High under-employment in India, says statistics ministry paper

The statistics ministry has officially acknowledged the phenomenon of low to moderate “underemployment” in the economy, formalising the whispers and allegations that have been in the air in the poll season recently.

The paper, which was released on May 29, said that quantifying underemployment could help in help in taking significant policy steps. It measured underemployment with a multidimensional approach and not just hours for which a person worked.

The paper written by Sonakhya Samaddar said though the unemployment rate in the country was found to be 6.8% according to the Periodic Labour Force Survey (PLFS) data of first quarter of 2023, the underemployment metric was “unsurprisingly high”.

The paper written by Sonakhya Samaddar said, “In the case of a developing nation like India, where the prevalence of working poverty is significant, it becomes imperative to transcend the conventional definition of unemployment and labour supply when formulating critical policy decisions.”

The overall underemployment score for India was found to be 62.28 that indicates low to moderate underemployment. “The score can be used by policymakers to monitor improvement in India’s labour market, with for instance a target of 70 or higher which will be closer to 80 that was conceived as the adequate state of employment without any underutilization,” Samaddar wrote in the paper.

The urban sector suffers more from underemployment than do the rural areas where the rate is marginally lower. The score is 63.95 is the cities and 61.73 in the rural areas. There is a gender divide too – for males the underemployment score is 62.50 slightly higher than the women who are at 59.81.

The author pointed out that it is important to find out the quality of employment and not only the quantity. He said that the often number of job seekers and individuals who secured employment is measured and highlighted. But it is crucial not to overlook the profound hardships many suffer due to deficiencies in their working conditions.

Underemployment is regularly measured using a low work hour rule. The International Labour Organisation says that 40 hours of work per week is the most prevalent standard. The report stated that about 50% of the 103 countries have enforced 40 hours per week or less as the standard.

For the paper, the author has calculated underemployment score using data that captures low wages, insufficient full-time employment, and occupations that do not utilise their full skill set – in short, the shortcomings suffered by workers at workplace.

India and similar developing countries often have longer working hours. This leads to a situation where using the 40 hours (or even 44 hours) as cut off coupled with the other two conditions that a person should be willing to work additional hours and must be available to do so will yield an almost negligible figure of underemployment. “However, working for longer hours does not necessarily indicate adequate employment,” the author stated.

Incidentally, if one employs the 40-hours-per-week definition of underemployment and considering that the person is willing to work more will only result in finding 1.2% of the people of this country underemployed. Moreover, for males, it turns out to be a mere 0.09%, while for females it is 1.8%. Even raising the cut-off hours by 10% — to 44 hours –just 1.6% of the population is found underemployed. The author argues, therefore, it becomes important that the measurement of underemployment utilises more parameters such as wage, and mismatch of skills.