.
Examples: Workers in industries that have become obsolete due to automation or whose skills are no longer in demand.
3. Cyclical Unemployment
Definition: Unemployment that is tied to the economic cycle, rising during recessions and falling during periods of economic growth.
Examples: Layoffs during economic recessions when businesses reduce production and cut costs.
4. Seasonal Unemployment
Definition: Unemployment related to seasonal changes in the demand or supply of labor.
Examples: Agricultural workers in the post-harvest season or retail workers after the holiday shopping season.
5. Hidden unemployment
Definition: A situation in which more people are employed than are needed, usually in low-productivity sectors such as agriculture.
Example: Farmers who have more family members working on the farm, but do not need as many members to maintain the same level of production.
Measuring unemployment in India
1. Periodic Labour Force Survey (PLFS)
Conducted by: Ministry of Statistics and Programme Implementation (MoSPI)
Purpose: Provides comprehensive data on employment, unemployment, and labour force participation.
Latest report: The PLFS Quarterly Bulletin (May 2024) shows that the urban unemployment rate has declined from 6.8% in January-March 2023 to 6.7% in January-March 2024.
2. National Sample Survey (NSS)
Conducted by: National Statistical Office (NSO)
Purpose: Collect data on various socio-economic indicators, including employment and unemployment.
Measurement Methods
1. Usual Status
Definition: Classifies individuals based on their activity status in the past year.
Use: Provides a long-term perspective on employment trends.
2. Current Weekly Status (CWS)
Definition: Measures employment based on activity status in the seven days preceding the survey.
Use: Provides short-term information on employment and unemployment.
3. Current Daily Status (CDS)
Definition: Records the activity status of individuals for each day of the reference week.
Uses: Covers daily variations in employment and is useful for understanding underemployment.
Worker Population Ratio (WPR)
• Worker population ratio (WPR) is a measure that shows the proportion of the working-age population (usually 15 to 59 years) that is employed.
It is calculated as:
Worker population ratio (WPR) = Total working age population ×100
Number of employed people
Importance
• Worker population ratio (WPR) provides insights into the labor market by showing the percentage of the population that is gainfully employed.
• A higher worker-population ratio (WPR) indicates higher levels of employment and economic activity.
Gross Value Added (GVA)
• Gross value added (GVA) measures the value of goods and services produced in an economy after subtracting the cost of inputs and raw materials.
• It provides an estimate of the economic contribution of different sectors.
GVA = Gross Output – Intermediate Consumption
Importance
• GVA helps in understanding the contribution of different sectors to the economy and is an important indicator for economic analysis.
Gross Value of Output (GVO)
• Gross Value of Output (GVO) represents the total value of all goods and services produced in an economy, including intermediate goods.
• It is a broader measure than GVA as it includes the value of inputs used in production.
Importance
• GVO provides a broader picture of economic output and is used to assess overall economic activity.
Labor Productivity (LP)
• Labor productivity (LP) measures the amount of output produced per unit of labor
It is calculated as:
Labor Productivity (LP) = Total Labor Input
Total Output
Importance
• Higher labor productivity indicates efficient use of labor, leading to higher economic output and growth.
Total Factor Productivity (TFP)
• Total Factor Productivity (TFP) measures the efficiency with which all inputs (labor, capital, energy, materials, and services) are used in the production process.
• It is a key indicator of technological progress and innovation.
Significance
• Total Factor Productivity (TFP) is important for understanding the overall efficiency and competitiveness of an economy.
• It reflects improvements in production processes, technological advancement, and better management practices.
Employment Growth
• Employment rate in India is projected to increase by 6% in FY24 from 3.2% in FY23.
• Employment increased by 4.67 crores in FY24 to reach 64.33 crores (provisional) compared to 59.67 crores in FY23. Unemployment-free economic growth
• Unemployment-free economic growth refers to a situation where the economy grows but there is no proportionate increase in employment.
• This phenomenon can be caused by various factors, such as automation, productivity improvements, and structural changes in the economy.
Causes
Automation: The increased use of technology and automation reduces the need for human labor.
Productivity improvements: Higher productivity means that the same amount of output can be produced with fewer workers.
Structural changes: Shifts in the economy, such as moving from manufacturing to services, can create a mismatch between the skills of the workforce and the needs of employers.
Implications
Economic inequality: Growth benefits are not distributed equally, leading to rising economic inequality.
Social impact: High unemployment rates can lead to social unrest and a reduction in the quality of life.
Policy challenges: Governments need to address the gap between economic growth and employment through targeted policies and interventions.
Government Initiatives to Tackle Unemployment in India
1. Make in India
Objective: To promote manufacturing and create jobs.
Key Features: Encourages investment, promotes innovation, enhances skill development.
2. Skill India
Objective: To provide skill development training to enhance employability.
Key Features: Provides vocational training and certification, Focuses on industry-relevant skills.
3. Startup India
Objective: To encourage entrepreneurship and job creation.
Key Features: Provides financing support, simplifies regulatory framework, and provides guidance.
4. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
Objective: To provide guaranteed wage employment to rural households.
Key Features: Ensures at least 100 days of wage employment in a financial year and focuses on rural development projects.