The good, bad and ugly about India’s post-pandemic labour market | Latest News India - Hindustan Times
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The good, bad and ugly about India’s post-pandemic labour market

ByAbhishek Jha and Roshan Kishore
Mar 01, 2023 12:02 AM IST

Once lockdown restrictions were relaxed and the economy started recovering, questions shifted to not just the magnitude of the recovery but also its nature

The 2021-22 Periodic Labour Force Survey (PLFS) report is the first comprehensive quantitative account of India’s post-pandemic labour market. The National Sample Survey Office (NSSO) released the report on February 24 and it covers the period from July 2021 to June 2022. Headline numbers of the report present a picture of reducing stress in labour markets (https://bit.ly/3SvMu72). However, one should not infer unemployment rate falling to its lowest level since 2017-18 as conclusive proof of India’s labour markets being completely stress free. The larger picture, an HT analysis of unit level data shows, is that the post-pandemic Indian labour markets show some trends that are good, and some that are downright alarming.

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HT Image

The Good: Agricultural employment is falling but some reverse migration seems has become entrenched

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If there is one image that captures the economic shock of the pandemic , it is that of workers walking back home, after the government imposed a 68-day long nationwide hard lockdown in March 2020. The economic impact of the lockdown and the reverse migration it triggered was not only limited to the inconvenience of reaching home. It also meant a loss of income.

Migration, after all, is the most effective tool for workers to escape the extremely overcrowded agriculture sector, which employs more than 40% of workers with less than 15% share in value added. That workers who went back to their villages did not return immediately became clear when the government released the 2020-21 PLFS report last year, as share of agriculture in employment continued to increase. The 2021-22 PLFS report shows that this trend has reversed. But agricultural employment continues to remain above pre-pandemic levels. That some workers who came back to their villages did not return also becomes clear from the fact that share of rural population (in the PLFS sample) and share of unpaid self-employed in rural areas has continued to increase even in the 2021-22 round. “While lack of fresh census statistics have made accurate rural-urban classification more difficult, a rise in share of rural population and labour force does suggest that some of the reverse migration has not been corrected”, said Himanshu, an associate professor of economics at Jawaharlal Nehru University.

See Chart 1: Share of agricultural employment, share of rural population and rural share of unpaid self-employed

The Bad: Wages have remained flat post-pandemic

Once lockdown restrictions were relaxed and the economy started recovering, questions shifted to not just the magnitude of the recovery but also its nature. Many independent economists described India’s post-pandemic recovery as being profit rather than wage-led. The latest PLFS report confirms this. While real wages started falling for both salaried and self-employed workers from 2019-20 itself (the last quarter of the PLFS year was affected by the 68-day lockdown), they did recover in 2021-22. To be sure, the casual worker’s wages had recovered even in 2020-21 and they kept rising in 2021-22. However, a comparison of real wages from the first PLFS report in 2017-18 shows that they have largely been flat. Real wages are unlikely to grow even in 2022-23 because of higher inflation. For the seven-month period (July-January) for which CPI data is available for the current PLFS year, 2022-23, inflation is the highest since PLFS started in 2017-18. While the PLFS numbers and methods are not strictly comparable with the Employment Unemployment Survey (EUS) numbers, a comparison shows that real wages for both salaried and casual workers increased at a much faster pace between 2004-05 and 2011-12 than they did between 2017-18 and 2021-22. CAGR of real wages for salaried and casual workers from 2004-05 to 2011-12 was 4.1% and 6.8% in EUS. In PLFS, the CAGR from 2017-18 to 2021-22 is 0.02% and 4.6%. A lower growth in wages means a lower growth in mass incomes and hence lower growth in consumption demand.

See Chart 2: real wages for regular, casual and self-employed from 2017-18 to 2021-22

The Ugly: College-educated young people face high unemployment

Unemployment rate among 19-29 year olds with a graduate degree stood at 29.1% in India in 2021-22. This statistic needs to be read with the fact that Labour Force Participation Rate (LFPR) for this cohort is just 53.7% compared to 62.4% among older people. What makes matters worse is that unpaid work hides actual unemployment. The headline unemployment rate for this age group has declined from 16.2% in 2018-19 to 12.8% in 2020-21 to 12.3% in 2021-22. If the unpaid self-employed are counted as unemployed, the rate increased from 33.3% in 2018-19 to 35.3% in 2020-21; and it remained above pre-pandemic levels in 2021-22 (34.9%). What makes the situation even more alarming is the fact that higher education seems to exacerbate the unemployment problem for young people, which is perhaps a reflection of mismatch between expectation and availability of actual jobs. An economy where one-third of young graduates face unemployment is sitting on a minefield of discontent .

See Chart 3: unemployment rate for graduate and non-graduate 19-29 year old with adjustment for unpaid employment

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