Labour Force Participation Rate

Labour Force Participation Rate

Labour Force Participation Rate


  • 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.

Related Links:

What is Unemployment and How is it Measured?Atmanirbhar Bharat
Inflation and DeflationOne Nation One Ration Card Scheme