60% urban men aged 20-24 unemployed, 50 lakh lost jobs in India since 2016: Study

Counterview Desk
In a new report, "State of Working India", prepared by the Centre for Sustainable Employment, Azim Premji University, Bangalore, even as taking strong exception to the Government of India discontinuing employment and unemployment survey, has quoted independent surveys to say that a whopping five million able bodied men lost their jobs between 2016 and 2018, adding, the situation is extremely grim among the relatively less educated youth.
Authored by Anand Shrivastava, Rosa Abraham, and Amit Basole, the report says that among rural men, 20 percent of graduates, who are around 7 per cent of the working age population, are unemployed; among urban women, 34 per cent of graduates, who are 10 per cent of the working age population, are unemployed; and in the age group 20-24, urban men account for 13.5 per cent of the working age population, but a whopping 60 per cent of the unemployed.

Excerpts

India’s labour statistics system is in transition. The five-year employment-unemployment surveys conducted by the National Sample Survey Office (NSS-EUS), the last of which was in 2011-12, have been discontinued. The annual surveys conducted by the Labour Bureau (LB-EUS) have also been discontinued. The last available survey in this series is from 2015.
The government has not released the results of the new high frequency Periodic Labour Force Survey (PLFS) conducted by the NSSO.
In the absence of official survey data, we use data from the Consumer Pyramids Survey of the Centre for Monitoring the Indian Economy (CMIE-CPDX) to understand the employment situation between 2016 and 2018. CMIE-CPDX is a nationally representative survey that covers about 160,000 households and 522,000 individuals and is conducted in three ‘waves’, each spanning four months, beginning from January of every year. An employment-unemployment module was added to this survey in 2016.

Labour Force Participation Rate

We find that the CMIE-CPDX estimates of the labour force participation rate (LFPR) and the workforce participation rate (WPR) for men are comparable to those from the LB-EUS survey, as well as the NSS-EUS. For women, these rates difer substantially across surveys.
Our analysis of CMIE-CPDX reveals that:
a. Five million men lost their jobs between 2016 and 2018, the beginning of the decline in jobs coinciding with demonetisation in November 2016, although no direct causal relationship can be established based only on these trends.
b. Unemployment, in general, has risen steadily post 2011. Both the PLFS and the CMIE-CPDX report the overall unemployment rate to be around 6 per cent in 2018, double of what it was in the decade from 2000 to 2011.
c. India’s unemployed are mostly the higher educated and the young. Among urban women, graduates are 10 per cent of the working age population but 34 per cent of the unemployed. The age group 20-24 years is hugely over-represented among the unemployed. Among urban men, for example, this age group accounts for 13.5 per cent of the working age population but 60 per cent of the unemployed.

Work Participation Rate

d. In addition to rising open unemployment among the higher educated, the less educated (and likely, informal) workers have also seen job losses and reduced work opportunities since 2016.
e. In general, women are much worse affected than men. They have higher unemployment rates as well as lower labour force participation rates.

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The labour force participation started to decline suddenly from September to December 2016 for both urban and rural men. The rate of decline slowed down by the second wave of 2017, but the general trend has continued and there has been no recovery. The timing of the start of the decline coincides with the demonetisation of high value currency notes in November 2016, although we cannot ascribe any causal link based only on these trends.
Between January to April 2016 and September to December 2018, the urban male Labour Force Participation Rate (LFPR) fell by 5.8 percentage points while the Work Participation Rate (WPR) for the same group fell by 2.8 percentage points. The corresponding numbers for rural males are 5 and 3.
What does a 3 percentage point decline in the WPR mean in terms of jobs lost? We can answer this question by drawing on the population estimates provided by the UN Department of Economics and Social Afairs. As per these data, the male working age population in India increased by 16.1 million between 2016 and 2018.
Accounting for the increase in working age population, the decline in the WPR amounts to a net loss of 5 million jobs during this period. Recall that this analysis applies to men only. When we take women into account, the number of jobs lost will be higher.
Broadly, these trends can be interpreted as saying that the proportion of working age men who are in employment continues to go down. This is the opposite of what one would expect with the ‘demographic dividend’ where the ratio of the working age group to the rest of the population increases, thus spurring higher growth. Whether or not this decline was caused by demonetisation, it is definitely a cause for concern and calls for urgent policy intervention.

The recent decline in LFPR and WPR has affected men with different educational backgrounds differently. The decline in LFPR and WPR is largely driven by men with lower education levels, for both rural and urban areas. For example, at the beginning of the period under analysis (2016-18), the WPR for both groups of men in urban areas was similar at around 68 per cent. By the end, the WPR for higher educated men had increased to 71.9 per cent while that for less educated men had fallen to 63.7 per cent.
Clearly, there is a large differential impact by level of education. This is consistent with the idea that the informal sector, where we can expect the share of less educated men to be higher, was hit hardest by demonetisation as well as the introduction of Goods and Services Tax (GST).
One question that may arise is, how can informal workers afford to remain out of the labour force? The answer may lie in the fact that a lower WPR does not necessarily mean a given person is fully out of work. Rather, it can be a result of the fact that work has become less regularly available, leading to a lower probability that the individual will be counted as part of the workforce in a survey.
Across all four slices (rural-urban, men-women), those who are educated beyond Class 10, and graduates in particular, are over-represented among the unemployed. For example, among rural men, graduates are around 7 per cent of the working age population but over 20 per cent of the unemployed.
Among urban women, graduates are 10 per cent of the working age population but 34 per cent of the unemployed. Among rural women, graduates form only a small 3.2 per cent of the working age population, but they make up 24 per cent of the unemployed.
Similarly, across age groups, the age group 20-24 years is hugely over-represented. Among urban men, for example, this age group accounts for 13.5 per cent of the working age population but a whopping 60 per cent of the unemployed. Beyond this age group, particularly for women, the 25-34 years group is also over-represented among the unemployed.
Thus broadly speaking, open unemployment in India today is largely a concern for those under 35 years of age and those who are educated beyond Class 10, and particularly beyond Class 12.