NCERT Summary: Growth & Changing Structure of Employment- 1

Table of Contents
1. Overview
2. Growth of GDP and Employment (1960-2000)
3. Jobless Growth
4. Sectoral Shift in Employment
5. Occupational Status and Casualisation
6. Informalisation of the Indian Workforce
7. Unemployment: Definition, Sources of Data and Types
8. Government and Employment Generation
9. Conclusion
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Overview

This chapter examines two developmental indicators: the growth of employment and the growth of gross domestic product (GDP). Planned development in India since independence has aimed at expanding the economy by increasing national product and employment. The relationship between GDP growth and employment growth is important for understanding whether economic expansion translates into improved livelihoods for the population. The period from the 1960s to 2000 shows distinct patterns in the pace and composition of employment and the way growth has affected different sections of the workforce.

Growth of GDP and Employment (1960-2000)

Between 1960 and 2000 India's GDP grew positively, though its growth rate fluctuated over time. During most of this period employment also grew, but at a lower and more stable rate of about 2 per cent per year. In the late 1990s employment growth began to decline and reached levels comparable to the early stages of India's planning era.

As GDP growth accelerated at times, the increase in output was not matched by a proportional increase in employment. This widening gap between GDP growth and employment growth has implications for poverty, inequality and the quality of jobs created.

Jobless Growth

Jobless growth describes a situation where an economy increases its production of goods and services (GDP) without generating a corresponding increase in employment. In India during the late 1990s and thereafter, scholars identified episodes of jobless growth because economic output rose faster than employment.

Jobless growth is important for policy because growth that does not create jobs leaves many people without improved livelihoods even as national income rises.

Sectoral Shift in Employment

The distribution of the workforce across primary, secondary and tertiary sectors changed substantially between the early 1970s and 2000.

• In 1972-73 about 74 per cent of the workforce was engaged in the primary sector (mostly agriculture).
• By 1999-2000 this share had declined to 60 per cent, indicating a shift away from agriculture.
• The secondary sector (manufacturing and industry) increased its share from 11 per cent to 16 per cent.
• The service sector (tertiary) showed the largest rise in share, from 15 per cent to 24 per cent.

This structural shift indicates expanding non-farm employment opportunities, with the service sector accounting for many of the newly emerging jobs.

Occupational Status and Casualisation

Changes in the status of employment over the last few decades show that many people have moved from self-employment and regular salaried employment to casual wage work. This process is referred to as casualisation of the workforce.

• Self-employment continues to be a major provider of employment, especially in agriculture and small enterprises.
• Regular salaried employment provides more stable incomes and social security benefits but has not expanded sufficiently to absorb the growing labour force.
• Casual wage work has increased, making many workers vulnerable because they typically lack job security and social protection.

Casualisation raises concerns about income instability, absence of benefits and the vulnerability of workers to economic shocks.

Informalisation of the Indian Workforce

One of the long-standing goals of development planning has been to provide decent livelihoods and to move workers from low-productivity agriculture to better paid, protected jobs in industry and services. Despite planned development, a large majority of the workforce remains outside formally regulated employment.

To understand this, we distinguish between the formal (organized) sector and the informal (unorganized) sector:

• The formal sector comprises public sector establishments and private sector establishments that employ a specified number of hired workers (commonly treated in many surveys and laws as those employing 10 or more hired workers). Workers in the formal sector typically receive social security benefits and statutory protections under labour laws.
• The informal sector comprises all other enterprises and workers: small enterprises with few or no hired workers, self-employed persons, casual labourers and a large number of farmers and agricultural labourers who lack formal contracts and social protection.

Key facts and trends:

• Informal employment is dominant: about 93 per cent of workers are reported to be in the informal sector.
• There were about 28 million formal sector workers; of these only 4.8 million (about 17 per cent) were women.
• In the informal sector, male workers constitute about 69 per cent of the workforce.

Workers in the informal sector usually lack regular income, social security benefits such as maternity benefits, provident fund, gratuity and pension, and have limited protection from dismissal or exploitation. Technology and working conditions in many informal enterprises are often outdated and unsafe.

