Unemployment Rate remains unchanged between 2017-18 & 2019-20 according to CWS approach
Sai Krishna Muthyanolla
August 14, 2021
As per the PLFS report for 2019-20, the unemployment rate based on the current weekly status (CWS) has remained unchanged at around 8.8% between 2017-18 and 2019-20. It is also higher than the usual status measure in cases of both urban and rural.
In India, the National Sample Survey Organisation (NSSO) has been quinquennially (every five years) collecting data on employment and unemployment since 1972-73. Considering the importance of the availability of labour force data at more frequent time intervals, the National Statistical Office (NSO) launched the Periodic Labour Force Survey (PLFS) in 2017.
PLFS was designed with two major objectives for the measurement of employment and unemployment. The first was to measure the dynamics in labour force participation and employment status in the short time interval of three months for only the urban areas in the Current Weekly Status (CWS). The second was, for both rural and urban areas, to measure the labour force estimates on key parameters in both usual status and CWS. The CWS status of a person is derived from the information on hours worked in the different activities of a person during 7 days of the reference week.
In this article, we look at major employment and unemployment trends revealed by the latest Periodic Labour Force Survey (PLFS) report 2019-20. We will also look at the trends in employment and unemployment by geography, gender, and approach.
Survey strategy of NSSO and PLFS
The NSSO collects data using a two-stage stratified random sampling design from over 1,00,000 households covering almost the entire geographical area of the country. From these survey data, we get reliable macro estimates at the level of India as a whole, rural, and urban sectors of India as well as for most of the states and within each one of these states. In addition, NSSO data is also suitable for analysis of the employment at the level of industry of work as well as occupation types.
On the other hand, the Periodic Labour Force Survey (PLFS) uses a rational panel sampling and stratified multi-stage sampling design from over 1,00,000 households. However, it adopts a substantial change in the strategy of data collection on employment and unemployment. The most important change in the PLFS strategy is to produce employment statistics for India every quarter. Additionally, the PLFS survey provides estimates on additional aspects of data (such as hours worked), which were not available from the quinquennial rounds of NSSO.
Despite the differences, the broad employment trends in both surveys are comparable. A study commissioned by the Economic Advisory Council to the Prime Minister, undertaken by Laveesh Bhandari and Amaresh Dubey, uses NSSO and PLFS to highlight employment trends between 2004 and 2018.
To arrive at the comparability, the study describes that the data collection during the PLFS survey has been divided into four rounds (called quarters which is identical to the four sub-rounds in NSSO Employment Unemployment Surveys). Like NSSO, the PLFS surveys also use NIC (national industrial classification code) and NCO (national classification of occupation) codes for employed persons. Therefore, PLFS data is suitable for carrying out analysis of employment at the same level of disaggregation as NSSO data.
Share of self-employment and casual labour higher among rural households, salaried employment higher among urban households
The nature and type of work from which a household derives its major income is an important indicator of the activity pattern of its members. In this survey, the source of major income of the household was worked out depending on the income from economic/non-economic activities of the members of the households during the 365 days preceding the date of the survey.
Household types in rural areas are categorised as self-employment in agriculture and in non-agriculture, regular wage/salary earnings, casual labour in agriculture and non-agriculture, and others. In urban areas, ‘self-employment’ and ‘casual labour’ households were not categorized separately into ‘agriculture’ and ‘non-agriculture’ households.
Two approaches to calculating labour force participation rate (LFPR)
Labour force, or in other words, the ‘economically active’ population includes both ‘employed’ and ‘unemployed’ persons. The labour force participation rate (LFPR) is defined as the percentage of persons in the labour force among the persons in the population.
Estimates of the labour force have been obtained based on the following approaches:
The labour force according to the usual status (ps+ss) is obtained by considering the usual principal status (ps) and the subsidiary status (ss) together. The estimate of the labour force in the usual status (ps+ss) includes (a) the persons who worked or were available for work for a relatively long part of the 365 days preceding the date of the survey and (b) those persons from among the remaining population who had worked at least for 30 days during the reference period of 365 days preceding the date of the survey.
