Unemployment rate fell in 2021-22

by Mahesh Vyas

The Ministry of Statistics and Programme Implementation (MoSPI) released, on February 24, 2023, the fourth Annual Report of the Periodic Labour Force Survey (PLFS). The survey was conducted from July 2021 through June 2022. This is India’s official labour survey. Its results differ from estimates from the privately conducted Consumer Pyramids Household Survey (CPHS) of CMIE. We try and understand the broad outcomes from the two surveys and explain some of their differences.

The PLFS measures labour statistics using two definitions the usual status (US) and the current weekly status (CWS). The usual status is an extremely liberal measure that could classify a person to be employed during a year if the person was employed in a “subsidiary” activity for only 30 days of the year. Under the CWS, a person can be classified as employed if she was working for at least one hour on at least one of the seven days preceding the date of the survey. And, the status of employment is assigned priority over other statuses such as unemployed or out of labour force. Even this is an extremely liberal definition of employment.

Effectively, the use of data based on such liberal definitions understates India’s employment challenges. The definitions are thus so as to align employment statistics with the official production (national accounts) statistics. But, such an alignment is neither the concern of an anxious population waiting for jobs and nor should it be the concern of policy-makers who are to address India’s employment challenge. If a person spent one hour in a week working on the family-owned farm, she would be considered to be an employed by the PLFS. But, neither the person considers herself to be employed and nor should policy makers consider her to be employed. The detailed PLFS data allows us to wean out such rather fictitiously employed persons (such as unpaid family workers) to get a better sense of India’s employment challenges. The headline numbers from PLFS can mislead us into understating India’s employment challenge although they may adhere to international standards.

CPHS classifies a person to be employed only if the person was employed for a better part of the day of the survey. This is a far more realistic definition.

According to the PLFS, the unemployment rate defined by the usual status was 4.1 per cent in 2021-22. It was higher, at 6.6 per cent, by the current weekly status. According to CMIE’s CPHS, it was 7.5 per cent during the same July 2021 through June 2022 period.

All three measures agree that the unemployment rate declined in 2021-22 compared to 2020-21. According to US, the rate fell marginally from 4.2 per cent to 4.1 per cent; according to CWS it fell significantly from 7.5 per cent to 6.6 per cent and according to CPHS it fell from 7.7 per cent to 7.5 per cent.

We stick with the CWS measure of the PLFS for the rest of this discussion.

The unemployment rate has fallen for men and for women and it has fallen in urban and rural regions. It has declined the most for urban women and the least for rural women. Nevertheless, the unemployment rate continues to be the highest among urban women and the lowest among rural women.

The unemployment rate for urban women was 12.2 per cent in 2020-21 and 9.9 per cent in 2021-22, implying a sharp fall of 2.3 percentage points. The unemployment rate for rural women dropped from 4.8 per cent to 4.3 per cent in the same time comparison.