MacroScan - Employment Growth: The Latest Trends

The quinquennnial large sample rounds of the NSSO provide the most exhaustive data on employment trends and conditions in India. The results of the latest survey - the 61st Round, covering 2004-05 - have just been released, and they reveal that there have been notable changes in the employment patterns and conditions of work in India over the first half of this decade.

The first important change from the previous period relates to aggregate employment growth itself. The late 1990s was a period of quite dramatic deceleration of aggregate employment generation, which fell to the lowest rate recorded since such data began being collected in the 1950s. However, the most recent period indicates a recovery, as shown in Chart 1. (Aggregate employment is calculated here by using NSS workforce participation rates and population estimates of the Registrar General of India based on Census data.)
Chart 1 >>

While aggregate employment growth (calculated at compound annual rates) in both rural and urban India was still slightly below the rates recorded in the period 1987-88 to 1993-94, it clearly recovered sharply from the deceleration of the earlier period. The recovery was most marked in rural areas, where the earlier slowdown had been sharper.

This in turn reflects an increase in labour force participation rates for both men and women, as evident from Table 1. This includes both those who are actively engaged in work and those who are unemployed but looking for work.
Table 1 >>

For rural males, labour force participation rates have recovered to the levels of the earlier decade, and conform to broader historical norms. Similarly, rural females show labour force participation rates only slightly higher than in 1993-94. However, for both males and females in urban areas, the latest period indicates significant increases in labour force participation according to both usual status and current daily status definitions. Incidentally, it should be noted that this aggregate increase incorporates declining rates of labour force participation among the youth, that is the age group 15-29, and a rise for the older age cohorts.
Chart 2 >>

The changes in work force participation, described in Chart 2, mirror the changes in labour force participation, but to a lesser extent. The biggest change here is for urban males, many more of whom describe themselves as working in some fashion than in the two preceding survey periods.

One of the more interesting features that emerge from these data is the shift in the type of employment. There has been a significant decline in wage employment in general. While regular employment had been declining as a share of total usual status employment for some time now (except for urban women workers), wage employment had continued to grow in share because employment on casual contracts had been on the increase. But the latest survey round suggests that even casual employment has fallen in proportion to total employment, as indicated in Chart 3.
Chart 3 >>

For urban male workers, total wage employment is now the lowest that it has been in at least two decades, driven by declines in both regular and casual paid work. For women, in both rural and urban areas, the share of regular work has increased but that of casual employment has fallen so sharply that the aggregate share of wage employment has fallen. So there is clearly a real and increasing difficulty among the working population, of finding paid jobs, whether they be in the form of regular or casual contracts.
Chart 4 >>

The fallout of this is indicated in Chart 4 - a very significant increase in self-employment among all categories of workers in India. The increase has been sharpest among rural women, where self-employment now accounts for nearly two-thirds of all jobs. But it is also remarkable for urban workers, both men and women, among whom the self-employed constitute 45 and 48 per cent respectively, of all usual status workers.

All told, therefore, around half of the work force in India currently does not work for a direct employer. This is true not only in agriculture, but increasingly in a wide range of non-agricultural activities. This in turn requires a significant rethinking of the way analysts and policy makers deal with the notion of ''workers''.

For example, how does one ensure decent conditions of work when the absence of a direct employer means that self-exploitation by workers in a competitive market is the greater danger? How do we assess and ensure ''living wages'' when wages are not received at all by such workers, who instead depend upon uncertain returns from various activities that are typically petty in nature? What are the possible forms of policy intervention to improve work conditions and strategies of worker mobilisation in this context?

This significance of self-employment also brings home the urgent need to consider basic social security that covers not just general workers in the unorganised sector, but also those who typically work for themselves, which is what makes the pending legislation on this so important.
Table 2 >>

Table 2 provides the details of which industry workers are engaged in. Once again, there are some surprises. While it is expected that there has been a significant decline in agriculture as a share of rural employment, the share of manufacturing employment has not gone up commensurately for rural male workers. Instead, the more noteworthy shift for rural males has been to construction, with some increase in the share of trade, hotels and restaurants.

For urban males, on the other hand, the share of trade, hotels and restaurants has actually declined, as it has for other services. Manufacturing is back to the shares of a decade ago, still accounting for less than a quarter of the urban male work force. The only consistent increases in shares have been in construction, and to a less extent transport and related activities.

Interestingly, the big shift for urban women workers has been to manufacturing, the share of which has increased by more than 4 percentage points. A substantial part of this is in the form of self employment. Other services continue to account for the largest proportion of women workers, but the share of trade hotels and restaurants has actually fallen compared to 1999-2000.
Table 3 >>

These activity rates, combined with projections of population growth from the Registrar General, allow us to estimate the growth of employment by broad category over the period 1999-2000 to 2004-05 and compare it with the earlier period. The results are shown in Table 3. While there has been a slight recovery in the rate of growth of agricultural employment, this is essentially because of a significant increase in self-employment on farms (dominantly by women workers) as wage employment in agriculture has actually fallen quite sharply.

However, urban non-agricultural employment certainly appears to have accelerated in the latest period. In rural areas, this is the case for both self and wage employment, although the rate of increase has been more rapid for self employment. In urban areas, the increase has been dominantly in self employment.

At one level, this should definitely be good news, especially if it represents a Lewisian movement out of agriculture to activities with higher labour productivity. However, this is not self-evident, and requires further investigation, in particular with respect to the remuneration and conditions of the newer employment. These issues will be investigated in the next edition of MacroScan.