Number Theory: How is India’s rural job market changing?

This is the final part of a four-part data journalism series on the key trends seen in the Periodic Labour Force Survey (PLFS).

Since 2017-18, the first year the Periodic Labour Force Survey was conducted, some of the biggest changes in India’s labour market have taken place in rural areas. For example, women’s labour force participation has increased because rural women have started participating much more in the labour market. Similarly, India’s headline unemployment rate is almost half of that in 2017-18 more because of a decline in rural unemployment (more than in urban unemployment). This suggests the rural job market has changed significantly. Here are four charts that describe that change.

Unpaid family work has replaced some casual work in rural areas.

How is India’s rural job market changing

• 
  Unpaid family work has replaced some casual work in rural areas

  As HT reported earlier, India’s unemployment rate has decreased significantly since 2017-18 because a large number of people in rural areas have taken up unpaid work in family enterprises. Of the estimated growth of 105 million in rural workers since 2017-18, 40 million has come from such unpaid work and 43 million from own account self-employed workers. Casual and regular wage workers, on the other hand, have contributed only 12 million and 10 million workers respectively. This has changed the structure of the rural workforce. In 2017-18, 41% rural workers were own account self-employed, 29% were casual workers, 17% were unpaid family workers, and 13% were regular wage workers. The share of the own account self-employed in 2022-23 is the same as in 2017-18 and that of regular wage workers has decreased by a percentage point. The proportion of casual and unpaid workers has changed in more significant ways. The former’s share in workers has decreased by 4 percentage points and the latter’s share, increased by 5 percentage points.
• 
  Does this trend mean that family members have replaced hired farm hands?

  This is plausible because most unpaid family workers are in agriculture, as HT has reported earlier. However, since PLFS does not track rural workers over different years, only summary statistics can be used to test the theory. For example, the four-percentage point decline in casual work in rural areas is almost entirely on account of agriculture. On the other hand, the five-percentage point growth in unpaid family workers is also on account of agriculture. This suggests that family members might have replaced some hired farm hands. Estimates of the absolute number of such workers shows this more clearly. The number of casual agricultural workers has decreased by 2.7 million since 2017-18 and the number of unpaid workers in the sector has increased by 25.3 million. This means that only a part of the growth in unpaid farm workers is a result of family members replacing hired farm hands.
• 
  Agriculture has contributed majority of rural workforce growth, but its proportion is marginally down

  Agriculture has contributed 55% to the growth in rural workforce since 2017-18. However, the share of agricultural workers is now 0.99 percentage points less than in 2017-18. How is this possible? This has happened because agriculture already had a very high share (59.40%) in the rural workforce in 2017-18. Because the industry has contributed less than this to workforce growth, its share has marginally decreased to 58.41%. Does this mean other sectors now have a bigger share in the rural workforce? Yes, two sectors – construction and manufacturing – now have a slightly bigger share in the rural workforce. To be sure, only construction’s share has increased in a significant way: 1.7 percentage points. Manufacturing’s share has increased by just 0.45 percentage points. The share of other sectors has either remained roughly the same or decreased marginally since 2017-18.
• 
  Urban-rural wage gap has increased for regular workers and decreased for the self-employed

  Urban workers earned more than rural workers in the first PLFS conducted in 2017-18. They continued to do so in the latest PLFS conducted in 2022-23. However, there have been some changes. Regular workers in urban areas earned 38% more than such workers in rural areas in 2017-18. This gap is now 45%. This is because wages of such workers have increased faster in urban areas than in rural areas. The nominal CAGR of regular workers was 4.6% in rural areas and 5.5% in urban areas. On the other hand, the gap between wages of urban and rural workers has decreased for the self-employed: from 73% in 2017-18 to 67% in 2022-23. This is because self-employment wages have increased at a nominal CAGR of 6.7% in rural areas compared to 5.9% in urban areas. However, the gap between casual workers in urban and rural areas has remained roughly the same: around 23%. The wages of such workers have increased at roughly the same rate in rural and urban areas: at a nominal CAGR of 9.7% and 9.8%, respectively.