Unemployment

India’s unemployment rate jumped to a two-year high to 6.9% in October, 2018, according to a report by the Centre for Monitoring Indian Economy, this portrays a worrying trend in the labour market. Around 397 million people were employed in October, 2018, down 2.4% compared to last year. The sudden surge can be because of labour returning back to the market to look for jobs after demonetization.

Recent Developments

Atal Bimit Vyakti Kalyan Yojana

  • Under the scheme, cash will be paid directly to the bank account of unemployed insured persons, while they search for new employment. The cash benefit given to an unemployed person will be equivalent to 25% of his average earnings over 90 days.
  • This scheme will cover persons insured under the Employees’ State Insurance Act, 1948. The Act applies to establishments having more than 10 workers with monthly wage ceiling of Rs 21,000.
  • The Employees’ State Insurance Corporation (ESIC) has approved a scheme. Further, the ESIC has approved a proposal for reimbursement of Rs 10 per person to employers if they seed the Aadhaar number of their workers and their family members in the ESIC database.

State of Working Report

  • The first Azim Premji University State of Working India (SWI) report was released. It highlights-
  • Growth is Creating Fewer Jobs than it used to: In the 1970-80s, when Gross Domestic Product (GDP) growth was 3-4%, employment growth was around 2% per annum. Since the 1990s, GDP growth has accelerated to 7%, but employment growth has slowed to 1% or less.
  • Lower Wage Rate: Wages rose at about 3% per annum between 2010 and 2015, but continued to be well below the minimal living wage. But, about 67% of households reported monthly earnings of up to Rs 10,000 in 2015, suggesting that a majority of Indians are not earning what may be termed a living wage, in turn explaining in part, the intense hunger for government jobs.
  • Replacement of Workers: There is a slowdown in the replacement of workers by machines. About Rs 1 crore of fixed capital (in 2015 prices) supported around 90 jobs in the 1980s. This fell to 10 by 2010 and has remained there.

Status of Unemployment in India

As per the International Labour Organization’s (ILO) “World Employment and Social Outlook: Trends 2018 Report”, India’s unemployment rate for 2018 is expected to be 3.5%, more than the estimated 3.4%. In absolute terms, unemployment is estimated to have risen to 18.3 million in 2017 from 17.8 million projected earlier; for 2018, the ILO estimates unemployment to increase to 18.6 million from the 18 million estimated in its previous employment outlook Report.

Report of ILO on Wage Inequality in India

The International Labour Organization (ILO) published “India Wage Report: Wage policies for decent work and inclusive growth”. This report provides an overview of recent trends in wages, including wage gaps between different categories of workers, gender wage gaps, wages by sector and occupation, and trends in wage inequality.

  • Real wage Doubled: Wages have seen a faster growth for the most vulnerable categories including workers in rural areas, informal employment, casual workers, female workers and low-paid occupations. Real average daily wages in India almost doubled in the first two decades after economic reforms.
  • Inequality Declined, Still High: Though the overall wage inequality in India has declined somewhat since 2004–05, it continues to remain high. The decline in overall wage inequality has been largely due to the doubling of the wages of casual workers between 1993–94 and 2011–12.
  • Steep Gender Gap: The gender wage gap however is still steep, as per international standards, despite having declined from 48% in 1993-94 to 34% in 2011–12. The wage gap exists for all kind of workers – regular and casual, urban and rural. The women employed as casual workers in the rural economy earn the lowest in India, which is 22% of what urban regular male workers earn.
  • Minimal Base Level: A national minimum wage floor was introduced in the 1990s which has progressively increased to INR 176 per day in 2017, but this wage floor is not legally binding. Around 62 million workers are still paid less than the indicative national minimum wage with the rate of low pay being higher for women than for men.

Fixed-term Employment

  • While presenting the Union Budget 2018-19, Finance Minister had said that fixed-term employment would be allowed in all industrial sectors. The Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, notified by the Ministry of Labour and Employment, defines a fixed-term employment workman as one who has been “engaged on the basis of a written contract of employment for a fixed period”.
  • The Rules state that no employer of an industrial establishment shall convert the position of the permanent workmen existing in his industrial establishment on the date of commencement of the amended Rules, i.e., March, 2018, as fixed-term employment thereafter.
  • The notified Rules for fixed-term employment provide for equal work hours, wages, allowances, and other benefits along with all statutory benefits available to a permanent workman in proportion to the period of service rendered by an individual, even if the period of employment does not extend to the qualifying period of employment required in the statute.

