India Labour and Employment Report 2014: Highlights

• India has witnessed an impressive GDP growth rate of over 6 per

cent since the 1980s. Growth has been particularly rapid since the
post-reform period of the 1990s. This high growth has contributed to
a sustained increase in per capita income and a decline in absolute
poverty, as well as modest improvement in standards of living. It has
also brought important changes in employment conditions in the
country.
• The first report—India Labour and Employment Report 2014—
• 1) provides analyses of the changes in the labour market and
employment since the inception of economic reform.
• 2) It explores the dynamics of these changes, by looking at
labour-market institutions, different types of employment, and
labour market policies.
• 3) It also outlines the emerging agenda for policies and action that
emerge from such analyses.

1
 Labour Market and Employment Conditions in India
• Today, India is counted among the most important emerging
economies of the world but employment conditions in the country
still remain poor.
• 1) Low participation: Overall, labour-force to population ratio (in the
age group 15 years and above) at 56 per cent is low in India
compared to nearly 64 per cent for the rest of the world.
• The low participation in India is largely because the female labour
force participation rate (LFPR) is dismally low at 31 per cent, which is
amongst the lowest in the world and the second lowest in South Asia
after Pakistan (though official figures are clearly underestimated).

2
• 2) Agriculture as a main occupation:
• Even today the large proportion of workers engaged in agriculture
(about 49 %) contribute a mere 14 % to the GDP.
• In contrast, the service sector which contributes 58 % of the GDP
barely generates 27 % of the employment, and the share of
manufacturing in both employment (13 %) and GDP (16 %) is much
lower than in East Asian and South-East Asian countries.
• This unbalanced pattern of growth is at variance with not just the
experience of the fast growing economies of East and South East Asia
but also the economic historical experience of the present day
developed countries of the West.

3
• 3) Poor Social Protection:
• An overwhelmingly large percentage of workers (about 92%) are
engaged in informal employment and a large majority of them have
low earnings with limited or no social protection.
• This is true for a substantial proportion of workers in the organized
sector as well.
• Over half the workers are self-employed, largely with a poor
asset-base, and around 30 % are casual labourers seeking
employment on a daily basis.
• About 18 % of those employed are regular workers, and amongst
them less than 8 % have regular, full-time employment with social
protection.

4
 4) Low Educational levels :
• Levels of education and professional and vocational skills are extremely low. Less
than 30 % of the workforce has completed secondary education or higher,
and less than one-tenth have had vocational training, either formal or informal.
Although these figures, based on National sample Survey Organisation (NSSO)
surveys, do not capture many types of skills that are informally acquired, it still
suggests that skill-acquisition is generally very low.
5) Lack of formal Employment opportunities and accessibility:
• Sincegood quality ‘formal’ employment is rare, access to it is extremely unequal.
Disadvantaged social groups such as Scheduled Castes (SCs), Scheduled Tribes
(STs), and large sections of the Other Backward Classes (OBCs) are mostly
concentrated in low-productivity sectors such as agriculture and construction and
in low -paying jobs as casual labourers and Muslims are concentrated in petty
so-called low productive self-employment.
• On the other hand, upper-caste Hindus and ‘others’ (comprising minorities such
as Jains, Sikhs and Christians), have a disproportionate share of good jobs and
higher educational attainments. There is an overlap between poverty and
poor quality of employment as well.

5
 5) Regional differentiation:
• There is considerable regional differentiation in access to good
quality employment. A preliminary Employment Situation Index (ESI)
prepared for this Report shows that generally workers in the
southern and western states of India have much better access to
good quality employment than do workers in states in the central
and eastern regions.
• Himachal Pradesh ranks number one, in particular because of a good
performance with respect to women’s employment, while Bihar
ranks last. (see Appendix Table for details as well as indicators used
in the index).

6
 6) Segmentation of labour market:
• There is considerable segmentation in the labour market in terms of
forms of employment, sector, location, region, gender, caste,
religion, tribe, etc.
• In spite of increased mobility over the years, acute dualism and
sometimes fragmentation persists in the labour market. There is a
great deal of movement between places of residence and work, and
rural-to-rural and rural-to-urban migration is substantial, especially in
terms of circular and temporary migration.
• Women in general are disadvantaged in the labour market. In
addition to their low share in overall employment, greater
proportions of them are engaged in low-productivity, low-income,
insecure jobs in farms, and in the unorganized and informal sectors
as compared to men.

