7 PM | Unemployment | 9 February, 2019

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Article:

Centre for Monitoring Indian Economy released its set of unemployment data in India.

Unemployment rate: Unemployment rate is the ratio of the unemployed to the total labour force.

Important Analysis:

• In India, the government releases two important reports on the labour market to calculate the employment status in the country. One is the Quarterly Employment Survey and the other is the Annual Employment-Unemployment Survey computed by National Sample Survey Organisation.
• Though the Government of India does not produce any measure of monthly unemployment rate, the Centre for Monitoring India Economy (CMIE), a private enterprise in India has released the Consumer Pyramids Household Survey (CPHS) to measure unemployment data in India

About Consumer Pyramids Household Survey (CPHS)

• Consumer Pyramids is the largest survey of households of India. It makes estimates of income, expenses, savings, borrowings, investments and ownership of assets of households.
• It also makes estimates of the age, gender, education, occupation, health and financial inclusion of individuals.
• Estimates of households for a quarter are released five months after the end of a quarter.
• CPHS is conducted as face-to-face interviews necessarily using GPS-enabled smartphones or tablets in real-time environment which ensures the delivery of high quality data.

Facts about unemployment rate as per CMIE:

• The unemployment rate for men was 4.9% in 2018 and that for women in the same year was much higher — 14.9%.
• Male labour participation rate was 74.5% in 2016. This dropped to 72.4% in 2017 and then to 71.7% in 2018.
• Female labour participation was as low as 15.5% in 2016 which dropped to 11.9% in 2017 and then 11% in 2018.
• Urban female labour participation rates fell faster than rural female participation. In urban India it dropped from 15.2% in 2016 to 10.5% in 2018

Analysis of Consumer Pyramids Household Survey (CPHS)

• India’s labour participation rate is very low when compared with world standards and it fell sharply after demonetization to 45% which is 2% of the working age population.
• According to the survey it was not the employed who lost jobs and decided to stop working but largely the unemployed who decided that the labour markets had been so badly vitiated after demonetization that they gave up looking for jobs any further.
• Due demonetization along with GST employment shrunk by 11 million in 2018, especially small enterprises could not compete in a tax-compliant environment and thrown out of business
• Findings on Female Labour Participation:
  • The CPHS shows that the situation with respect to women’s participation in the labour force is extremely poor and substantially much lower than male participation
• Reasons for low female labour participation rate:
  • Rising household incomes reduces the need for women to join the labour force
  • Increased enrolment in higher education by women delays their entry into the labour force
  • Cultural and security factors keep women away from the labour market in India.
  • Employers are biased against hiring women.

NSSO survey: Other way of Measuring unemployment data

• NSSO measures the employment / unemployment in India and provides three different estimates of employment and unemployment based on different approaches/reference periods used to classify an individual’s activity status.
• The NSSO defines following three broad Activity Status i) Working (engaged in an economic activity) i.e. ‘Employed’ ii) Seeking or available for work i.e. ‘Unemployed’ iii) Neither seeking nor available for work.

Difference between CPHS survey and NSSO survey:

• NSSO’s estimates are based on the Usual Status that takes into account a person’s status during a 365-day period while CPHS takes into consideration a person’s status on the day of the survey.
• The Usual Status is too liberal in classifying a person as employed and is not the most suitable to decipher short-term shocks like demonetization on the other hand CPHS is better suited to measure short-term impact.
• According to the NSSO, the unemployment rate using the liberal Usual Status measure was 6.1 per cent in 2017-18 just 5 per cent according to CPHS.

Conclusion:

• Considering the unemployment data released by CMIE survey, Government must pay heed to its findings. Since Government of India does not produce any measure of monthly data on unemployment, it must consider these findings to device a policy to manage unemployment rate.