The labour force in current weekly status (CWS) gives the average picture of the labour force participation in a short period of one week during the survey period. The estimate of labour force according to the current weekly status approach is derived by considering those who worked for at least 1 hour or was seeking/ available for work for at least 1 hour on any day during the 7 days preceding the date of the survey.
Labour Force Participation Rate (LFPR) increases in the last three years; Male LFPR remains significantly higher than female LFPR
In terms of the usual status approach, the LFPR registered an increase from 36.9% in 2017-18 to 40.1% in 2019-20.
Male LFPR only grew marginally from 55.5% to 56.8% in the past three years. However, male LFPR continues to be more than two times the female LFPR. Female LFPR registered an increased from 17.5% to 22.8% in the past three years in the usual status approach. It is important to note that the rise has been steeper between 2018-19 to 2019-20, as compared to 2017-18 to 2018-2019.
In terms of the Current Weekly Status (CWS) approach, the LFPR registered an increase from 35.9% in 2017-18 to 38.3% in 2019-20 overall.
Male LFPR only grew marginally from 55% to 56% in the past three years. However, here too, the male LFPR is significantly higher than female LFPR, by almost three times. Female LFPR registered an increased from 15.8% to 20% in the past three years. As is the case with usual status, the rise has been steeper between 2018-19 to 2019-20, as compared to 2017-18 to 2018-19.
In terms of the usual status approach, rural and urban LFPRs display the same patterns, in terms of registering an overall increase in the past three years. While rural female LFPR is higher than urban LFPR, the male LFPRs across rural and urban areas remains closer.
In terms of the CWS approach in both rural and urban, male, and female LFPRs registered the same patterns, in terms of registering an overall increase in the past three years. The rise has been steeper between 2018-19 to 2019-20, as compared to 2017-18 to 2018-2019.
Overall unemployed rate declines based on usual status but increases based on current status approach; only female unemployment rate registers a decline by both approaches
The unemployment rate (UR) is defined as the percentage of unemployed persons in the labour force. Same as LFPR, the Unemployment rate is also calculated based on the usual status (ps+ss) approach and current weekly status approach (CWS).
In terms of the usual status approach, the unemployment rate registered a decline from 6.15% in 2017-18 to 4.8% in 2019-20. The male unemployment rate declined from 6.2% to 5.1% and the female unemployment rate declined from 5.7% to 4.2% in the last few years.
In terms of the CWS approach, the unemployment rate remained almost the same for the past three years.
The overall decline in unemployment is based on the current approach but the urban female unemployment rate increased based on the current status approach
In terms of the usual status approach, in both rural and urban, the male, and female unemployment rates registered the same patterns, in terms of registering an overall increase in the past three years.
In terms of the CWS approach, the rural unemployment rate declined from 8.5% to 7.9% over the last few years. At the same time, the urban unemployment rate increased from 9.6% to 11%.
Higher unemployment by CWS approach
The usual status approach is wherein the activity status of a person is captured for a reference period of 365 days preceding the date of the survey. While the current weekly status (CWS) gives the average picture of the labour force participation in a short period of one week during the survey period.
Those who are reported as unemployed by the usual status approach are likely to be chronically unemployed. In developing countries, where casual, intermittent, part-time and temporary jobs are widespread, employment estimates based on the usual status approach tend to include the under-employed workforce. Consequently, as the editorial opinion piece points out, the unemployment rates derived from the usual status approach give a misleading picture of the extent of labour underutilisation and the employment challenges faced by the economy. The author argues that the divergence in these statistics only reinforces the need for anchoring the policy discourse in India on weekly status measures and not the usual status measures.
The divergence is evident from the above sections, the unemployment rate based on the current weekly status (CWS) is not only higher than the usual status measure (in cases of both urban and rural) but has also remained unchanged at 8.8% in 2019-20 compared to 2018-19.
Featured Image: Unemployment Rate unchanged between 2017-18 & 2019-20