7
• Conclusion :
• As is typical for a poor and developing economy, most workers in
India cannot afford to be unemployed, hence the level of open
unemployment is quite low at 2.7 per cent.
• Even the more comprehensive current daily status (CDS) measure of
unemployment reaches only 5.6 per cent.
• In reality, the problem is not primarily one of unemployment but lack
of productive employment.
• **

8
 Labour Market Performance and Employment Outcomes in the Last
Three Decades
• Labour markets have witnessed significant changes in two decades
since the economic reforms, which started in the 1990s. There are
both negative and positive aspects to these changes.
• Some major concerns (negative features) that have emerged from
the analyses.
1) Increase in Informalization :
• There has been increasing informalization of the workforce. The
transfer of workers from agriculture to non-agriculture has been
slow, with some acceleration in recent years, but most of the
employment generated has been informal and insecure.
• To illustrate, the % share of contract workers in organized
manufacturing sector has increased from 13 % in 1995, to 34 % in
2011.
• The growth of regular, protected jobs is also slow.

9
 2) Decline in the work participation of females :
• Female participation has declined during 2005-12. Taking all age-groups into
account, it stood at 29 % in 2004-05, decreasing to 22 % in 2011-12.
• Discounting for enrolment in educational institutions and the so-called income
effect, this substantial decline has much to do with lack of appropriate
opportunities for females.
• This is evident from the very high levels of young female unemployment. The
employment of women remains 20 to 40 % below that of men.
3) Increase in labour market inequalities:
• Labour market inequalities are large and the gap have generally increased.
• The most striking is the disparity between the regular/casual and organized/
unorganized sector workers.
• The average daily earnings of a casual worker stood at Rs. 138 in rural areas & Rs.
173 in urban areas in 2011-12, and that of a regular worker at Rs. 298 in rural
areas and Rs. 445 in urban areas, while that of a central public sector enterprise
employee was Rs. 2,005 per day.
• And, of course, the public sector employee has many other benefits as well as a
secure job. Thus, a rural casual worker earned less than 7 % of the salary of a
public-sector employee.

10
 4) Increase in inter-sectoral inequalities in income :
• The gap between per-worker earnings in agriculture & non-agriculture has
considerably widened and now stands at a ratio of 1: 6.
• The share of wages in total value-added in manufacturing has been declining
consistently. From around 0.45 in the 1980s, it has fallen to around 0.25 in
2009-10.
• The shift from wages to profits is large, and is closely connected with acceleration
of growth in recent years.
• Thus, there is substantial shift towards income from capital, contributing to the
overall increase in income inequality.
5) Decline in Trade unionism:
• The increasing ‘informalization’ of employment has gradually eroded the strength
of trade unions. It is also evident from the sharp decline in the percentage of
work-days lost due to strikes, alongside considerable increase in the incidence of
closures.
• As such, the space for collective bargaining has been shrinking. Recent years have
witnessed a significant rise in industrial unrest in several new manufacturing units,
which poses a challenge for industrial peace, and is detrimental to the growth of
the manufacturing sector.
11
 Labour Market Performance and Employment Outcomes in the Last
Three Decades – Positive features
1) Increase in real wages :
• In spite of disparities, there has been significant increase in real
wages at the rate of over 3 % per year on average during the three
decades between 1983 to 2011-12. Labour productivity has also
shown an increase, although it remains low in comparison to global
figures.
2) Marginal increase in organized sector employment after
2004-05:
• The process of informalization of the workforce seems to have halted
since 2004-05. In fact, the growth of organized-sector employment
has been high after this period and the share increased from 11.8 per
cent in 2004-05 to 17.0 per cent in 2011-12. Although the majority of
this growth was still informal in nature, for the first time the share of
regular formal employment increased from 6.6 to 7.5 per cent.
12
 3) Increase in diversification of employment:
• The process of diversification of employment away from agriculture has also accelerated.
• Although the large share has gone to services and construction, and only marginally to
manufacturing, the process has led to an acceleration in labour productivity.
• The level of per worker productivity has increased three times during the period 1993-94 to
2011-12. The wage share in the organized manufacturing sector, after declining steadily until
2007-08, started to recover to some extent in the last few years.
4) Decline in absolute Poverty:
• The rise in wages has led to decline in absolute poverty. Importantly, although the decline in
poverty has been across all socio-religious groups, the largest decline has been observed among
the SCs, STs and OBCs as well as among upper Muslims.
• Thanks to the reservation policy, the proportion of SCs and to a very small extent STs in the public
sector has increased between 1999-2000 and 2011-12, although their access to the private sector
has declined.
• The proportion of Muslims employed in both private and public sector has also declined. The most
noticeable trend is the significant increase in the proportion of OBCs employed in both private
and public sectors, and a significant decline in the proportion of upper-caste Hindus as well as
‘others’ in both categories.
• Thus it seems that access to quality employment of the deprived groups has increased at the
expense of the upper strata, although access to private sector of some groups (STs and Muslims),
remains a matter of concern.

