Slowdown Dents the Quality of Employment

The annual report of the Periodic Labour Force Survey, 2021–22, which is the fifth in the series, highlights the recent trends in employment and unemployment at both the national level and in the states. A major gain noted in the report was the post-pandemic recovery in the labour markets with unemployment levels falling marginally, even while employment levels dipped for the first time in four years.

The report shows that the unemployment rate as measured by the usual status, which is a very liberal definition of the activity status over a reference period of 365 days, has fallen by 0.1 percentage point to 4.1% in 2021–22, the lowest in five years. While male unemployment fell to 4.4%, female unemployment was still lower at 3.3%. The trends show that the decline in female employment during this period was one-third faster than that of males.

Coming to the employment rate, or the labour force participation rate (LFPR), which is the share of the labour force (both working and seeking work) in the population, the trends were disappointing. The overall LFPR dipped marginally by 0.3 percentage points to 41.3% for the first time in four years. It is also seen that the dip in female LFPR was higher than that of the males. Consequently, the marginal improvement in the female LFPR during the pandemic was partially reversed.

A major reason for the dip in the employment rate is the steady deterioration in the quality of employment mainly due to the slow growth of formal sector employment. This is evident from the disaggregated employment numbers which show that the slowdown in the economy has significantly reversed the improvements in the structure of employment and the conditions of work over the years.

The data clearly show that the marginal gains in employment since 2018–19 are mostly restricted to the self-employed segment which dominates the labour markets. This has steadily pushed up the share of self-employed workers by 3.6 percentage points to 55.8% in 2021–22, a five-year high. This entire increase in self-employment was accounted by the large number of helpers engaged in household enterprises.

In sharp contrast to this, the share of regular wage or salaried workers has shrunk to 21.5% over the period, a decline of more than a percentage point from their peak levels. Moreover, the share of casual workers has fallen at a much faster rate to 22.7%, which is also the lowest level in five years. Clearly, the lack of adequate decent employment opportunities for regular workers in the formal sector has forced more and more workers to increasingly depend on self-employment as it is their last resort to sustain livelihoods.

This is amply clear from the data on earnings which indicates that the self-employed workers who are the most disadvantaged after the casual workers face the twin disadvantage of low wage rates and erratic employment. Their average monthly income is just about two-thirds that of the regular wage or salaried employees and it remains the most unevenly distributed.

A reason for the substantially lower incomes of the self-employed workers is the skewed nature of their earnings across the different segments. The numbers show that there are huge disparities in their earnings across the rural and urban sectors and across genders. For instance, earnings of the rural self-employed are less than two-thirds of that in the urban sector. Similarly, the earnings of the self-employed females are less than half that of the self-employed males. The virtual absence of any significant welfare benefits also adds to their plight.

Another disturbing aspect highlighted in the report is the steady deterioration in the conditions of the work of the regular wage or salaried workers in the recent years. Though the regular wage or salaried workers generally enjoy at least some marginal protection from labour laws and are usually entitled to several wage and non-wage benefits, as per the legal statutes, these entitlements have been continuously eroded after the economic slowdown.

Thus, for instance, the share of workers who have no written job contracts has gone up by more than 5 percentage points to 67.3% in the last three years. Similarly, the share of regular workers who are not entitled to paid leave has gone up by 3.1 percentage points to 52.3%. Likewise, the number of regular wage and salaried workers not eligible for any social security benefit has also touched 54.2%. The worst hit by the deteriorating conditions of work are the urban and female self-employed workers.

Another important pointer to the continued deterioration in the quality of work is the changes in the sectoral composition of employment. Though the trends in 2021–22 are positive with the share of employment in agriculture declining by close to a percentage point to 45.5% and that of industrial employment rising marginally to 24.9%, the overall medium-term trends remain rather disappointing.

This is because the earlier gains made in reducing the share of agriculture in total employment and the accompanying increase in industry and services employment have been substantially rever­sed since 2018–19. By 2021–22, the share of labour in agriculture has increased by 2.6 percentage points to 44.5%. In contrast, the share of industry in total employment has dipped marginally by 0.3 percentage points to 24.9%. The worst hit has been the services sector whose share in employment has gone down by 2.7 percentage points to 29.6% during the period. Clearly, the slowdown in the economy has negatively hit the employment generation in industry and services and pushed more workers into agriculture and self-employment to sustain their livelihoods.