35% of India's workforce underemployed, sharp drop in agricultural job creation due to slowdown: McKinsey report

By Rajiv Shah
One of the world’s topmost consultants, McKinsey, has suggested that the official unemployment rate of just about 4% hides the fact that India has a huge army of underemployment. Pointing out that in India’s context “unemployment is not really an option”, it underlines, here, “entering the informal sector as a worker is the norm.”
“Some 86% of India’s workforce is employed in the informal sector, and more than 90% is in informal employment”, the McKinsey Global Institute’s new report says, adding, “Rarely would a poor rural boy who had dropped out of school remain ‘unemployed’ – he would typically be put to ‘work’ on his family’s small piece of land or would lend a hand at the local kirana shop owned by his uncle.”
Emphasizing that “being employed disguises the slack of underemployment”, the report , released early this month, says the number of jobs created according to India’s surveys “does not help us assess growth in the amount of work done (or so-called man-days or man-hours actually worked).”
Pointing out that the Labour Bureau has classified work in four categories – those who found work for 12 months, six to 11 months, one to five months, and less than one month” -- the report says, by this measure, just about “65% of those seeking full-time work through the year found it”, while the rest, 35%, waited for work “in rising gainful employment, although not in new job creation.”

Drop in agricultural employment

Quoting Labour Bureau data, the report says, there has been a remarkable sluggishness in job creation in India, with the total number of jobs rising from 455 million to 462 million between 2011 and 2015.
At the same time, the report says, this “apparent sluggishness in job creation disguises significant structural change: agricultural employment fell by 26 million and non-farm employment rose by 33 million, or by more than eight million jobs a year.”
Noting that the pace of non-farm job creation dipped during the economic slowdown years of 2011 to 2013 to as low as eleven million, and rose sharply to 22 million during the following two years, the report says, “Labour moved out of agriculture into construction, trade and hospitality, and transport, the mainstays of the non-farm labour market in many developing countries.”
“By contrast”, the report states, “Mining and manufacturing lost jobs during the slowdown, although manufacturing jobs seem to have grown between 2013 and 2015. The growth in non-farm jobs in India is also evident in the growth in number of Employees Provident Fund members. Membership grew at a 7 percent rate, from 32.6 million in 2013–14 to 37.6 million in 2015–16, and currently stands at 45 million.”
However, the report regrets, “Despite the growth of non-farm employment, India’s overall labour force participation rate (the share of the working-age population looking for work) fell by three percentage points, from 55.4 percent in 2011 to 52.4 percent in 2015.”
In fact, the report states, “The movement of workers from farm to non-farm jobs has not been rapid enough to account for growth in the working-age population.” Thus, it adds, “The labour force participation rate for urban males appears to have dipped the most, from 73.7 to 69.1 percent over the period.”