How unemployment is measured?

Source: The post is based on the article “How unemployment is measured” published in “The Hindu” on 7th September 2023.

Syllabus: GS3- Economy – employment

News: The article talks about challenges and methods for measuring unemployment in India. It points out differences with developed countries due to India’s informal economy. It also mentions that varying definitions and time frames can result in different unemployment rates, and the 2020 lockdown’s impact on these rates may not be accurately reflected due to measurement methods.

What is unemployment?

Unemployment refers to when someone is out of a job, is ready to work, and is actively seeking employment. It doesn’t mean simply being without a job; one must also be searching for work.

To measure unemployment, the number of unemployed people is divided by the total labor force to get the unemployment rate.

In 2017, India’s unemployment rate was 6.1%, but by 2021-22, it decreased to 4.1%.

Comparatively, the U.S. had rates fluctuating between 3.5% in 2022 and 3.7% in 2023. The U.S.’s employment-to-population ratio was 60.8% in 2019 with an unemployment rate of 3.7%.

What are the different methods for measuring unemployment in India?

Methods for Measuring Unemployment in India:

Usual Principal and Subsidiary Status (UPSS):

Considers one’s main activity over the past year.

If someone worked for seven months and was unemployed for five, they are still considered employed under this method.

Current Weekly Status (CWS):

Focuses on an individual’s employment status over the past week.

A person is deemed employed if they’ve worked at least an hour in the past week.

This method often shows higher unemployment rates than UPSS because it captures short-term joblessness.

Centre for Monitoring Indian Economy Approach:

Classifies people based on their activity the day before the interview.

It often reports a higher unemployment rate but lower labor force participation rates because of its focus on daily activity.

What are the challenges for measuring unemployment in India?

Informal Economy:

Many Indians don’t have a single, year-round job.

People might work as a casual laborer one month and as a farmer another, making it hard to consistently classify their employment status.

Social and Cultural Norms:

Many women, particularly in rural areas, might be willing to work but aren’t actively searching due to societal constraints.

In a 2009-10 survey, 33.3% of rural women showed willingness to work if available within their household.

Varied Employment Definitions:

Methods like Usual Principal and Subsidiary Status (UPSS) and Current Weekly Status (CWS) have different time frames and criteria, leading to different unemployment rates.

For instance, UPSS considers someone employed if they worked seven months in a year, even if unemployed for five.

Lockdown Impact:

The 2020 lockdown greatly affected the Indian economy.

Its effects might not be accurately reflected in yearly unemployment rates, given the long-term (UPSS) and short-term (CWS) measures used.

Urban vs. Rural Dynamics:

Unemployment rates are often lower in rural areas due to the nature of agrarian work, even if joblessness exists.