13
 5) Increase in the size of Middle class:
• There is a rising middle-class, which includes better-educated and skilled workers
with rising incomes and high levels consumption. This may give some
sustainability to the growth process.
6) Significant growth of some advanced sectors:
• There has been significant growth in some advanced sectors of the economy
such as information technology, automobiles, pharmaceuticals etc., which has
had a spill-over effect on other sectors. Productivity in several industries has
increased.
• 7) Marginal rise in unionization in informal sector:
• Recent years have also witnessed a rise in the unionization of informal-sector
workers. The popular movements about the right to work and its implementation
in the form of Mahatma Gandhi National Rural Employment Guarantee Act or
MGNREGA), have contributed to worker awareness and improved their
bargaining power.
• To summarize, while the three decades of rapid growth have not radically
transformed the labour market and employment conditions in the country, it
has brought fairly substantial improvements. Nevertheless, low productivity
employment in both agriculture and other sectors continues to dominate the
labour market, and the disparities and inequalities across groups and regions
remain large.
**
14
 IV. Employment Challenges
• 1) Underemployment: The most important challenge is the large number of ‘working
poor’ and under-employed engaged in low-productivity activities in the unorganized
sectors.
• By the current poverty line (equivalent to about US$ 1.25 per day in terms of purchasing
power parity or PPP), one fourth of all workers-about 118 million- are poor.
• They are largely either casual workers or own-account workers. If the current poverty line
is raised to about US$ 2 per day (in terms of PPP), the percentage of working poor will
increase to nearly 58 per cent and the number of such workers would be around 276
million. Overcoming the low productivity and poor income streams of this large group is
indeed a gigantic task.
• 2) Poor conditions of work: Furthermore, these figures do not fully capture the
vulnerability of the working poor. The low earnings are compounded by deplorable
conditions of work in many informal-sector enterprises, as well as in the work premises of
self-employed workers engaged in petty activities either at home or on the streets. They
suffer from high health-risks as well as lack of safety standards.
• 3) High Unemployment of educated Youth : Although, overall, open unemployment is low,
the problem of youth unemployment, particularly that of educated youth, is gradually
becoming a major concern. About 30 per cent of the total unemployed in the year
2011-12 were graduates and above, up from 21 per cent in 2004-05. Differently put, the
rate of unemployment among graduates (including technically trained), and diploma
holders was around 18 per cent.

15
• 4) Provision of education and Skills: Then there will be the new entrants in the labour
force and the so-called ‘demographic dividend’. India’s labour force is growing at a brisk
rate despite the fact that more young people are increasingly opting to prolong their years
of education. By 2030 India’s workforce will be larger than that of China. Most of the new
entrants will be in the urban areas. Providing education and skills to the growing young
population and meeting their job aspirations pose huge challenge. As the pace of
migration and urbanization is likely to accelerate in the future, there will be the huge task
of planning urban growth and formulating effective labour market policies. Failure to do
so can be disastrous.
• 5) Providing equal access to women: The unequal access of women to employment,
and discrimination in the labour market, poses yet another challenge. An important
reason for the declining participation of women in work is the lack of appropriate
employment opportunities. In the wake of rising educational levels, coming years will
witness a surge in the number of educated women; many of them will be graduates or
more. At present, qualified women have much higher labour force participation than
average. The country has unfortunately not been able to create enough jobs even for the
limited number of educated females in the workforce. This is reflected in the very high
rates of unemployment of young women—around 23 % among 15 to 29 year-old
women, which is double that of their male counterparts.
• So the challenge for creating suitable employment opportunities for the youth bulge is
particularly acute with regard to young women.

