Syllabus
GS Paper II – Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
Context
The 7th Periodic Labour Force Survey (PLFS) for the period from July 2023 to June 2024 has been recently released.
Indian Labour Market
Introduction
The release of the 7th Periodic Labour Force Survey (PLFS) for the period from July 2023 to June 2024 marks a significant milestone in understanding the dynamics of the Indian labour market. This comprehensive survey provides crucial insights into key employment indicators such as the Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), and Unemployment Rate (UR). The latest data reveals notable trends, including an increase in LFPR and WPR, reflecting a growing engagement of the Indian workforce. These findings are instrumental for policymakers and stakeholders in shaping strategies to enhance employment opportunities and economic growth in India.
Key Definitions
- Labour Supply: The number of individuals willing to work at various wage rates, dependent on the current wage rate, and measured in man-days.
- Labour Force: The total number of individuals either working or willing to work, independent of wage rates, measured in days.
- Workforce: The number of individuals currently employed, excluding those who are willing to work but are not employed.
Formal and Informal Labour Market
| Aspect | Formal Labour Market | Informal Labour Market |
| Definition | Organised sector with legal recognition and regulation | Unorganised sector lacking formal recognition and regulation with minimal adherence to labour laws |
| Employment Type | Fixed working hours, permanent, contractual agreements, or temporary jobs (includes part-time work and self-employment) | Casual, domestic workers, daily-wage, part-time workers, or self-employment |
| Job Security | Generally higher job security due to labour laws | Lower job security; vulnerable to layoffs |
| Wages and Benefits | Fixed wages, benefits (e.g., provident fund, insurance) | Variable wages, limited benefits |
| Social Security | Eligible for social security schemes (e.g., pensions) | Limited access to social security programs |
| Work Conditions | Better working conditions (e.g., safety standards) | Often poor working conditions (e.g., lack of safety measures) |
| Trade Unions | Active trade unions and collective bargaining | Limited unionisation and weaker bargaining power |
| Sector Examples | Manufacturing, IT, finance, government jobs | Street vendors, domestic workers, agriculture |
Current State of the Labour Market in India
- Labour Force Participation Rate (LFPR):
- The LFPR in India has shown a gradual increase, reaching 41.5% in 2023.
- Female LFPR remains low, highlighting gender disparities in the workforce.
- Unemployment Rate:
- The unemployment rate has decreased to 7.2% in 2023, reflecting a recovery post-pandemic.
- Youth unemployment remains a significant challenge, particularly in urban areas.
- Employment Distribution:
- A large portion of the workforce is engaged in the informal sector, accounting for about 80% of total employment.
- The formal sector has seen growth, particularly in IT, manufacturing, and services.
- Wages and Working Conditions:
- Wage growth has been modest, with significant variations across sectors.
- Working conditions in the informal sector remain poor, with limited access to social security.
- Impact of Technology and Automation:
- Increasing adoption of technology and automation is reshaping job roles, particularly in urban areas.
- There is a growing demand for digital skills and reskilling initiatives.
Current State of the Global Labour Market
- Global Labour Force Participation:
- The global LFPR has stabilized at around 60% in 2023.
- High-income countries report higher participation rates compared to low- and middle-income countries.
- Unemployment Trends:
- Global unemployment rates have decreased to pre-pandemic levels, averaging around 5.3% in 2023.
- Disparities exist, with higher unemployment in developing economies.
- Sectoral Shifts:
- There is a notable shift towards service-oriented jobs, with a decline in traditional manufacturing roles.
- The green economy and renewable energy sectors are creating new employment opportunities.
- Wages and Inequality:
- Wage growth has been uneven, with significant disparities between regions and sectors.
- Income inequality remains a pressing issue, particularly in emerging economies.
- Technological Impact:
- The Fourth Industrial Revolution is driving demand for new skills and occupations.
- Automation and AI are expected to displace certain job categories while creating new ones.
Issues with the Labour Market of India
- Complex Rural-Urban Dynamics: The Indian labour market exhibits a complex interplay between rural and urban trends, with distinct challenges in each area.
- Worker Population Ratio (WPR): The WPR for individuals aged 15 and above increased slightly to 57.1% in 2023-24, up from 56.0% the previous year.
- Unemployment Rate (UR): The UR for individuals aged 15 and above in the usual status is 3.2%.
- Urban Unemployment Rate:
- In rural India, the unemployment rate for men is 2.7%.
- Urban men face a higher unemployment rate of 4.4%.
- Rural Participation Driven by Necessity: High rural participation is often driven by necessity rather than opportunity, with much of the workforce engaged in small-scale subsistence farming.
- Urban Female Unemployment Rate:
- In rural regions, female unemployment is 2.1%.
- Urban centres report a much higher female unemployment rate of 7.1%.
