The Hindu Editorial Analysis- 9th March 2024 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

India’s Suboptimal use of its Labour Power

The majority of Indians rely on labour for income, with 90% engaged in informal employment lacking job security and benefits.

• GDP growth headlines often overshadow the critical factor of labour market dynamics in determining the well-being of the masses.

Improvements in Labour Force Participation:

• Labour Force Participation Rate (LFPR) Increase:
  • LFPR has seen a notable rise from 52.35% in 2017-18 to 58.35% in 2021-22.
  • The surge is primarily attributed to increased participation of rural women in the workforce.
• Decline in Unemployment Rates:
  • Overall unemployment rates have decreased from 6.2% in 2017-18 to 4.2% in 2021-22.
  • This trend is also reflected in youth unemployment rates, indicating a positive trajectory in employment opportunities.

Composition of Employment Types:

• Role of Self-Employment in LFPR and Unemployment Trends:
  • The increase in LFPR and the decline in unemployment rates are primarily fueled by growth in self-employment.
  • Self-employment emerges as a significant contributor to the observed shifts in labor market dynamics.
• Composition of Self-Employment:
  • Within self-employment, unpaid family workers have experienced a notable increase from 26% to 31.4%.
  • This surpasses the marginal rise observed in employer-driven self-employment.
• Significance of Own-Account Workers:
  • Own-account workers, such as small business owners or street vendors, constitute nearly 35% of the employed population.
  • Their contribution underscores the importance of entrepreneurship and micro-enterprises in the labor market.

Quality of Jobs and Workforce Composition:

• Decline in Traditional Employment Categories:
  • The proportion of regular wage/salaried employees, casual laborers, and employers has decreased from 2017-18 to 2021-22.
  • This suggests a notable shift in the composition of the workforce away from traditional employment arrangements.
• Rise in Unpaid Family Labor and Own-Account Workers:
  • The most significant increase in employment is observed in unpaid family labor and own-account workers.
  • This trend may signal a potential decline in job quality, as these categories often entail less stability and fewer benefits compared to traditional wage/salaried positions.
• Concerns Regarding Job Quality and Precarious Work:
  • The shift towards a higher proportion of unpaid family labor and own-account workers reflects a worrisome trend in the nature of work.
  • It emphasizes the precariousness of the informal employment sector, where workers may face greater vulnerability and instability.

Earnings Scenario:

• Overall Increase in Real Daily Earnings: The average real daily earnings rose by approximately ₹10 (4%) from 2017-18 to 2021-22.
• Rural and Urban Earnings Trends: Both rural and urban daily earnings witnessed a slight uptick during the same period.
• Distribution Across Worker Types:
  • Wage and salaried workers recorded the highest average earnings, followed by the self-employed and casual workers.
  • However, despite the increase, average earnings for the self-employed and salaried workers remained stagnant in real terms.
• Notable Increase for Casual Workers:
  • Casual workers experienced a noteworthy 20% increase in daily earnings.
  • Nonetheless, their monthly income continues to hover close to or just above the poverty line, highlighting persistent economic challenges for this group.

Concerns for Economic Growth and Demographic Dividend:

• Challenges Amidst Positive Trends:
  • Despite the apparent rise in LFPR and the decrease in unemployment rates, concerns arise due to the predominant growth in low-quality self-employment.
  • This shift indicates a significant portion of the workforce engaged in low-productivity work, overshadowing the potential benefits of India's demographic dividend.
• Impact on Economic Growth:
  • With more than three-quarters of the employed population involved in low-quality work, the potential for economic growth may be constrained.
  • The lack of productivity in these roles could hinder overall economic advancement.
• Stagnant Earnings and Consumer Expenditure:
  • Stagnant earnings, particularly among the poorer sections of society, pose a threat to consumer expenditure.
  • This could potentially contribute to an economic downturn as reduced spending power affects overall demand and economic activity.

Conclusion:

• While some headline economic indicators show positive trends, a closer examination of the labour market reveals concerns about job quality, earnings, and their impact on economic growth.
• Addressing the challenges in the composition of employment and the quality of work is crucial for sustaining a positive trajectory in India’s economic development.