Q.Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements.
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Structural unemployment is a persistent form of involuntary unemployment caused by a mismatch between the skills of the workforce and the requirements of available jobs. This mismatch is often driven by technological shifts, industrial transitions, or educational gaps. According to recent Periodic Labour Force Survey (PLFS) reports, India's unemployment rate for individuals aged 15 and above stood at 4.2%, 4.1%, and 3.2% during the 2020-23 period, with structural factors heavily impacting youth and women who struggle to find jobs matching their qualifications.
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Structural Unemployment in India
- Skill Mismatch:
- Education-Industry Gap: A significant portion of the workforce lacks industry-relevant skills. The India Skills Report 2022 highlighted that only about 46.2% of Indian youth are employable, indicating a gap between academic curricula and market demands.
- Technological Displacement: Rapid automation and digitalization are making traditional roles obsolete. The World Bank estimates that automation could impact nearly 69% of jobs in India.
- Sectoral Shifts:
- Agricultural Dependence: While agriculture contributes only about 18% to India's GDP, it still employs nearly 42.6% of the workforce (Economic Survey 2022-23), indicating high disguised and seasonal unemployment.
- Urbanization and Regional Disparities: Rapid urban migration has strained urban labor markets. According to the 2011 Census, 31.2% of India's population was urban, and the service and manufacturing sectors have not expanded fast enough to absorb the influx.
- Demographic Factors:
- Youth Unemployment: India's youth unemployment rate was estimated at 28.3% in 2020 by the World Bank, reflecting structural barriers in entry-level hiring.
- Gender Disparities: The female labor force participation rate was low at 19.2% in 2021 (World Bank), constrained by cultural norms, safety concerns, and lack of flexible work options.
Methodology Adopted to Compute Unemployment in India
- Periodic Labour Force Survey (PLFS): Conducted by the National Statistical Office (NSO), the PLFS is the primary official data source. It uses three key measurement approaches:
- Usual Status (UPS): Measures employment status based on the individual's activity over a 365-day reference period. This is effective for capturing long-term structural trends.
- Current Weekly Status (CWS): Classifies a person as employed if they worked for at least one hour on any day during a 7-day reference period. This captures short-term seasonal fluctuations.
- Current Daily Status (CDS): Records activity on a daily basis within the reference week, offering insights into underemployment and the intensity of work.
- Annual Employment-Unemployment Surveys (EUS): Previously conducted by the Labour Bureau, these surveys provided historical data on employment patterns before being succeeded by the PLFS.
Improvements in Measuring Unemployment
- Better Data Collection and Frequency:
- More Frequent Surveys: Transitioning from annual to quarterly PLFS reporting for rural areas (similar to urban areas) would provide more responsive policy inputs.
- Enhanced Data Granularity: Capturing detailed regional, sectoral, and demographic variations would help design targeted regional employment policies.
- Incorporation of Informal Sector Employment:
- Recognizing Informal Work: Since a vast majority of India's workforce is in the informal sector, statistics should better capture gig workers, home-based workers, and self-employed individuals to avoid underestimating underemployment.
- Focus on Skill Gaps and Education:
- Skill Mapping Surveys: Conduct regular industry-specific surveys to map emerging skill requirements against vocational training outputs.
- Integration of Educational Data: Link educational databases with labor market registries to track employment outcomes of graduates.
- Use of Technology and Big Data:
- Leveraging Big Data: Analyze real-time hiring trends from online job portals, professional networks, and EPFO registration data to complement traditional household surveys.
- AI and Predictive Analytics: Use machine learning models to forecast labor demand in emerging sectors, helping align skill development programs proactively.
Conclusion
Addressing India's structural unemployment requires not only robust job creation but also a highly precise, real-time data collection methodology. By modernizing measurement techniques, incorporating informal sector dynamics, and leveraging big data, policymakers can design targeted interventions to bridge the skill gap and foster an inclusive labor market.
