Employment, Skills, and Labour in India – UPSC Economy Notes

Employment, Skills, and Labour in India form the cornerstone of the nation’s socio-economic landscape, reflecting both its challenges and opportunities. As one of the world’s most populous countries, India grapples with the complex task of providing meaningful employment opportunities to its vast workforce, while simultaneously enhancing their skills to meet the demands of a rapidly evolving global economy. The dynamic interplay between employment, skills development, and labor policies shapes the trajectory of India’s growth, influencing productivity, competitiveness, and social cohesion. Against a backdrop of demographic shifts, technological advancements, and globalization, understanding the intricacies of employment patterns, skill gaps, and labor market dynamics is imperative for crafting effective policies that foster inclusive growth and prosperity for all segments of society.

Work and Employment Overview:

1. Definition of Work:
   • Involves tasks requiring mental and physical effort.
   • Aims to produce goods and services to fulfil human needs.
2. Employment Defined:
   • A contractual arrangement where work is compensated.
3. Worker Definition:
   • A person who voluntarily enters into employment.
4. Types of Work:
   • Formal Work:
     • Governed by formal rules and regulations.
     • Applies to public and private sector establishments with 10 or more hired workers.
   • Informal Work:
     • Not governed by fixed rules, but by employer directions.
     • More than 80% of the Indian workforce falls into this sector, lacking social security.
5. Challenges in the Informal Sector:
   • Vulnerability to exploitation due to lack of regulation.
   • Irregular wages and tenure.
   • Limited capacity to form trade unions, reducing bargaining power.
6. Formal Worker Definitions in India:
   • Employees registered under the Factories Act, 1948.
   • Those in enterprises with 10 or more workers and all government workers.
   • Those with a contract, irrespective of enterprise size (Arjun Sengupta Committee Report).
7. Characteristics of a Formal Job:
   • Regular salaried position in government or private enterprises.
   • Entitlement to social security benefits: provident fund, pension, gratuity, healthcare, and maternity.
8. Organized versus Unorganized Enterprises:
   • Originally referred to enterprises registered under the Factories Act, of 1948.
   • Some contexts broaden the term to include enterprises with 10 or more workers.
   • Enterprises with less than 10 workers are labelled unorganized.

Current Employment Scenario in India: Key Statistics

New Entrants vs. Job Creation:

• New Entrants: A minimum of 8 million new job seekers enter the job market annually.
• Job Creation (2017): In 2017, only 5.5 million jobs were created.
• Worsening Situation: The job creation situation is reported to be worsening.
• Highest Unemployment Rate in 45 Years:
• The current unemployment rate is reported to be the highest in 45 years.
• Impact on Indian Youth:
• Youth Unemployment (20-24 years): The unemployment rate among 20-24-year-olds was 34% in the first quarter of 2019.
• Urban Youth Unemployment: Urban youth face a high unemployment rate, reaching close to 38%, according to the CMIE.
• 2018 Periodic Labour Force Survey (PLFS):
• According to the 2018 PLFS:
• Urban Youth (15-29 years): The unemployment rate among urban 15-29-year-olds was 23.7%.
• These statistics paint a challenging picture of the employment scenario in India, indicating a significant gap between the number of new job seekers and the available opportunities. The high unemployment rates, particularly among the youth, highlight the urgency for comprehensive policies to address the employment crisis.Top of Form

Definition as per International Labour Organisation (ILO):

1. Employment:
   • Individuals aged 15 or older who have worked for at least one hour during a week or have a job with permissible absences (e.g., holidays, sick leave).
2. Unemployment:
   • Individuals aged 15 and older without a job who are actively seeking employment.
3. Unemployment Rate:
   • The percentage of unemployed individuals divided by the total labor force.
4. Labor Force Participation Rate:
   • The proportion of the working-age population that is either employed or actively seeking employment.

Unemployment Trends in India:

1. Current Unemployment Rate (March 2023):
   • Stands at a 3-month high of 7.8% (Center of Monitoring Indian Economy).
   • Approximately 1 million people are unemployed in India.
2. Labour Force Participation Rate in India:
   • Updated yearly, available data spans from December 1990 to December 2022.
   • The average rate over this period is 54.2%.
3. Female Labour Force Participation Rate (FLFPR) in India:
   • As of 2021-22, it stands at 32.8%.
   • This rate has been declining and is significantly below the global average of 48%.

Nature of Employment in India: Key Features

1. Seasonal Employment:
   • Varied nature of employment; some have year-round employment, while others work only a few months annually.
   • Economic planning aims to optimize resource use for maximum growth and optimal employment.
2. Ruralization:
   • In 2011-12, India’s workforce totaled around 473 million.
   • Approximately three-quarters of the workforce is engaged in rural areas.
   • Men constitute around 70% of the workforce, with the remaining 30% being women.
3. Informalization:
   • According to the International Labour Organization (ILO), 81% of the labor force operates in the informal sector.
   • Only 6.5% are in the formal sector, and 0.8% are in the household sector.
4. Casualization:
   • “Casualization of the workforce” refers to the shift from regular salaried employment and self-employment to casual wage work.
   • Statistics indicate a gradual increase in the casual workforce over the last few decades.
5. Masculinization:
   • India’s Female Labour Force Participation Rate (LFPR) hit a historic low of 23.3% in 2017-18.
   • Over three-quarters of women in India are neither working nor seeking employment, often engaged in household chores.
   • This leads to the under-valuation of women’s economic contributions.
6. Informal Economy Challenges:
   • Issues arise due to the high level of informality in India’s economy.
   • There is a crucial need for a transition towards a more formalized economy to address these challenges.

