About
- According to the CMIE, the labour force consists of people who are 15 years or older, and belong to either of the following two categories:
- Are Employed
- Are unemployed and are willing to work and are actively looking for a job.
- These two categories have people “demanding” jobs. This demand is what Labour Force Participation Rate refers to.
- Thus, 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.
- The Unemployment Rate (UER), which is routinely quoted in the news, is nothing but the number of unemployed (category 2) as a proportion of the labour force.
- In India, the LFPR is not only lower than in the rest of the world but also falling.
- In India, it has been sliding over the last 10 years and has shrunk from 47% in 2016 to just 40% as of December 2021.
Why is India’s LFPR low?
- The main reason for India’s Labour Force Participation Rate being low is the abysmally low level of female LFPR.
- According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%.
- In other words, less than one in 10 working-age women in India are even demanding work.
- Even if one sources data from the World Bank, India’s female labor force participation rate is around 25% when the global average is 47%.
- The reasons or low women LFPR is essentially about the working conditions — such as law and order, efficient public transportation, violence against women, societal norms etc. — being far from conducive for women to seek work.
- Further, lot of women in India are exclusively involved within their own homes (caring for their family)
Issue with LFPR calculation
- Unemployment Rate only measures person who are unemployed, but it didn’t calculate the total people have stopped demanding work.
- Typically, this happens when people of the working-age get disheartened from not finding work.
- Thus, it is better to track another variable: the Employment Rate (ER).
- The ER refers to the total number of employed people as a percentage of the working-age population.
Different Types of Unemployment in India
Disguised Unemployment:
- It is a phenomenon wherein more people are employed than actually needed.
- It is primarily traced in the agricultural and the unorganized sectors of India.
Seasonal Unemployment:
- It is unemployment that occurs during certain seasons of the year.
- Agricultural laborers in India rarely have work throughout the year.
Structural Unemployment:
- It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.
- Many people in India do not get jobs due to lack of requisite skills and due to poor education level, it becomes difficult to train them.
Cyclical Unemployment:
- It is a result of the business cycle, where unemployment rises during recessions and declines with economic growth.
- Cyclical unemployment figures in India are negligible. It is a phenomenon that is mostly found in capitalist economies.
Technological Unemployment:
- It is the loss of jobs due to changes in technology.
- In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India is 69% year-on-year.
Frictional Unemployment:
Frictional Unemployment, also called Search Unemployment, refers to the time lag between jobs when an individual is searching for a new job or is switching between jobs.
Vulnerable Employment:
- This means people working informally, without proper job contracts and thus lacking any legal protection.
- These people are deemed ‘unemployed’ since records of their work are never maintained.
- It is one of the main types of unemployment in India.
