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Employment and Consumer Sentiments in India


Why is it in the news?

  • Recently, the Bihar caste survey categorized non-Hindus into different castes, indicating the need to consider religion-based caste data and it further, raises questions about whether a nationwide caste survey would benefit India.
  • As Caste often plays a crucial role in determining the economic fortunes of people, the following key findings regarding employment and consumer sentiments in India based on caste and religion needs to be understood.

More about the news

Labour Force Participation Rate

  • Labour Force Participation Rate (LFPR) measures how many Indians are actively seeking jobs.
  • The LFPR essentially is the percentage of the working-age (15 years or older) population that is asking for a job. It represents the “demand” for jobs in an economy. It includes those who are employed and those who are unemployed.
  • LFPR has fallen for all castes, with the lowest demand for jobs among the so-called upper castes (37.21% LFPR).
  • OBCs and SCs have witnessed the most significant decline in LFPR since 2016.

Caste-wise Unemployment Rate

  • Unemployment Rate (UER) represents the percentage of the labour force looking for jobs but unemployed.
  • UER has remained persistently high in India, even as the economy recovered.
  • UER is higher despite LFPRs falling, indicating a more concerning trend.
  • UER fell slightly for OBCs due to a significant decline in their LFPR.

 Caste-wise Employment Rate

  • Employment Rate (ER) considers the total number of employed people as a percentage of the working-age population.
  • The Employment Rate (ER) has fallen for all caste groups, indicating a decline in employment proportions.
  • Upper castes have the lowest ER, but OBCs and SCs experienced the most significant drop.

Religion-wise Employment Rate

  • Among recognized religions, Hindus experienced the most substantial fall in the employment rate between 2016-17 and 2022-23.
  • Jains had the lowest employment rate among religious groups.

 Caste-wise Consumer Sentiments

  • Consumer sentiments for most caste groups are 20% to 25% below their 2016-17 levels.
  • OBCs had low consumer sentiments, while intermediate castes, aspiring for OBC status, were the worst affected.

Understanding Unemployment in India

  • International Labor Organization (ILO) defines unemployment as being out of a job, available for work, and actively seeking employment.
    • Those not actively searching for work are not considered unemployed.

 The Labor Force

  • It includes the employed and the unemployed.
  • Those not in these categories (e.g., students, unpaid domestic workers) are categorized as out of the labor force.

Types of Unemployment

  • Disguised Unemployment: More people are employed than needed, often found in agriculture and the unorganized sectors.
  • Seasonal Unemployment: Occurs during specific seasons of the year, common in agricultural labor.
  • Structural Unemployment: Arises from a mismatch between available jobs and worker skills.
  • Cyclical Unemployment: Linked to economic cycles, prevalent in capitalist economies.
  • Technological Unemployment: Job loss due to technological advancements.
  • Frictional Unemployment: Occurs during job transitions or searches.
  • Vulnerable Employment: Informal, unprotected work without proper contracts.

 Unemployment Measurement in India

  • Usual Principal and Subsidiary Status (UPSS): Principal status determined based on the most time spent on an activity in the previous year.
  • Current Weekly Status (CWS): Employment status based on activity in the preceding week.
  • UPSS tends to result in lower unemployment rates, while CWS often yields higher rates.

 The Usual Principal and Subsidiary Status (UPSS):

  • An individual’s principal status, whether employed, unemployed or out of the labour force, is based on the activity in which they spent relatively a long time in the previous year.
  • A person who is not a worker, according to the principal status, would still be counted as employed, if they were engaged in some economic activity in a subsidiary role for a period “…not less than 30 days”.
  • Thus, an individual unemployed for five months and working for seven months in the previous year would be considered a worker.

 The Current Weekly Status (CWS):

  • The CWS adopts a shorter reference period of a week. An individual is counted as being employed if they have worked for “…at least one hour on at least one day during the seven days preceding the date of survey.”
  • UPSS unemployment rates will always be lower than CWS rates because there is a greater probability that an individual would find work over a year as compared to a week.
  • The low bar for classifying an individual as employed explains why unemployment rates are lower in rural areas than urban.
    • In agrarian economies, where individuals have access to family farms, there is greater probability of finding some kind of work when compared to urban areas.
  • These definitions may ‘underestimate’ unemployment, but they were largely designed to capture the extent of the informal economy.
  • The Centre for Monitoring Indian Economy classifies individuals based on their activity in the day preceding the interview. They, therefore, estimate a higher unemployment rate, but lower labour force participation rates.
    • This is because in an informal economy, there is a lower chance of an individual having work on any given day as compared to longer periods of a week or a year.
  • One cannot say which of the above frameworks is “right” or “wrong” for this represents an unavoidable trade-off in a developing economy.
  • Adopt too short a reference period, and one gets higher rates of the unemployed and lower of the employed, and vice versa. This dilemma does not arise in developed nations where work is largely regular over the year.

 Complexities in measuring unemployment in India

  • Social Norms: Social norms influence work-seeking decisions, affecting labor force participation rates.
  • Informal Sector: Informal job nature complicates measurement, as individuals engage in various activities.
  • Rural vs. Urban Disparities: Low employment threshold in rural areas leads to lower unemployment rates.

 Major Causes of Unemployment in India

  • Social Factors: Caste system restrictions and dependence on joint family income.
  • Rapid Population Growth: Continuous population increase poses challenges.
  • Dominance of Agriculture: High dependence on agriculture with seasonal employment.
  • Decline of Cottage Industries: Industrialization affected small industries and artisans.
  • Immobility of Labor: Low labor mobility due to family attachment, language, religion, and climate.
  • Education System Defects: Lack of specialized skills for modern jobs.

 Government’s Initiatives to Curb Unemployment

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