Developing economies like India typically face structural unemployment due to reasons like structural changes in economy (Agricultural to Service-based), structural weaknesses like lack of capital formation, Infrastructural bottlenecks and High-population growth. This is visible in seasonal nature, disguised and under-employment prevalent in India.
Periodic Labour Force Survey(PLFS) conducted by National Statistical Office measures unemployment status using Usual status and CWS annually.
However, this structural nature is not adequately reflected in unemployment measures.
Issues with Unemployment Methodology:Traditional definition of Unemployment may underestimate true picture in developing economy, as:
- Decisions to search for work are constrained by social norms (E.g., Patriarchy)
- The definition, which equates ‘work’ with economic activity, doesn’t include unpaid care-work by women.
- Unemployment cannot be restricted to merely those “searching-for-work”, as in India where seasonal unemployment is prevalent, some workers may not venture actively to seek work, but would be available for employment if suitable opportunities arise.
- UPS limitations:
- May not reflect true picture of unemployment due to prevalence of seasonal employment and majority of informal workforce.
- Suitable to measure chronic unemployment but fails to measure cyclical unemployment due to temporary fluctuations in business cycle.
- Recall errors: Usual status requires a recall over a whole year of what the person did. But, in case of irregular and multiple forms of work, it becomes a challenge and may result in recall errors.
- CWS limitations: In Indian labour-market, where demand for labour is non-uniform throughout the year with regional-variations, CWS either underestimates or overestimates unemployment status.
- Disguised unemployment: Existing approaches fail to estimate extent of underemployment and disguised unemployment prevalent in India, especially in agrarian sector.
- Regional variations: PLFS do not account for regional variations in extent and nature of unemployment. E.g., Unemployment is rural phenomenon in several states, whereas concentrated in urban areas for others.
- Revise definition of “labour-force” and “worker” to include individuals:
- engaged in care-economy.
- not-actively seeking work due to barriers like social norms or lack of short-term gainful employment.
- Conduct labour surveys multiple times in a year to overcome challenge of non-uniformity of demand for labour throughout the year.
Replace CWS, which overestimates labour force and workforce, with Modified CWS (MCWS) to include only those who were in labour force for major part of the week.
By adopting these suggested improvements, India can better understand and tackle its unemployment challenges with tailor-made solutions, ultimately achieving inclusive economic growth and development.