- Labour Force Participation Rate (LFPR): The overall LFPR stands at 60.1%, with rural areas reporting a higher participation rate of 63.7% compared to 52% in urban regions.
- Rural Women LFPR:
- Rural women have an LFPR of 47.6%.
- In urban areas, the rate drops to 28%.
- Self-Employment in Agriculture: In rural areas, women are predominantly self-employed in agriculture, which does not necessarily lead to better income or job security.
- Youth Unemployment:
- For individuals aged 15 to 29, the unemployment rate stands at 10.2%.
- Rural male youth unemployment is 8.7%, while in urban areas, it rises to 12.8%.
Causes for the labour market issues
- Agricultural Dominance: Agriculture remains a primary employment source, especially in rural areas, but its productivity and growth potential are limited.
- Dependence on agriculture in rural regions restricts diversification and income enhancement opportunities.
- Seasonal Nature of Agriculture: The cyclical nature of agricultural work often results in underemployment during off-seasons, leading to instability in the rural labour market.
- While farming provides a safety net for many rural families, it often results in lower incomes and fewer chances for skill development.
- Cultural and Economic Barriers: Gender disparities in both Labour Force Participation Rate (LFPR) and Unemployment Rate (UR) highlight the cultural and economic obstacles that prevent women from accessing formal sector jobs in urban areas.
- Exploitative Self-Employment: Rural women’s self-employment is mainly in small-scale farming, limiting their involvement in more diverse and higher-paying sectors.
- Limited Resource Access: Women face restricted access to resources such as credit, land, and market linkages, further entrenching their roles in low-productivity agricultural activities.
- Mismatch in Education System: The high rate of urban female youth unemployment underscores the disconnect between the education system and the job market.
- Lack of Job Opportunities: As more young people pursue formal education, particularly in urban areas, the job market has not kept pace in creating opportunities that match their qualifications.
- Skill Mismatch: Many young women find themselves overeducated and underemployed, struggling to secure jobs that align with their skills.
- Underemployment in Rural Areas: The rise in rural underemployment can be attributed to agricultural work, where underemployment is widespread.
- Capital-Intensive Manufacturing: This sector results in low employment creation despite high economic growth rates of around 7%.
Way forward
- Vocational Training and Education Reform: Enhance vocational training and reform the education system to bridge the gap in the labour market, ensuring that young people, especially in urban areas, are better equipped for available jobs.
- Inclusive and Dynamic Labour Markets: Develop more inclusive and dynamic labour markets to ensure that economic growth benefits all segments of the population.
- Promotion of Labour-Intensive Industries: Encourage the growth of labour-intensive industries to create more employment opportunities.
- Support for MSMEs: Facilitate the expansion of micro, small, and medium enterprises (MSMEs) as significant job creators.
- Entrepreneurship and Startups: Cultivate a culture of entrepreneurship and provide resources to support the growth of startups.
- Balanced Regional Development: Promote balanced regional development to reduce migration and create job opportunities in rural areas.
Conclusion
The Indian labour market, characterized by its complex rural-urban dynamics and significant gender disparities, faces numerous challenges. While agriculture remains a dominant employment source, its seasonal nature and low productivity hinder economic growth. Urban areas struggle with high youth unemployment and a mismatch between education and job opportunities. Addressing these issues requires comprehensive reforms, including better vocational training, support for MSMEs, and promotion of labour-intensive industries. By fostering inclusive and dynamic labour markets, India can ensure that economic growth benefits all segments of the population, paving the way for a more equitable and prosperous future.
Reference: DH
Related PYQ
Skill development programmes have succeeded in increasing human resources supply to various sectors. In the context of the statement analyse the linkages between education, skill and employment. [UPSC CSE – 2023 Mains]
Practice Question
Discuss the key findings of the 7th Periodic Labour Force Survey (PLFS) for the period July 2023 to June 2024 and analyze the current status of the Indian labour market. Highlight the major issues and suggest measures to address these challenges. [250 words]
Guidelines to Answer
Introduction
- Briefly introduce the 7th PLFS and its significance.
- Mention the time period covered by the survey.
Body
- Key Findings:
- Summarize the main findings of the PLFS, including LFPR, WPR, and UR.
- Highlight any significant trends or changes compared to previous years.
- Current Status of the Indian Labour Market:
- Discuss the rural-urban dynamics.
- Address gender disparities in employment.
- Mention the state of youth employment.
- Major Issues:
- Identify and explain the primary challenges such as high rural participation driven by necessity, seasonal nature of agriculture, cultural barriers, and skill mismatch.
- Measures to Address Challenges:
- Suggest reforms in vocational training and education.
- Propose the promotion of labour-intensive industries and support for MSMEs.
- Recommend fostering entrepreneurship and balanced regional development.
Conclusion
- Provide a balanced summary of the current labour market status.
- Emphasize the importance of comprehensive reforms for inclusive growth.