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In April 2020, the International Labour Organisation (ILO) estimated that nearly 2.5 crore jobs could be lost worldwide due to the COVID-19 pandemic in 2020. Further, it observed that more than 40 crore informal workers in India may get pushed into deeper poverty due to the pandemic. In this blog post, we discuss the effect of COVID-19 on unemployment in urban areas as per the quarterly Periodic Labour Force Survey (PLFS) report released last week, and highlight some of the measures taken by the central government with regard to unemployment.
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Methodology for estimating unemployment in PLFS reports The National Statistics Office (NSO) released its latest quarterly PLFS report for the October-December 2020 quarter. The PLFS reports give estimates of labour force indicators including Labour Force Participation Rate (LFPR), Unemployment Rate, and distribution of workers across industries. The reports are released on a quarterly as well as annual basis. The quarterly reports cover only urban areas whereas the annual report covers both urban and rural areas. The latest annual report is available for the July 2019-June 2020 period. The quarterly PLFS reports provide estimates based on the Current Weekly Activity Status (CWS). The CWS of a person is the activity status obtained during a reference period of seven days preceding the date of the survey. As per CWS status, a person is considered as unemployed in a week if he did not work even for at least one hour on any day during the reference week but sought or was available for work. In contrast, the headline numbers on employment-unemployment in the annual PLFS reports are reported based on the usual activity status. Usual activity status relates to the activity status of a person during the reference period of the last 365 days preceding the date of the survey. |
To contain the spread of COVID-19, a nationwide lockdown was imposed from late March till May 2020. During the lockdown, severe restrictions were placed on the movement of individuals and economic activities were significantly halted barring the activities related to essential goods and services. Unemployment rate in urban areas rose to 20.9% during the April-June quarter of 2020, more than double the unemployment rate in the same quarter the previous year (8.9%). Unemployment rate refers to the percentage of unemployed persons in the labour force. Labour force includes persons who are either employed or unemployed but seeking work. The lockdown restrictions were gradually relaxed during the subsequent months. Unemployment rate also saw a decrease as compared to the levels seen in the April-June quarter of 2020. During the October-December quarter of 2020 (latest data available), unemployment rate had reduced to 10.3%. However, it was notably higher than the unemployment rate in the same quarter last year (7.9%).
Figure 1: Unemployment rate in urban areas across all age groups as per current weekly activity status (Figures in %)
Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Recovery post-national lockdown uneven in case of females
Pre-COVID-19 trends suggest that the female unemployment rate has generally been higher than the male unemployment rate in the country (7.3% vs 9.8% during the October-December quarter of 2019, respectively). Since the onset of the COVID-19 pandemic, this gap seems to have widened. During the October-December quarter of 2020, the unemployment rate for females was 13.1%, as compared to 9.5% for males.
The Standing Committee on Labour (April 2021) also noted that the pandemic led to large-scale unemployment for female workers, in both organised and unorganised sectors. It recommended: (i) increasing government procurement from women-led enterprises, (ii) training women in new technologies, (iii) providing women with access to capital, and (iv) investing in childcare and linked infrastructure.
Labour force participation
Persons dropping in and out of the labour force may also influence the unemployment rate. At a given point of time, there may be persons who are below the legal working age or may drop out of the labour force due to various socio-economic reasons, for instance, to pursue education. At the same time, there may also be discouraged workers who, while willing and able to be employed, have ceased to seek work. Labour Force Participation Rate (LFPR) is the indicator that denotes the percentage of the population which is part of the labour force. The LFPR saw only marginal changes throughout 2019 and 2020. During the April-June quarter (where COVID-19 restrictions were the most stringent), the LFPR was 35.9%, which was lower than same in the corresponding quarter in 2019 (36.2%). Note that female LFPR in India is significantly lower than male LFPR (16.6% and 56.7%, respectively, in the October-December quarter of 2019).
Figure 2: LFPR in urban areas across all groups as per current weekly activity status (Figures in %)
Note: PLFS includes data for transgenders among males.
Sources: Quarterly Periodic Labour Force Survey Reports, Ministry of Statistics and Program Implementation; PRS.
Measures taken by the government for workers
The Standing Committee on Labour in its report released in August 2021 noted that 90% of workers in India are from the informal sector. These workers include: (i) migrant workers, (ii) contract labourers, (iii) construction workers, and (iv) street vendors. The Committee observed that these workers were worst impacted by the pandemic due to seasonality of employment and lack of employer-employee relationship in unorganised sectors. The Committee recommended central and state governments to: (i) encourage entrepreneurial opportunities, (ii) attract investment in traditional manufacturing sectors and developing industrial clusters, (iii) strengthen social security measures, (iv) maintain a database of workers in the informal sector, and (v) promote vocational training. It took note of the various steps taken by the central government to support workers and address the challenges and threats posed by the COVID-19 pandemic (applicable to urban areas):
The central and state governments have also taken various other measures, such as increasing spending on infrastructure creation and enabling access to cheaper lending for businesses, to sustain economic activity and boost employment generation.
Yesterday the Rajya Sabha and Lok Sabha engaged in a debate on the President's speech, known as the Motion of Thanks. The President's speech is a statement of the legislative and policy achievements of the government during the preceding year and gives a broad indication of the agenda for the year ahead. Close to the end of the UPA government’s term, it would be useful to evaluate the status of the commitments made in the President’s addresses. (To know more about the significance of the President’s speech refer to this Indian Express article. To understand the broad policy and legislative agenda outlined in this year's address see this PRS Blog.) The President's speeches since the beginning of the 15th Lok Sabha in 2009, have addressed reforms to the financial and social sectors, improving accountability of public officials, and making the delivery of public services more efficient. We analyse the status of each of these commitments. Accountability in governance processes In an effort to increase accountability and transparency in governance processes, the government introduced a number of Bills.
These bills have been passed by the Lok Sabha and are pending in the Rajya Sabha. The government has recently approved amendments to the Lokpal Bill, which may be considered by the Rajya Sabha in the Budget session. Public service delivery In order to make public service delivery more efficient, the government introduced the Electronic Services Delivery Bill and the Citizen’s Charter Bill.
Social sector reforms: land, food security and education Broad sectoral reforms have been undertaken in land acquisition, food security and education to aid development and economic growth.
Financial sector reforms In order to aid growth and encourage investments, the President had mapped out necessary financial sector reforms.
In the backdrop of these legislations, it will be interesting to see the direction the recommendations of the Financial Sector Legislative Reforms Commission, responsible for redrafting all financial sector regulation, takes. Internal security The government is taking measures to deal with internal security concerns such as terrorism and naxalism. In 2009, the President mentioned that the government has proposed the setting up of a National Counter Terrorism Centre. However, this has been on hold since March 2011. At the beginning of the 15th Lok Sabha in June 2009, the President presented the 100 day agenda of the UPA II government, in his address. Of the eight bills listed for passing within 100 days, none have been passed. In addition, the President’s address in 2009 mentioned five other Bills, from which, only the RTE Act has been passed. In the final year of its tenure, it needs to be seen what are the different legislative items and economic measures, on which the government would be able to build consensus across the political spectrum.