In recent decades, international organisations such as the International Labour Organization (ILO) have pressed for modernising informal enterprises and extending social security. The Indian government has also initiated reforms and programmes to improve productivity and provide some social security to informal workers.

Unemployment: Definition, Sources of Data and Types

Understanding unemployment requires clear definitions and reliable data.

Definition (NSSO-inspired): An unemployed person is one who, owing to lack of work, is not working but either seeks work through employment exchanges, intermediaries, friends or relatives, or by making applications to prospective employers, or expresses willingness or availability for work under the prevailing conditions of work and remuneration. Economists sometimes define an unemployed person as one who is not able to get employment even for one hour in half a day.

Main sources of data on unemployment in India:

• Reports of the Census of India
• Reports of the National Sample Survey Organisation (NSSO) on employment and unemployment
• Data from the Directorate General of Employment and Training based on registrations with employment exchanges

These sources provide different estimates because of varying definitions, reference periods and methods of data collection, but together they help describe the characteristics of the unemployed and the forms of unemployment present in the economy.

Common types of unemployment observed in India:

• Disguised unemployment: Occurs when more people work in a job (typically in agriculture) than are actually required to produce the given output. Example: if a farmer needs two workers plus himself to cultivate four acres, but five family members work on the farm, the extra workers are disguisedly unemployed because removing them would not reduce output substantially.
• Seasonal unemployment: Occurs when employment is available only during certain seasons. Agricultural work is seasonal; during lean periods many rural workers migrate temporarily to urban areas to find work. This migration and return pattern reflects seasonal unemployment in agriculture.
• Open unemployment: When workers are actively seeking work but cannot find any employment at prevailing wages. Open unemployment is more visible in urban areas and in recorded unemployment statistics.
• Underemployment: When workers are employed for fewer hours than they would prefer or are engaged in jobs below their skill level. Many persons accept low-quality, hazardous or unpleasant work because of economic necessity.

The coexistence of disguised, seasonal and underemployment means that many people cannot remain completely unemployed for long; they take up low-paid, insecure, or informal jobs to survive.

Government and Employment Generation

Governments at the Union and state levels play an important role in generating employment. Their interventions can be broadly categorised as direct and indirect measures.

• Direct generation: Government employs people directly in administrative departments, public sector enterprises, public services (health, education) and in government-run industries, hotels and transport companies.
• Indirect generation: When government enterprises increase output, private suppliers and buyers of those enterprises also expand production, creating additional employment in the private sector. Public investment in infrastructure and services stimulates demand and creates indirect employment through forward and backward linkages.

In addition to these roles, the government runs specific employment generation programmes which aim to provide wage employment and to create durable community assets. Typical objectives of such programmes include providing primary health and education services, rural shelter and drinking water, nutrition support, assistance to acquire income-generating assets, and development of rural infrastructure such as roads, sanitation and wasteland development.

National Rural Employment Guarantee Act, 2005 (NREGA):

The Act, passed by Parliament in 2005, promises up to 100 days of guaranteed wage employment in a financial year to rural adult household members who volunteer to do unskilled manual work. The scheme is designed to provide a social safety net, augment rural livelihood security and create rural assets. It represents a statutory right to work subject to conditions and is one of the significant policy responses to rural unemployment and underemployment.

Conclusion

The structure of India's workforce has changed considerably in recent decades. Employment has shifted away from the primary sector toward secondary and especially tertiary activities, with newly emerging jobs concentrated largely in the service sector. At the same time, the nature of employment has become more informal, with a large majority of workers lacking social security and regular incomes. The phenomena of casualisation and informalisation of work, together with episodes of jobless growth, pose serious policy challenges.

To address these challenges, governments have combined direct employment creation, public investment and targeted employment schemes such as NREGA with efforts to modernise informal enterprises and extend social protection. Continued emphasis on labour-intensive sectors, skill development, social security coverage and improvement of working conditions is necessary to ensure that economic growth translates into secure, decent and inclusive employment for a larger proportion of the population.