New Method to Keep Track of Employment Generation (Payroll Calculation)

  • There has been a constant problem of insufficient data on employment in the country. To resolve this problem, Niti Aayog has decided to come up with detailed data set based on the regularly conducted national survey for household on employment creation, for which the Ministry of Statistics and Programme Implementation (MoSPI) has been given the charge. The government also plans to sync this data with other sources of formal employment such as the Employees Provident Fund Organization (EPFO), and with bodies like Institute of Chartered Accountants of India (ICAI) and Institute of Cost Accountants of India (ICAI).

Payroll Report for the Formal Sector

  • The NITI Aayog has tapped the data collected by the Employees’ Provident Fund Organization (EPFO), Employees’ State Insurance Corporation (ESIC) and the Pension fund Regulatory and Development Authority (PFRDA) to put together a payroll report for the formal sector.
  • According to the EPFO data, 31.1 lakh new jobs were added in the 6-month period. The PFRDA’s data show 4.2 lakh new payrolls were generated in the period. This reflects the additions to Central and State government jobs.

Concepts of Employment

  • A person engaged in a job, is called an employed person. He may be engaged in agriculture or business or profession or service. By employment is meant an engagement of a person in some occupation, business, trade or profession, etc. The nation of desiring to be employment can be explained by taking three established facts:
    • Working hours per day
    • Wage rate
    • A man’s state of health
  • A person working 8 hours a day for 273 days in a year is regarded as employed on a standard person year basis. Thus, a person to be called an employed person, must get meaningful work for a minimum of 2184 hours in a year. The person who does not get work even for this duration, is known as unemployed person.
  • The structure of employment can be examined by dividing it as follows: employment in organized and unorganized sector, and rural and urban employment. Sectoral Distribution of Employment Broadly, an economy is classified into primary sector, secondary sector and tertiary sector.

Concepts of Unemployment in India

  • The National Sample Survey Organization (NSSO) has developed and standardized the concepts and definitions of labour force, employment and unemployment, suitable to Indian conditions.
  • The three concepts of unemployment developed by the NSSO are:
    1. The Usual Status Concept: It is meant to determine the usual activity status - employed or unemployed or outside the labour force. The activity status is determined with reference to a longer period, say a year preceding to the time of survey. The Usual Status unemployment rate is a person rate and indicates chronic unemployment because all those who are found “usually unemployed” in the reference year, are counted as unemployed.
    2. The Current Weekly Status Concept: It determines the activity status of a person with reference to a period of preceding seven days. If in this period, a person seeking employment fails to get work for even one hour on any day, he (or she) is deemed to be unemployed. A person having worked for an hour or more on any one or more days during the reference period gets the employed status.
    3. The Current Daily Status: The concept considers the activity status of a person for each day of the preceding seven days. A person who works for one hour but less than four hours is considered having worked for half a day. If he works for four hours or more during a day, he is considered as employed for the whole day. The Current Daily Status unemployment rate is a time rate.

Recent Trends of Employment in India

  • Work is becoming more precarious in the organized manufacturing sector, with 30% workers on short-term contracts.
  • Labour productivity in organized manufacturing increased 6-times over the past three decades, but wages increased only 1.5 times. Labour income’s share in organised manufacturing has collapsed to around 10%.
  • The organized manufacturing sector as a whole has failed to increase its employment share substantially. More than 50% of the services sector employment is still made up of petty trade, domestic services and other types of small-scale and informal employment.
  • Gender disparities are still high but are reducing in some cases. Overall, women earn 65% of what men do, though disparities have reduced over time.
  • Women’s participation in the paid workforce is low but some states perform much better than others. While only 20 women are in paid employment for every 100 men in Uttar Pradesh, the number is 50 in Tamil Nadu and 70 in NorthEast India.
  • Scheduled Castes and Scheduled Tribe groups are over-represented in low-paying occupations and severely under-represented in high-paying occupations. The caste earnings (vs. upper caste) gap at 55% is larger than the gender earnings gap.
  • Crafts remain big employers and are central to the rural non-farm economy. The sector represents immense cultural value, ecological positives, and millions of jobs. The craft sector can provide the much-needed rural employment. But for this to happen, the sector must be treated on a par with other industries and given infrastructural support.

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