16
• Removing regional and other types of disparities:
• The inequalities and disparities that exist in access to employment across regions
and social groups remain a huge challenge in India. This is particularly evident in
the distribution of formal regular jobs and employment in productive sectors,
which is skewed in favour of dominant groups and certain regions. Not surprisingly,
states like Bihar, Odisha, Uttar Pradesh, and Madhya Pradesh, which carry the tag
of ‘backward’ states, fare the worst on all indicators of good quality employment
and the historically deprived groups like the SCs and STs resident in these states
thus face a double disadvantage in access to decent employment opportunities.

17
 V. Policy Agenda
• 1) A medium- to long-term employment strategy should be envisaged to deal with the
challenges highlighted above. It should ensure that the organized sector, particularly
manufacturing, grows much more rapidly than in the past and leads to a process of
economy-wide productivity growth, along with employment expansion and rising wages.
Even in the organized sector, informal employment should not grow at the cost of formal
jobs.
• 2) Regulatory interventions in informal enterprises should ensure that a minimum
quality of employment is maintained and basic rights of workers are respected. The recent
growth in the productivity and wages of workers in the unorganized sector is an important
and welcome development. Although small, it has important implications for employment
and development policies of the country. The need is to sustain and accelerate this
process.
• 3) Appropriate policies and measures to address the issue of education and skills
acquisition, and of skills mismatches need to be urgently put in place. The rising
aspirations of the youth have to be met and the ongoing ‘youth bulge’ is likely to
exacerbate this challenge. The challenge pertains not only to the achievement of a major
quantitative expansion of the facilities for education and skill-training, but also to the
equally important task of raising their quality. If it is to compete globally, India has to
invest heavily in its National Skill Development Mission.

18
• 4) There are significant differences in access to quality employment across
different social groups and regions. While economic growth in India has led to an
increase in the quantity of employment, the access to quality jobs is still very low.
Policy also needs to take into account the social and regional dimensions to access
to employment. Affirmative action policies have played a role, but some states and
regions, and certain deprived sections among the social groups need special
attention. There is a need to also examine whether only sub-groups within the
reserved groups, the poorest amongst the upper groups, and certain sections of
minorities need to be included in the gamut of affirmative action policies.
• 5) Macroeconomic policies have been pursued independently from the
employment goals of the country. There is a need for the restructuring these
policies to make them supportive of an appropriate employment strategy. Tax
incentives for particular types of investment or economic activity, public-sector
investment in infrastructure or institutional support which promotes
enterprise-development, research and development which aims to open up new
production methods which are more labour-intensive, training and skill systems
which make labour more productive, labour codes which encourage hiring,
promotion of small and medium enterprises that are known to be more labour
intensive, the list of possibilities is endless.

19
• 6) Despite an improvement in management levels over the years, direct
employment-generation programmes, with the possible exception of MGNREGA,
have not had the desired impact in large parts of the country. Apart from the need
for their restructuring, several of them also need to be more focused in the
deprived regions. These regions include areas dominated by the tribal and
backward populations, as also remote regions of the country, in order to unpack
the full potential of both programmes and regions.
• 7) Debates on labour market flexibility must be resolved in a way that meets the
needs of both workers and enterprises. The question is how to ensure flexibility for
market adjustments without compromising the basic interests of labour. Trade
unions may agree to a job security trade-off in return for adequate separation
benefits, say 45 days wages for every completed year of service as suggested by
the Second National Commission on Labour, and adequate income security for all
workers—employed or unemployed. It is necessary to ensure equal pay for all types
of workers-regular, casual, contract, and temporary, to strictly enforce the
payment of minimum wages and to provide social security to all workers.
Simplification and modernisation of labour laws, the necessity of which is widely
felt, has to be on the agenda.

20
• 8) Given the widespread insecurity of livelihoods, it is extremely important to
provide a minimum level of social security to all workers, which will certainly
promote flexibility. Of course, the major role in this has to be played by the
government and it is now widely viewed that at the present juncture of
development it is possible for the country to do this. What is needed is political will
to make universal social security a reality.
• 9) The general statistical system of the country should proactively fill the gaps that
exist in our understanding of some of these aspects of the labour market borne out
of data limitations.
• **

21