Points to Remember:
- Official unemployment rate vs. underemployment
- Data sources: NSSO, PLFS
- Methodologies: Usual Principal Status (UPS) and Current Weekly Status (CWS)
- Limitations of measurement
- Importance of accurate measurement for policy formulation
Introduction:
Unemployment, the state of being without a job while actively seeking employment, is a significant socio-economic challenge in India. Accurate measurement of unemployment is crucial for effective policy interventions and resource allocation. India’s unemployment statistics are primarily derived from two major sources: the National Sample Survey Office (NSSO) and the Periodic Labour Force Survey (PLFS), employing different methodologies that yield varying results. Understanding these methodologies and their limitations is key to interpreting the data and formulating appropriate policies.
Body:
1. Data Sources and Methodologies:
-
National Sample Survey Office (NSSO): Historically, the NSSO was the primary source of employment-unemployment data in India. It conducted employment-unemployment surveys using the Usual Principal Status (UPS) method. UPS classifies a person as employed or unemployed based on their principal or main activity during the usual period (365 days preceding the survey). This approach captures long-term unemployment but may not reflect short-term fluctuations.
-
Periodic Labour Force Survey (PLFS): The PLFS, launched in 2017-18, replaced the NSSO’s employment-unemployment surveys. It uses the Current Weekly Status (CWS) method, classifying individuals based on their activity during the previous week. CWS provides a more dynamic picture of the labour market, capturing short-term changes and seasonal variations in employment. The PLFS also provides data on underemployment, which the UPS method does not adequately capture.
2. Defining Unemployment:
Both UPS and CWS methodologies define unemployment differently. UPS focuses on the principal activity over a year, while CWS focuses on the activity during the previous week. This difference leads to variations in the reported unemployment rates. Furthermore, both methodologies have limitations in capturing the nuances of the Indian labour market, particularly the informal sector, which constitutes a significant portion of the workforce.
3. Limitations of Measurement:
-
Informal Sector: A large portion of India’s workforce is employed in the informal sector, characterized by low wages, lack of social security, and irregular work. Capturing accurate employment data for this sector is challenging due to its decentralized and often unregistered nature.
-
Underemployment: Both surveys provide data on underemployment, but the definition and measurement can vary. Underemployment refers to situations where individuals are working less than they would like or are working in jobs that don’t utilize their skills fully. Accurate measurement of underemployment is crucial for understanding the true extent of labour market issues.
-
Data Collection Challenges: Conducting large-scale surveys across a diverse and geographically vast country like India presents logistical and methodological challenges. Sampling errors, response biases, and data processing issues can affect the accuracy of the results.
4. Interpreting the Data:
It’s crucial to understand the limitations of the data before drawing conclusions. Comparing unemployment rates across different surveys and time periods requires careful consideration of the methodologies used. The differences in unemployment rates reported by UPS and CWS highlight the need for a nuanced understanding of the labour market dynamics.
Conclusion:
Unemployment in India is measured primarily through the PLFS using the CWS methodology and previously through the NSSO using the UPS method. While both provide valuable insights, they have limitations in capturing the complexities of the Indian labour market, particularly the informal sector and underemployment. Accurate measurement requires continuous improvement in data collection methodologies, addressing the challenges of the informal sector, and refining the definitions of employment and unemployment to reflect the realities of the Indian context. Future policy interventions should focus on creating more formal sector jobs, improving skill development programs, and strengthening social safety nets to address the challenges of unemployment and underemployment, ultimately contributing to inclusive and sustainable economic growth. A holistic approach that considers both official unemployment rates and the prevalence of underemployment is essential for effective policymaking.