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Unemployment: Measurement in India

A person who is in the age group of working population (15-60 years), is called unemployed if s/he does not get work, despite offering himself in the labour market for work on existing wage rate. There are various sub categories of unemployed people such as underemployed, seasonally unemployed and disguisedly employed. If a person voluntarily chooses to remain unemployed for education, upgrade of skills and waiting for a better job avenue, he is not considered as unemployed. Only involuntarily unemployed are described as unemployed.

Types of Unemployment

  1. Structural unemployment: unemployment occurring because of structural features of the economy such as lack of economic growth and private enterprise, use of capital intensive technology, higher share of services sector in GDP especially financial sector
  2. Frictional unemployment: Such kind of unemployment is short term unemployment that exists in the developed countries due to recession in some sectors. Labour force remains unemployed while taking some kind of training and skill enhancement and soon they get employment in sectors that are vibrant.
  3. Cyclical unemployment: Such kind of unemployment occurs due to downswing of the business cycle.
  4. Seasonal unemployment: This kind of unemployment occurs when any seasonal activity like agriculture passes through slack season.
  5. Underemployment: Underemployment refers to a situation in which the labour force is employed at lower than his qualification and at lower wages than s/he deserves or for lesser hours than he can work.
  6. Disguised unemployment: This kind of unemployment exists in agriculture. This is about employment of such labour force in agriculture, who contribute nothing or negligible amount in total production, still they seem to be employed while actually they are disguisedly unemployed. Technically the marginal productivity of disguisedly unemployed is zero or near zero. For example 10 labour units produce 100 quintals of wheat in a plot and 15 labour units also produce 102 quintals. Then we can say them disguisedly unemployed.


Measurement of unemployment in India

Unemployment and employment is measured in India on the basis of quinquennial (every five years) and annual surveys on activity status of the work force of India done by the National Sample Survey Organization (NSSO), since its setting up in1950. The quinquennial data is based on bigger samples and so more reliable than annual data, which is based on a smaller sample. Thus we can say that more reliable unemployment and employment figures come with a time lag of four years at least.

The National Sample Survey Organization (NSSO) provides three different estimates of employment and unemployment based on different approaches / reference periods used to classify an individual’s activity status. These are the

  1. Usual status approachwith a reference period of 365 days preceding the date of survey. reference period of 365 days preceding the date of survey. The activity status on which a person spent relatively longer time (major time criterion) during the 365 days preceding the date of survey is considered the principal usual activity status of the person.
  2. Current weekly status approachwith a reference period of seven days preceding the date of survey. A person found ‘working’ for at least one hour for at least one day during the reference week was categorised as ‘working’ according to current weekly status even if he was seeking work or available for work for the rest of the period.
  3. Current daily status approachwith each day of the seven days preceding date of survey as the reference period. CDS does provide day-to-day accounting of the available labour time (in terms of ‘half-day’ units) of persons classified under the categories employed and unemployed (labour force) is done according to the current weekly status concept separately for each of the seven days period of reference. It mean if you get employment for more than half a day on a particular day, your activity status according  to CDS  is equal to one full man day “employed.”



Activity Status

The surveys by NSSO try to find the activity status of the work force from the given samples in order to find out whether an individual is employed or unemployed during the chosen reference period. Activity Status refers to the activity situation in which the individual is found during the reference period with respect to his participation in economic or non-economic activities. The NSSO defines three broad Activity Status—first is activity status classified as employed or working (engaged in an economic activity), second is unemployed that is seeking employment  and still not getting it and third is that segment of working age which is not the part of work force as they are not seeking nor available for work.

Work force = Number of people employed + no of people seeking employment

It is notable that “not seeking work” segment of working age people are classified as “not in labour force.”

Unemployment Rate

Unemployment rate is the percent of the labor force that is without work.

Unemployment Rate = Unemployed Workers/Total Labour Force x 100

Work participation rate

The Work participation rate is also estimated which is defined as the percentage of total workers (main and marginal) to total population.

Work Force Participation Rate = Total Workers (Main + Marginal)/ Total Population x 100

Usual Status measures chronic or open ended unemployment (unemployment in the longer period) whereas Current Weekly Status and Current Daily Status measure underemployment and variations in unemployment in the shorter period. It is notable that Usual Staus Unemployment and Current Weekly Status unemployment are “person rates” of unemployment whereas Current Daily Status Unemployment is the “time rate of unemployment”. Person rates of unemployment how many persons out of total work force are unemployment whereas time rate of unemployment measures how many work days remained unemployed out of total man days available in a country.

Man Day =  one unit of labour’s  work in a day (within legal working hours)

Thus a man day is a day regarded in terms of the amount of work that can be done by one person within this period.

As far as the situation in India was concerned, the longer the reference period, the smaller will be the rate of unemployment and the shorter the reference period, the larger the unemployment rate. Current Daily Staus unemployment is the most comprehensive measure of unemployment in India.