Formalization of the Indian Economy:

Definition:

• Formalization entails the creation and expansion of formal jobs, ensuring social security, financial inclusion, and legal empowerment for the workforce.

Advantages of Formalization:

1. Increased Tax Revenues:
   • Better reporting under taxation laws enhances government tax revenues.
2. Social Protection Plans:
   • Broad coverage under social protection plans safeguards against financial distress during challenging times.
3. Improved Workers’ Welfare:
   • Formalization enhances workers’ welfare and provides more opportunities for decent jobs.
4. Reduced Unfair Competition:
   • Mitigates unfair competition between formal and informal enterprises resulting from tax or regulatory advantages.

Downsides of Formalization:

1. Population Exclusion:
   • Rapid formalization, especially if not well-planned (e.g., demonetization), may lead to the exclusion of certain population segments.
2. Poverty and Destitution:
   • Quick formalization can impose additional costs on the informal economy, potentially leading to poverty and destitution.

Approaches to Formalization:

1. Job Creation Focus:
   • Emphasize the creation of high-productivity, high-paying jobs.
2. Sector Synergies:
   • Foster coordination between different economic sectors through inter-ministerial collaboration.
3. Enhance Employability:
   • Address skill mismatch through formal skill training and retraining programs.
4. Gender Equality:
   • Improve women’s participation in the economy, aligning with SDG 5 on Gender Equality.
5. Gradual Transition:
   • Advocate a slow transition of the informal sector into the formal economy to mitigate downsides.

National Employment Policy:

• Development of a comprehensive National Employment Policy is crucial for coherent and converging actions toward the formalization of the Indian economy.

Sector-Wise Employment in India (2011-12):

Total Workforce Employed:

• According to the Employment-Unemployment Survey by NSSO (2011-12, latest available):
  • Total workforce employed is 47.36 crore.

Distribution by Sectors:

1. Agriculture:
   • Employed: 23.16 crore.
2. Industry and Services:
   • Employed: 24.2 crore.

Summary:

• The employment landscape in India, as of 2011-12, demonstrates a relatively balanced distribution between the agriculture sector and industry/services. Approximately half of the total workforce is engaged in agriculture, with the remaining half in industry and services combined. It’s important to note that these figures might have undergone changes over the years, and more recent data would provide a clearer picture of the current employment scenario in India.

Unemployment Definition:

Unemployment is a situation where individuals are willing and ready to work at the existing rate of wages but are unable to secure employment.

Definition by NSSO:

• According to the National Sample Survey Organization (NSSO):
  • Unemployment is characterized by individuals not working due to a lack of employment opportunities.
  • Individuals in this situation actively seek work through employment exchanges, intermediaries, friends, relatives, or by applying to potential employers.
  • They express their willingness or availability for work under the prevailing conditions of work and remunerations.

Calculation of Unemployment:

• Number of Unemployed = Labour Force – Workforce
  • Where Workforce includes individuals engaged in economic activity.
  • Labour Force includes the workforce plus those not engaged in economic activity but actively seeking work or available for work if opportunities arise.

Explanation:

• Workforce consists of individuals currently engaged in economic activity.
• Labour Force includes the workforce and those not currently engaged in economic activity but actively seeking work or available for work under the prevailing conditions.

Note:

• These definitions and calculations help quantify the extent of unemployment in a given population, providing insights into the labor market dynamics.

FAQs

1. FAQ: What are the key challenges faced by job seekers in India?

Answer: Job seekers in India often encounter challenges such as lack of relevant skills for available positions, intense competition in the job market, inadequate job opportunities matching their qualifications, and sometimes biases based on factors like age, gender, or caste. Additionally, the informal sector dominates employment, leading to issues like job insecurity and lack of social security benefits.

2. FAQ: How can individuals in India enhance their employability?

Answer: To enhance employability, individuals in India can focus on acquiring both technical and soft skills relevant to their desired industry. Continuous learning through online courses, vocational training programs, and internships can also help. Networking and building professional relationships, staying updated with industry trends, and adapting to new technologies are crucial for remaining competitive in the job market.

3. FAQ: What measures are being taken in India to address unemployment?

Answer: The Indian government has initiated various schemes and policies to address unemployment, including skill development programs like Skill India Mission and initiatives promoting entrepreneurship such as Startup India. Efforts to boost manufacturing through initiatives like Make in India aim to generate more job opportunities. Additionally, schemes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provide temporary employment to rural households.

4. FAQ: What is the significance of labor laws in India?

Answer: Labor laws in India play a crucial role in safeguarding the rights and interests of workers. They cover aspects such as minimum wages, working conditions, safety standards, and social security benefits. These laws ensure fair treatment of employees and help prevent exploitation by employers. However, there is ongoing debate about the need for labor reforms to balance worker protections with the ease of doing business.

5. FAQ: How does the gig economy impact employment dynamics in India?

Answer: The gig economy, characterized by short-term contracts and freelance work, has significantly impacted employment dynamics in India. It offers flexibility to workers but also poses challenges such as job insecurity and lack of social benefits. Platforms like Uber, Ola, and Swiggy have emerged as major players, providing opportunities for part-time employment. However, regulatory issues regarding labor rights and social security for gig workers remain unresolved.

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