To Be Or Not To Be: Can Desperate Choices Of Jobseekers Be Counted As Jobs Created?

Economic jargon-dropping always comes handy in such tricky situations. In India, people perceive a “formal job” to be paying, at least, a regular salary. However, in reality, the bulk of jobs created are “employment opportunities”.

The latest debate around creating jobs revolves around this economic reality of the country.

Triggering The Job Debate

Citigroup economists recently published a report stating that the Indian economy has to churn out 12 million jobs every year for the next decade to absorb the number of new entrants to the labour market. The report estimated the economy currently generating 8 to 9 million jobs annually, based on an assumed GDP growth of 7.0 per cent.

The Ministry of Labour and Employment reacted sharply to this report rebutting its estimates. In a press release on July 8, the ministry said that Citigroup's report “fails to account for the comprehensive and positive employment data available in official sources like Periodic Labour Force Survey (PLFS) and the RBI’s KLEMS database".

Meanwhile, the RBI has also updated its industry-wise productivity database, the KLEMS (capital, labour, energy, material input, services). Quoting these data, the ministry said India generated more than 80 million “employment opportunities” between 2017-18 and 2021-22.

This implies an annual average of more than 20 million employment opportunities were generated in this period, despite the COVID-19 pandemic, which shut down many businesses, slowed the economy and had a debilitating impact on jobs and livelihoods of millions across the country.

The ministry asserted that this “significant employment creation” is due to “the effectiveness of various government initiatives aimed at boosting employment across sectors”.

What Does Data Say

A look at the data available in the RBI-KLEMS database (which relies on PLFS for employment data) indeed confirms the ministry’s claim that more than 20 million yearly employment opportunities were created in that period.

Though 2023-24 employment data are provisional, the year’s employment growth rate stands at 6.0 per cent, which is a big jump from 3.2 per cent growth in 2022-23. However, the 5.1 per cent growth rate in 2020-21, the peak pandemic year, demands a deeper inspection. 

The majority of the casual informal workers migrated back to their rural homes and depended on MGNREGA for mere survival. This boosted the growth in “employment opportunities” while the GDP growth rate tumbled to a negative zone.

Moreover, there were other methodology issues involved in PLFS data collection during the pandemic. The fieldwork was suspended twice during the survey in March 2020 and April 2021 due to the spread of the disease. The sampling design was also changed, as a result. 

While the surveyors visited selected urban households four times, there was no revisit in rural areas. The rural samples were drawn randomly in the form of two independent sub-samples. The survey in the time of COVID-19, therefore, needs to be taken with a statistical pinch of salt.

Without factoring in migration (and in turn not visiting rural households a second time), the results of the PLFS during the pandemic time triggered methodological questions among the experts. Therefore, a comparison between a normal year and an abnormal pandemic-hit year through the lens of the PLFS may be a flawed one.

Quality Of Jobs

The Citigroup report also talks about the quality of jobs, as another challenge. Around 46 per cent of the workforce is engaged in agriculture, while the sector’s share in GVA (gross value added) was 18.3 per cent in 2022-23.

About 21 per cent of the Indian workforce, approximately 122 million people, have jobs with a salary or regular wage. The proportion was 24 per cent before the pandemic. More than half of the 582 million workers are self-employed, the report noted. 

Declaration of self-employment in the survey often represents unpaid work in family enterprises or land, sometimes even doing nothing (people are generally hesitant to make their unemployed status public).

The Ministry of Labour and Employment's rebuttal also cited the increase in the number of subscribers in EPFO (Employee’s Provident Fund Organisation) and NPS (National Pension System), underlining the rising trend of formalisation of employment due to “the government’s proactive measures”.

According to the IHD (Institute for Human Development) India Employment Report 2024, the size of the informal sector has been 83 per cent in 2023. It was 80.4 per cent in 2019, but the pandemic made its size grow again.

Informal employment also went down 2 percentage points from 91.5 per cent in 2000 to 89.5 per cent of the total in 2019. However, it clawed back again to 90.4 per cent in 2023 after the pandemic. 

Informal employment within the formal sector was quite low in 2000 at 41.4 per cent but increased to 57.8 per cent in 2012, and finally, it was 45.2 per cent in 2023. So, even within roughly 10 per cent of formal sector employment 45.2 per cent are informal. 

In simple words, out of every 100 jobs created in the economy, around 90 are in the informal sector, approximately 4.5 jobs are informal ones within the formal sector, and the rest 5.5 jobs are formal ones within the formal sector. This is the situation of the quality of jobs in the economy, in a nutshell.

Keeping aside methodological criticisms of the existing employment-unemployment surveys, in a highly populous country like India, sample survey of a few lakhs should not be the ideal way to measure employment or unemployment.

The entire population ideally should be covered for a clear picture to emerge. Unfortunately, the last population census was done in 2011. Initiating the population census and incorporating detailed queries about employment status in the questionnaire can be a good start.