The NSSO collected employment data based on ‘usual status (UPS)’ only upto its eighth round. However from 9th round onwards, it started collecting data based on ‘current weekly status (CWS)’ approach also. Planning Commission set up the Committee of Experts on Employment Estimates (Dantwala Committee) in 1960. The Committee recommended concepts and definitions for conducting such surveys. It recommended collection of data based on CDS in addition to UPS and CWS. Accordingly, beginning with the 27th round (1972-73),quinquennial(5-yearly) surveys were being conducted by NSSO to collect employment-unemployment data based on all the three approaches of UPS,CWS and CDS.

In the annual survey rounds of NSSO, only employment-unemployment data based on ‘usual activity status’ and ‘current weekly status’ were collected up to 59th round. However in 60th round, a separate schedule was canvassed to collect employment and unemployment data on ‘current daily status’ also. In fact, since 60th round, NSSO is collecting data on employment and unemployment on current daily status also in its annual rounds.

NSSO surveys are conducted on quinquennial basis. In order to measure employment-unemployment on an annual basis, Employment-Unemployment Survey is being conducted by Labour Bureau since 2009. This survey also captures the labour estimates in terms of usual principal status, usual principal and subsidiary status, current weekly status and current daily status.

Besides this, a quick quarterly enterprise level surveys (Quick Employment Survey)are also conducted by Labour Bureau to capture the changes in the employment –unemployment scenario at much shorter interval. However the intent of this survey was to mainly assess the impact of global financial crisis on the Indian economy.

The National Sample Survey Office (NSSO) has addressed the problem through a clever technique of measuring a sampled person’s time disposition using multiple concepts: usual status, daily status and weekly status. By collecting data on employment through large sophisticated surveys of inter-penetrating samples and using these multiple employment concepts, the NSSO has been generating fairly reliable estimates of both open unemployment and underemployment for several decades.

However, since the employment-unemployment survey is an elaborate and costly operation, it is undertaken only once every five years. Such quinquennial estimates of unemployment are obviously inadequate for macro-economic policy, which requires up-to-date information at least annually, if not more frequently. In fact, no NSS estimates of employment are available since 2011-12. Unfortunately, the more recent Labour Bureau surveys have been largely ignored, and all sorts of humbug estimates are put out to fill the gap.

This situation is about to change. The NSSO has replaced the old series of quinquennial employment-unemployment estimates with a new survey series, the periodic labour force survey (PLFS), that matches the different production cycles of the agricultural and non-agricultural sectors. Urban employment surveys are now being conducted every quarter to give us quarterly estimates of urban employment covering most of the non-agricultural sector. Rural surveys are being conducted annually to give us annual estimates of rural employment, and underemployment, covering most of the agricultural sector. The urban and rural estimates are being combined to give us annual estimates of total employment.

Pointers from latest NSSO data

According to NSSO 68th round of the Employment and Unemployment Situation among Major Religious Groups in India report, following points come out.

Key findings of the survey 

  • The unemployment rate in urban areas reduced from 4.5% in 2004-05 to 3.4% in 2011-12, the unemployment rate in urban areas reduced from 4.5% in 2004-05 to 3.4% in 2011-12.
  • According to the survey, which was conducted in 2011-12, the unemployment rate across all the religious groups in rural areas was on the lower side than those in urban areas for both males and females.
  • The most peculiar finding of the survey is that Christians which are supposed to be a better off community have the highest rate of unemployment in both rural (4.5%) and urban (5.9%) areas in 2011-12. The rate in urban areas for Christians stood at (8.6%) in 2004-05 while the rural rate stays constant.
  • While the unemployment rate in rural areas has decreased for Sikhs (from 3.5 to 1.3%) – now the lowest across all religious groups – it has slightly increased for Muslims (from 2.3 to 2.6%). At 3.3%, Hindus have the lowest unemployment rate in urban areas.
  • Self-employment is the major source of income for almost half the households, across all religious groups, in rural areas, followed by casual labour.
  • In urban areas, the proportion of households deriving major income from regular wage or salary earnings is the highest. Half the Muslim households in urban areas have self-employment as major source of income, the highest among all religions, while regular wage or salary earnings was the highest for Christians with 45.8 per cent households.

What does the survey indicate?

  • The survey confirms the apprehensions shown by many experts that India is facing rural distress. As survey clearly indicates that all religious groups registering an increase in unemployment in rural areas.
  • The report states that the unemployment rate is 1.7% in rural and 3.4% in urban areas. In its previous report of 2013, unemployment rate was 1.5% in rural and 4.8% in urban areas.
  • The unemployment rate in India is even lower than Many developed countries, however survey of NSSO on number of jobs created reveal that there are very less number of jobs created in formal sector in last 2 decades, Therefore this low unemployment figure indicates that most jobs created in last few years are either in informal sector or in unorganized sector.

Why do Christians have largest unemployment rate?

  • Unemployment level in India is highest among those people who are richer and more educated. The reason is that poor people can’t afford to stay unemployed, and hence, opt for any kind of work, irrespective of the nature of the job. The better off have the capacity to be unemployed as they look for the right job. Christians are the most educated group, hence unemployment rate is higher among them
  • Among the persons of age 15 and above, the proportion of people who are not literates was the lowest for Christians. Also, the proportion of persons with educational level secondary and above is highest for Christians.

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