Over the past few decades, India’s economic environment has seen substantial changes. Despite global economic concerns, the country has experienced average economic growth of over 6%; yet, one of the main issues facing the nation is still unemployment.
The International Labour Organisation (ILO) has released its India Employment report 2024, which states that the country is experiencing a significant demographic shift. Notably, the percentage of the working-age population has increased from 59% in 2011 to 63% in 2021.
Even while the proportion of young people in the population is trending downward, they still make up a sizable portion—83 percent of those without jobs.
Despite a declining trend in the share of youths in the total population, they continue to represent a substantial portion, accounting for 83 per cent of the unemployed population.
The labour force participation rate (LFPR) among youths has exhibited a declining trend over the years, declining from 54 per cent in 2000 to 42 per cent in 2022. This decline has been more pronounced among youths aged 15–19 compared to those aged 20–24 and 25–29.
Similarly, the worker population ratio for youths experienced a downward trajectory between 2000 and 2019, prior to the onset of the COVID-19 pandemic.
As per the ILO report, The GDP of the country displayed resilience, recording growth rates of 7.3% and 7.2% in 2022 and 2023, respectively.
Notably, the services sector emerged as the primary driver of growth, contributing 55 per cent to GDP, while manufacturing and agriculture accounted for 18 per cent and 14%, respectively, in 2022.
The share of agriculture in total employment steadily declined from 60 per cent in 2000 to 42 per cent in 2019, with services and construction sectors absorbing the shift.
However, informality persists, with around 90 per cent of workers classified as informal, highlighting challenges in accessing formal employment opportunities.
Youth unemployment emerges as a pressing concern.
In India, the unemployment landscape has undergone significant shifts over the past two decades. In 2000, the total number of unemployed persons stood at 9.2 million. However, by 2022, this figure surged to 22.9 million individuals, indicating a substantial increase in open unemployment rates.
The period between 2012 and 2019 witnessed a notable spike in the open unemployment rate, primarily attributed to the expansion of the labour force without a corresponding increase in employment opportunities.
Contrastingly, the subsequent years saw a different trend. The increase in the labour force from 2019 to 2022 was accompanied by significant growth in the workforce, indicating a more robust absorption of labour into productive employment.
The fluctuation in women’s participation in the labour market, particularly in rural areas, has played a significant role in shaping the overall Labour Force Participation Rate (LFPR) in India over the past two decades. Scholars argue that during economic downturns or periods of household income losses, family members, particularly women, increasingly engage in economic activities to support their families.
Women’s participation in subsidiary employment, have showed a decline from 8.3% in 2000 to 2.8% in 2019.
However, there was a significant increase to 6.3% in 2022, indicating a larger proportion of women with short-term engagement in the workforce.
The decline in women’s workforce participation in rural areas before 2019 was attributed to various factors.
However, between 2019 and 2022, there was a notable increase in women’s engagement in self-employment and subsidiary work, driven by the need to support their families during challenging economic conditions.
As of 2022, time-related underemployment in India stood at 7.5%, a figure that has fluctuated over the years. It increased from 8.1% in 2012 to 9.1% in 2019 before declining to 7.5% in 2022 (Figure 2.5). Notably, the underemployment rate was slightly higher among men (7.7%) compared to women (7.1%) in 2022. Moreover, underemployment was more prevalent in urban areas (8.4%) than in rural areas (7.2%).
Despite being higher than open unemployment, underemployment also decreased between 2019 and 2022, particularly among women (by 2.5 percentage points).
This trend of increasing underemployment in the pre-pandemic period and its subsequent decline during and after the pandemic, especially among women, raises questions about the availability of additional employment opportunities.
In 2022, gender disparities in employment were evident, with women being more engaged in self-employment, particularly in rural areas, while men were more prominent in regular employment, especially in urban areas. The data for 2022 reveals that the proportion of women in self-employment (62%) was significantly larger than that of men (53.1%), whereas men dominated regular employment, with a proportion of 23.6%, compared to women’s 16.6%. In casual work, however, the proportions of men (23.2%) and women (21.4%) were similar.
The disparity between rural and urban areas was also notable. Women in rural areas (67.7%) were considerably more involved in self-employment than their urban counterparts (39.3%), while men in urban areas (46.2%) engaged more in regular employment than men in rural areas (14.7%).
Interestingly, there was a significant reversal in the trend towards declining self-employment, particularly among women. Between 2000 and 2019, the share of women in self-employment declined from 55.4% to 53.2%, while men’s share remained stable at around 51%. However, in 2022, the proportion of women in self-employment increased by 8.8 percentage points to 62%, while men’s proportion increased by only about 2 percentage points to 53.1%.
Similarly, the percentage of women in regular employment almost tripled, from 7.4% in 2000 to 21.9% in 2019, while the percentage of men increased from 17.3% to 24.4%. However, this trend reversed during the pandemic years, with the share of women in regular employment declining by 6 percentage points to 16.6% in 2022, and the share of men declining marginally by 0.6 percentage points to 23.6%.
