Why unemployment rate is not an appropriate indicator?
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The unemployment rate was 7.9 percent in December 2021. This does not mean that the remaining 92.1 percent were employed.
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The unemployment rate merely tells us the proportion of the working-age population that wants to be employed to earn some wages or profits through its work.
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The unemployment rate does not take into account those who do not want to be employed and those who do not try to find work.
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The problem in India is that most adults do not express a desire to work to earn wages or profits.
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This reluctance to work on the part of the majority of adults makes the unemployment rate a less useful indicator of the health of the economy than it is imagined to be.
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Employment rate is a more useful indicator. It is a ratio of the employed to the total working-age population. The employment rate is a measure of success.
Where India stands in the employment rate statistics?
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India’s success rate on this count is low.
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While the global employment rate was 55 percent in the pandemic-hit 2020 (it was 58 percent in 2019), India recorded a low of 43 per cent.
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Only West Asia and North Africa by World Bank classification have a lower employment rate than India.
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According to CMIE’s relatively stringent definition of employment, the employment rate in India is lower, at 38 percent.
What can be inferred from the available employment rate statistics?
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Only 38 percent of the working-age population is employed and only another 3 percent wants to work but cannot find work. It implies that 59 percent of the working-age population does not want to work.
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So, India’s path to prosperity is in finding employment for not only the 3 percent who are unemployed but also for the eligible population of the remaining 59 percent of the population.
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To reach global employment rate standards, India needs to employ an additional 187.5 million people.
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Out of the 59%, 9 million women were willing to work, although they were not actively looking for work. Therefore, there is a need to investigate why such many women are not looking for work, though they are willing to work.
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Immediate challenge is to provide employment to the 7.9 percent (35 million) who were not employed and were actively looking for employment.