- Recently, data from the Centre for Monitoring Indian Economy (CMIE) shows that India’s Labour Force Participation Rate (LFPR) has fallen to just 40% from an already low 47% in 2016.
- This suggests not only that more than half of India’s population in the working-age group (15 years and older) is deciding to sit out of the job market, but also that this proportion of people is increasing.
LFPR
- According to the CMIE, the labor force consists of people who are 15 years or older, and belong to either of the following two categories:
- Are Employed
- Are unemployed and are willing to work and are actively looking for a job.
- These two categories have people “demanding” jobs. This demand is what LFPR refers to.
- Thus, the LFPR essentially is the percentage of the working-age (15 years or older) population that is asking for a job.
- It represents the “demand” for jobs in an economy.
- It includes those who are employed and those who are unemployed.
- The Unemployment Rate (UER), which is routinely quoted in the news, is nothing but the number of unemployed (category 2) as a proportion of the labor force.
- In India, the LFPR is not only lower than in the rest of the world but also falling.
- In India, it has been sliding over the last 10 years and has shrunk from 47% in 2016 to just 40% as of December 2021.
India’s LFPR
- The main reason for India’s LFPR being low is the abysmally low level of female LFPR.
- According to CMIE data, as of December 2021, while the male LFPR was 67.4%, the female LFPR was as low as 9.4%.
- In other words, less than one in 10 working-age women in India are even demanding work.
- Even if one sources data from the World Bank, India’s female labor force participation rate is around 25% when the global average is 47%.
- The reasons or low women LFPR is essentially about the working conditions — such as law and order, efficient public transportation, violence against women, societal norms etc. — being far from conducive for women to seek work.
- Further, lot of women in India are exclusively involved within their own homes (caring for their family)
Issue with LFPR calculation
- Unemployment Rate only measures person who are unemployed, but it didn’t calculate the total people have stopped demanding work.
- Typically, this happens when people of the working-age get disheartened from not finding work.
- Thus, it is better to track another variable: the Employment Rate (ER).
- The ER refers to the total number of employed people as a percentage of the working-age population.
Way Forward
- Promoting Labour Intensive Industries: There are several labor-intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
- Special packages, individually designed for each industry, are needed to create jobs.
- Decentralization of Industries: Decentralization of Industrial activities is necessary so that people of every region get employment.
SOURCE: THE HINDU,THE ECONOMIC TIMES,MINT