How Unemployment is Measured

Context

In order to successfully tackle, it is important to understand how unemployment is defined and measured in a developing economy like India.

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• According to the Periodic Labour force Survey (PLFS) 2017, unemployment rate of India was highest i.e 6.1%. However a recent PLFS report (2021-22) showed declining trends i.e  4.1%.
• One Size Does Not Fits All: The economies of the U.S (industrialized) and India (developing) are very different. As such, the methods used to measure unemployment are very different.

About Unemployment:

• Definition: According to the International Labour Organisation (ILO), an unemployed person is a person aged 15 or over who simultaneously meets three conditions
  • Unemployment is being out of a job.
  • Being available to take a job.
  • Actively engaged in searching for a job. 
• Trends in unemployment rates in india: Refer table 1.

Methodology of measuring unemployment in India

• The National Sample Survey Office (NSSO) launched the PLFS with the primary objectives of providing more frequent and comprehensive labor force data. The PLFS has two main objectives:
  • To estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) for the urban areas only in the ‘Current Weekly Status’ (CWS).
  • To estimate employment and unemployment indicators in both ‘Usual Status’ and CWS in both rural and urban areas annually
• Center for Monitoring the Indian economy (CMIE) conducts its own survey and periodically presents data and reports on unemployment following different methodology.

Key Challenges in Methodology of Measuring Unemployment

• Conceptual framework of key employment and unemployment indicators
  • An individual’s principal status is based on the activity in which they spent relatively a long time in the previous year. 
  • The CWS adopts a shorter reference period of a week.
• Informal nature of  job markets: In terms of employment share the unorganized sector employs 83% of the work force and 17% in the organized sector. 
  • There are 92.4% informal workers (with no written contract, paid leave and other benefits) in the economy.
• Agrarian Economy: The low bar for classifying an individual as employed is why rural areas tend to have lower unemployment rates than urban areas. 
  • For instance, in agrarian economies, individuals have better chances of finding some kind of work, even if it is informal.
• Social Norms and Gender Roles:
  • Traditional gender roles often place the responsibility of domestic work and caregiving on women. 
  • For instance, 29.4% of women (aged 15-59) were part of India’s labor force in 2021-22, in contrast, men’s LFPR was 80.7% in 2021-22.
• Lockdown Effect (Covid-19) : the different measurement criteria may not fully capture the effects of such disruptions, leading to discrepancies in reported unemployment rates.

Steps taken to address unemployment by Central government

• Atma Nirbhar Bharat Package: The government announced the Aatmanirbhar Bharat package to stimulate business and mitigate the impact of COVID-19. It includes various long-term schemes and policies for self-reliance and employment opportunities.
• Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS): Statutory guaranteed 100 days employment for an unskilled worker in rural areas.
• Flagship Programme: Initiatives like and Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) are encouraged for employment generation.
• Others: Make in India, Start-up India, Digital India, Smart City Mission, Housing for All, and Industrial Corridors are also oriented towards creating employment opportunities.

WAY FORWARD

• Incorporate Underemployment: The current methodology primarily focuses on open unemployment and does not adequately capture underemployment. 
  • Expanding the definition to include those who are employed but not fully utilizing their skills or working fewer hours than desired.
• Regular and Comprehensive Surveys: It can help capture fluctuations in employment patterns and provide policymakers with timely information.
• Improve Data Quality and Consistency: By investing in training for surveyors and adopting modern data collection technologies to minimize errors.
• Include Informal Sector: A significant portion of India’s workforce is employed in the informal sector, which often goes unaccounted for in official statistics. 
  • Develop methodologies to better capture informal employment and its dynamics.
• Seasonal Employment Adjustment: Develop methods for seasonally adjusting unemployment rates, especially in sectors like agriculture where employment patterns vary throughout the year.
• Utilize Technology: To track employment trends in real-time. 
  • This can include analyzing online job portals, social media, and other digital sources for labor market insights.

SOURCE : THE HINDU

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