New Delhi: Although Union labour minister Mansukh Mandaviya has lauded the increase in jobs generated during the Modi governments as per RBI data, three scholars have said that changes in the composition of the workforce and its earnings over the last seven years suggest that not all is well with the labour market.
Official data indicates Indians are taking up self-employment amid falling or unchanging earnings and growing inflation, wrote economists Maitreesh Ghatak, Mrinalini Jha and Jitendra Singh in the Hindustan Times, adding that along with this, the engagement of a significant chunk of the workforce in low-productivity work is a matter of concern.
Average earnings of self-employed, regular wage workers lower compared to seven years ago
Data from the Periodic Labour Force Surveys (PLFS) show that the overall labour force participation rate among those 15 and older grew from 36.9% in 2017-18 to 60.1% in 2023-24, while unemployment decreased from 6.1% to 3.2% during the same time period.
But average earnings in the same seven-year period for self-employed workers went down from Rs 324 per day to Rs 317, and regular wage or salaried workers likewise saw a decline in their average earnings from Rs 497 per day to Rs 492, Ghatak, Jha and Singh wrote based on their perusal of PLFS data and after controlling for inflation.
Average earnings for daily wage or casual workers, however, grew from Rs 250 per day to Rs 297. Self-employment, regular wage employment and casual employment are the three main categories of work under the PLFS.
More of the workforce now is taking up informal self-employment
During the aforementioned time frame, the share of self-employed workers among India’s labour force went up from 52% to 58%, while that of regular wage workers went down from 24% to 23%, the authors of the HT piece said.
Ghatak and Jha pointed out in a previous article that as far as the period between 2017-18 and 2021-22 is concerned, the increase in the labour force participation rate and the decrease in unemployment were largely fuelled by self-employment. This was in turn mostly driven by an increase in the share of unpaid family workers among the self-employed from 26% to 31.4%.
Combined with the fact that ‘own-account workers’ (which the authors noted include people running corner shops or operating roadside food carts) made up a majority of the employed population at almost 35%, as well as decreases in the shares of categories of workers other than unpaid helpers, pointed to a “worsening of the quality of work being done by the workforce”, they had written in March 2024.
“Given that the seeming dynamism in the labour market has come from a subcategory of the self-employed – a category which itself is considered to be a main component of informal employment and, therefore, precarious in nature – it is cause for worry,” they added.
Evidence indicates households are sending more people to work amid distress: authors
In the HT article from earlier this week, Ghatak, Jha and Singh said that PLFS data suggested people were “compelled to self-employ themselves to cope with falling and/or stagnating earnings in the face of rising inflation”, leading to higher distress.
They also claimed that there was evidence to show that families were, in a bid to cope with rising distress and declining earnings per worker, sending more people from the household to work.
“Deteriorating livelihood conditions” in addition to an estimated 55% of the workforce being single-worker enterprises or unpaid helpers doing low-productivity labour “should be a source of concern not just from the lens of the living conditions of the poor”, the three economists said.
They continued: “More than half the workforce being engaged in low-productivity activities, combined with no significant rise in earnings from their livelihoods does not bode well for economic growth.”