The Indian Labour Organisation also observed significant differences in the average level of daily earnings across various employment statuses, gender, and locations in India in 2022.
According to ILO, the average earnings or wage rate for regular salaried workers surpassed that of self-employed and casual workers. Specifically, regular workers earned an average of 19,010 rupees per month, followed by self-employed individuals earning 11,973 rupees and casual workers earning 8,267 rupees.
Despite the inflation having grown immensely, the earnings have not grown much in the country. According to ILO, the poorest in India’s labour sector earned 2546 per month in 2002, and their monthly income has grown to 3095 rupees in 2022. The richest in India’s labour earned 31, 094 in 2012 and their monthly wages have gone down to 26,890 in 2022.
From 2012 to 2022, there were notable shifts in household employment status across different sectors in both rural and urban areas of India. In rural India, self-employment in non-agricultural sectors saw a decrease from 19.3% to 13.2%, reflecting a decline of 6.1 percentage points.
Similarly, self-employment in agriculture decreased from 16.8% to 11.9%, indicating a reduction of 4.9 percentage points.
Regular workers experienced a marginal decline from 7.6% to 7.2%, with a change of 0.4 percentage points.
Notably, casual workers in agriculture and non-agricultural sectors witnessed significant decreases of 11.9 and 6.2 percentage points, respectively.
In urban India, self-employment declined from 15.3% from 2002 to 10.0% in 2022, resulting in a change of 5.3 percentage points.
Regular workers also experienced a decrease from 7.4% to 5.7%, reflecting a change of 1.7 percentage points. However, the most significant change was observed in casual workers, with a notable decrease from 33.0% to 20.8%, indicating a change of 12.2 per cent.
In 2021, the proportion of persons among migrants who migrated due to employment-related reasons varied across different states and union territories in India.
Among the major states and union territories, Delhi had the highest proportion, with 87.1% of male migrants moving for employment-related reasons, followed by Kerala with 63.2%, Gujarat with 51.4%, and Chhattisgarh with 54.9%.Conversely, Bihar had the lowest proportion, with only 39.0% of male migrants citing employment-related reasons for migration, followed by Uttar Pradesh with 35.9%, Jammu & Kashmir with 38.3%, and Kerala with 37.2%.
Regarding the overall migration rate, which accounts for all reasons for migration, Himachal Pradesh had the highest rate at 38.1%, followed by Kerala at 41.2%, and Odisha at 33.1%. Conversely, Bihar had the lowest overall migration rate at 14.2%, followed by Jammu & Kashmir at 22.1%, Telangana at 25.2%, and Assam at 23.7%.
The annual growth rate of real monthly wages and earnings in India varied across different employment categories and genders from 2018 to 2022.
For casual wages, there was a fluctuation in growth rates over the period. In 2018-19, the growth rate was 4.20%, which decreased to 2.90% in 2019-20, before rebounding to 5.10% in 2021-22.
The agrarian transition denotes a shift of labor from traditional, low-efficiency agricultural activities towards higher-productivity roles in modern manufacturing and service sectors.
This transition is particularly pronounced in economies where growth is propelled by non-farm sectors. In India, with the exception of the period between 2019 and 2022, there has been a gradual movement of labor from agriculture to non-agricultural sectors. Despite this shift, agriculture still employs around 45 percent of the workforce while contributing only 14 percent to the total GDP.
The degree of this sectoral disparity and the pace of migration away from agriculture hinge on various factors, including agricultural productivity and income levels, as well as the relative attractiveness of income opportunities in both agricultural and non-agricultural sectors.
In Jammu & Kashmir, a significant portion of the youth, approximately 58.7%, are highly qualified. However, a large majority, around 79.0%, are employed in the informal sector, which is one of the lowest rates in the country. Only a small fraction, 6.3%, of the youth are employed in the formal sector, while the majority, approximately 80.8%, are not categorized as NEET (Not in Education, Employment, or Training), with 56.2% falling into this category.
Regarding male workers, the percentage of those in regular formal employment has seen fluctuations over the years. It stood at 13.32% in 2005, increased to 15.14% in 2012, rose further to 19.40% in 2019, but witnessed a significant drop to 15.05% in 2022.
The percentage of casual laborers aged 15 and above has experienced consistent growth, rising from 12.73% in 2005 to 20.54% in 2022. Jammu & Kashmir stands out as one of the few states to observe an increase in casual labor numbers during this period.
In terms of self-employment, the percentage of workers aged 15 and above living below the poverty line has seen a slight decrease, declining from 16.26% in 2005 to 15.74% in 2022, according to ILO data. Additionally, the average monthly wage for casual workers has seen a significant increase, climbing from ₹2,689 per month in 2005 to ₹11,162 per month in 2022.