Changes in India’s job market before and after the COVID-19 pandemic

Source: The post changes in India’s job market before and after the COVID-19 pandemic has been created, based on the article “India’s employment paradox of the 21st century: An explanation” published in “Live mints” on 26th April 2024.

UPSC Syllabus Topic: GS Paper 3 – Indian Economy – Employment

News: The article discusses changes in India’s job market before and after the COVID-19 pandemic, based on a recent report. It mentions shifts in job types, where people worked, and overall employment numbers, showing how these trends reversed because of the pandemic.

For details information on India’s labor market and employment situation read Article 1, Article 2, Article 3

What were the employment trends in India before the pandemic?

Before the COVID-19 pandemic, employment trends in India from 2000 to 2019 included:

1. A shift from agricultural to non-agricultural jobs, although many new jobs were low-skilled and poorly paid in sectors like construction and services.
2. An increase in formal, regular employment in the organized sector, rising from 15% of total employment in 2000 to 24% in 2019.
3. Improvement in labor productivity across all sectors, with the highest annual gains in manufacturing at 6%, followed by services at 5%, agriculture at 4%, and construction at 1%.
4. Despite these positive trends, both the Labor Force Participation Rate and Worker Population Ratio fell from 62% to 50%, and the unemployment rate increased from 2% to 6%.

How did the pandemic change these trends?

The COVID-19 pandemic reversed several pre-pandemic employment trends in India:

1. The share of agricultural jobs increased again in 2021, a reversal from the previous trend of decline.
2. The increase in the share of regular wage employment in the formal sector was halted, with rates lower in 2023 than in 2019.
3. Labor Force Participation Rate (LFPR) and Worker Population Ratio (WPR) improved post-pandemic, despite their decline before 2020.
4. The unemployment rate, which had been rising pre-pandemic, fell after the pandemic hit.

Why did these reversals happen?

The reversals in employment trends in India due to the pandemic can be explained by several factors:

Economic Shock: The pandemic caused a significant disruption, leading to job losses in urban and non-agricultural sectors, forcing many to return to rural areas and rely on agricultural work as a fallback option.

Measurement of Employment: In the PLFS, any economic activity, including unpaid family work in agriculture, counts as employment, inflating employment figures during the crisis.

Market Conditions: During better economic times, individuals could leave low-paying or unsatisfactory jobs, but the pandemic reversed this, pushing more people into any available work, including less secure and informal jobs.

Education and Labor Withdrawal: The decrease in urban job opportunities led more people to focus on education or return to family farms, both counted as employed or out of the labor force under different metrics.

Question for practice:

Evaluate the impact of the COVID-19 pandemic on India’s employment trends, considering shifts in job types, formal employment rates, labor force participation, and unemployment rates.