Employment crisis in India. Finance Minister Nirmala Sitharaman claimed in the Lok Sabha on Thursday that unemployment in the country has dropped to pre-pandemic levels in an attempt to dispute the Opposition’s allegations on the politically sensitive issue of unemployment. According to the quarterly labor force survey, urban unemployment fell to roughly 9% in January-March 2021, after peaking at 20.8 percent during the first wave.
Various other estimates also indicate that the country’s unemployment rate has returned to pre-Covid levels. According to CMIE, the unemployment rate was 6.57 percent in January 2022, down from 23.52 percent in April 2020. Before the pandemic, it was 7.76 percent in February 2020. However, is this decrease in the unemployment rate indicative of a lessening of labor market distress? Is this a sign of the growth of more productive types of work? And, if so, does this imply that the scars left by the pandemic will heal?
India’s employment crisis predates Covid. The pandemic, on the other hand, has exacerbated multiple fault lines. To begin with, India’s labor force participation rate has decreased. This suggests that many people have simply chosen to leave the labor force, perhaps due to a lack of opportunities. Second, unemployment rates are much more excellent among young people and those with a higher level of education. According to studies, the unemployment rate for people aged 15 to 29 was 22.9 percent in January-March 2021.
Third, while there are indicators that the labor force is becoming more formalized (albeit this employment is more likely to be concentrated among low-wage positions in more prominent industrial regions), there is still the issue of casualization to reckon with. Casual wage labor does not provide the same level of social protection as formal employment. Fourth, given present per capita income levels, few people can afford to be unemployed for long periods. Many people will just choose lower-paying jobs that are less productive. This suggests that a declining unemployment rate may not be a reliable indicator of labor market turmoil. Although significant areas of the economy have recovered to pre-pandemic levels, the increased demand for labor under MGNREGA indicates that the economy is still in distress.
The recent protests in the states of Uttar Pradesh and Bihar by persons who had applied for the Indian Railways’ non-technical popular categories exam are indicative of the rising gap between job demand and supply, as are the needs of various caste groups for more reservation in public sector jobs and for its reach to be expanded to include the private sector. At their core, they reflect the country’s inability to generate adequate and remunerative employment, as well as the government’s inability to facilitate the creation of a labor-intensive manufacturing sector capable of absorbing the surplus labor force in agriculture and the millions who enter the labor force each year. This is the government’s most serious problem.