India’s harsh 68-day lockdown in 2020, imposed to curb Covid-19 infections, pushed a lot of workers out of jobs. Unit-level data of India’s official employment survey – the Periodic Labour Force Survey – analysed by HT shows that the unemployment rate increased in both urban and rural areas in the months of the lockdown. This is despite the fact that agriculture compensated for job losses elsewhere. But how has the labour market fared in 2021?
Official employment statistics for both rural and urban areas are available only up to June 2020. Even urban employment statistics are available only up to the March quarter of 2021. These statistics for urban areas suggest that the long-term effects of the pandemic might be more qualitative in nature than quantitative. Urban unemployment rate and labour force participation rate – the share of the population either working or looking for a job – were both recovering in the first quarter of 2021. However, the quality of jobs was worsening.
Only private surveys show the trends in India’s labour markets after March 2021. One such survey is the Consumer Pyramid Household Survey (CPHS) of the Centre for Monitoring Indian Economy (CMIE). Data from this survey, available until November 2021, shows that the headline unemployment rate was indeed improving in 2021. It was lower than in 2019 in all but four months of 2021 up to November. These four months are the second-wave period of April to June and the month of August.
To be sure, there was a gender bias in the improvement in the unemployment rate. The employment rate for men – who are a majority of the labour force – was not better than in 2019 in any month this year. On the other hand, the unemployment rate for women was far better than in 2019, thus moderating the effect of the male unemployment rate on the overall unemployment rate.
An improvement in unemployment rate – for women or overall – does not mean that more jobs are available in 2021 than even in 2019. This is because only those people who are willing to work and don’t find work are considered unemployed. An example can make this clear. If there are 90 jobs in an area of 100 people all looking for a job, the unemployment rate will be 10%. If only 90 people of this area were looking for a job, the unemployment rate would be zero.
This is why the improvement in the unemployment rate in 2021 is not encouraging. The labour force participation rate – the share of the population willing to work – was lesser than 2019 in all months of 2021 up to November. Compared to 2020 too, year-on-year improvement LFPR was substantial only in the months of April and May, because of a low base. This also explains why women’s unemployment rate in 2021 has shown improvement. The recovery in their labour force participation has been much less than for men.
Although the CPHS is a nationally representative survey, it differs significantly from the PLFS in design. For instance, its questions on employment are part of a broader survey on consumption and investment. CPHS respondents are asked about their job situation in the past day, while PLFS asks respondents about their job status in the week before the survey. Some economists suggest that the CPHS might show changes in unemployment level better than absolute levels of unemployment because CMIE relies on a fixed panel of households for its survey.
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