Context: Employment opportunities need to expand in areas where labour is deployed to deliver higher productivity for enterprise and higher returns to labour.

• India’s unemployment rate in August was 8.3 per cent and, it signifies very high unemployment rates.

What are some concerns regarding unemployment in India?

High unemployment rate: Periodic Labour Force Survey (PLFS) highlighted a 45-year-high unemployment rate of 6.1% in 2017-18 (July to June). Today, an unemployment rate of 7-8% seems to be the norm.

• India still provides 9.2 million jobs less than it provided before the pandemic. It fell by nearly 2 million from 399.7 million in July 2021.

Unemployment rate is not an input into policymaking: Between inflation and unemployment, it is inflation that wields political power.

• High inflation rates can upset financial markets, that in turn exert pressure on regulators to keep inflation in control. The unemployment rate does not have such an influence.

Unemployment directly impacts only the unemployed: A 7% unemployment rate impacts less than 3% of the population. The society perceives being unemployed as an individual shortcoming, and not an outcome of a macroeconomic malaise.

What is the impact of rising unemployment?

• Demands for jobs reservations: The dearth of employment opportunities lends potency to reservations as a political tool.
• Low labour force participation rate (LFPR): In India, very often people do not look for jobs in the belief that none are available. Hence, India’s LFPR is at around 40% when the global rate is close to 60%.
• Poor quality formal jobs: In a country of over a billion adults, there are less than 80 million salaried jobs. So, questions arise that where would the remaining 920 million go to find employment?
• Reverse-migration: In August, even the farms could not absorb the excess labour spilling out from factories and offices. Labour moved to providing odd services to the household sector and into retail trade presumably as delivery boys.

Road Ahead

• Definitions of employment: We should not reduce its meaning into a relaxed definition, as the official system does. For instance, India uses CMIE’s definition of employment that requires a person to be employed for a better part of a day to qualify.
• Increasing investments: the investment climate needs to be business-friendly and government interventions must shift away from supply-side support to spurring demand.