Never-ending fragility grips Indian workforce
The June quarter numbers capture the period of the hard lockdown, and things have improved since then, as can be seen from the GDP numbers.
The 68-day long nationwide hard lockdown which was imposed from March 25, 2020 pushed India’s urban unemployment rate above 20%, according to the Periodic Labour Force Survey (PLFS) findings for the quarter ending June 2020.
The report was released by the National Statistical Office (NSO) on March 10. The latest PLFS numbers also show that the rise in unemployment rate might not capture the entire stress in labour markets.
This is because it was accompanied by a fall in labour force participation rate (PLFS), which means a section of workers actually withdrew from the labour markets. The June quarter numbers capture the period of the hard lockdown, and things have improved since then, as can be seen from the GDP numbers. However, when read with private estimates of employment, the PLFS numbers point to a continuing fragility in India’s labour markets.
Urban unemployment more than doubled during the lockdown
The NSO has been conducting quarterly PLFS surveys in urban areas since the quarter ending June 2018. Although the quarterly surveys are not as extensive as the annual ones—the latest available data is for 2018-19—they are useful in giving a snapshot picture of labour markets in the urban economy.
India’s urban unemployment rate increased sharply from 9.1% in the quarter ending March 2020 to 20.9% in the quarter ending June 2020. Although the unemployment rate was higher for women in absolute terms, the proportional increase in unemployment was higher for men between the March 2020 and June 2020 quarters. Younger workers suffered even more, and every third worker in the 15-29 year age group was out of work in the quarter ending June 2020.
Only men withdrew from labour force during lockdown
With many commercial establishments shutting shop and fear of large scale reverse migration of the migrant workforce, the lockdown was expected to have led to a drop in the labour force participation rate or LFPR. The PLFS results do show a drop, but it is lower than what is seen in private estimates such as the employment numbers collected by the Centre for Monitoring Indian Economy (CMIE) database.
Urban LFPR in the quarter ending June 2020 was 55.5% for men, the lowest since June quarter of 2018 (56%). This number was 56.7% in the quarter ending March 2020 and 56.3% in the quarter ending June 2019. The year-on-year comparison is important because seasonality might play a role in determining LPFR.
One reason why it might be the case is a lot of migrant workers go back to their villages during the harvest season. What is interesting in the PLFS LFPR statistics is the fact that the participation rate for women did not fall on a year-on-year basis in the quarter ending June 2020. The overall LFPR, however, did fall to its second-lowest level since the June quarter of 2018 (35.6%), the earliest period for which data is available.
Lockdown hurt poorest workers the most
The lockdown’s adverse impact on jobs hurt the poorest workers (casual workers) the most. The share of casual workers in the urban economy, which has been around the 12% mark, fell to just 6.3% in the quarter ending June 2020. The quarterly PLFS reports do not give wage data, but casual workers have the least earnings among the three broad worker categories ( self-employed, regular wage/salaried and casual workers) in the economy as per information given in the annual PLFS reports.
When seen from a sector-wise perspective, job losses seem to have affected the secondary sector (which includes mining, manufacturing, construction, electricity and water supply) the most. The share of both agriculture and tertiary (services) sectors in total jobs actually increased. The rise in self-employment and shift towards the tertiary sector suggests an increase in labour market distress, said Himanshu, an associate professor of economics at Jawaharlal Nehru University. Think of this as someone who was working in a factory or construction site being forced to set up a vegetable cart to somehow make a living, he added.
The highest increase in the unemployment rate was in Maharashtra, Jharkhand, Gujarat, Karnataka, and Andhra Pradesh, where it rose 4.7 times, 3.6 times, 3.5 times, 3 times, and 2.9 times respectively.
All these states had unemployment rates under 10% in the first quarter of 2019-20. The states that saw the least increase in unemployment – Haryana (1.16 times), Bihar (1.25 times), Uttar Pradesh (1.46 times), Assam (1.49 times) – had above 10% unemployment in 2019-20 too.
The PLFS unemployment rates for the quarter ending June 2020 are in sync with the 17.8% unemployment rate in the CMIE statistics. The CMIE figures have improved to 7.3% and 7.4% in the quarters ending September 2020 and December 2020, although a worrying trend in the CMIE database is that LPFR values have still not come back to pre-lockdown levels.