5

Trends and Patterns of Employment in India

B. A. Prakash. and M. P. Abraham

5.1 Introduction

The failure to generate adequate productive and gainful employment on a large scale to absorb the growing labour force is one of the basic economic problems of the Indian economy. Though the economic reforms implemented since 1991 have accelerated the development process and generated more employment opportunities in the different sectors, unemployment of a few categories of labour still remains as a major concern. The post-reform period has witnessed substantial changes in the structure of employment. The primary sector comprising agriculture and the allied activities has declined. There has been a marginal increase in the share of the secondary sector. But the tertiary sector registered a sustained increase in the share of employment. The other noticeable changes in the employment front are an increase in the share of self-employment and a fall in the casual employment. The regular employment has not increased as expected. In this context, the chapter examines the trends, patterns and the structure of employment during the post-reform period.

For the analysis, we have used the concepts and definitions of the National Sample Survey Organization (NSSO). The data used for the chapter are the various rounds of NSSO surveys on employment and unemployment. We extensively used the three NSSO surveys on employment and unemployment, viz, the 50th round (1993–94), the 55th (1999–2000) and the 61st round (2004–05), as they are the only authentic sources of data on employment in India. In this chapter, we present the concepts and definitions of employment in Section 5.2, an analysis of the Worker Population Ratio (WPR) in Section 5.3, a discussion of the growth and structure of employment in Section 5.4 and the characteristics of employment in Section 5.5.

5.2 Concepts and Definitions (NSSO)

Activity status: It is the activity status of a person relating to his/her participation in the economic and non-economic activities during a reference period. The activity status can be classified into three broad statuses during a reference period.

1. Engaged in an economic activity (work) (status: employed).
2. Not engaged in an economic activity (work) but either seeking or available for work (status: unemployed).
3. Not working and not available for ‘work’ (status: not in labour force).

The activity status mentioned in the first two points above belongs to the category ‘labour force’ and that mentioned in the third point is ‘not in the labour force’.

Workers (or employed): Persons who were engaged in any economic activity or temporarily abstained from work due to illness or physical disability, bad weather, social or religious functions or other contingencies necessitating temporary absence from work, constituted workers. Unpaid helpers who assisted in the operation of an economic activity in the household farm or non-farm activities were also considered as workers. Workers were further categorized as self-employed, regular salaried/wage employee and casual wage labour.

Seeking or available for work (or unemployed): Persons who, owing to lack of work, were jobless but sought work either through employment exchanges, intermediaries, friends or relatives or by applying to prospective employers or expressed their willingness or availability for work under the prevailing conditions of work and remuneration, were considered as those who were ‘seeking or available for work’ (or unemployed).

Labour force: The ‘economically active’ population which supplies or seeks to supply labour for production, therefore, includes both ‘employed’ and ‘unemployed’ persons.

Not in labour force: Persons who were neither ‘working’ nor ‘seeking or available for work’ for various reasons during the reference period were considered as ‘not in labour force’. Persons under this category are the students, those engaged in domestic duties, rentiers, pensioners, recipients of remittances, those living on alms, infirm or disabled persons, too young persons, prostitutes and casual labours not working due to sickness.

Self-employed: Persons who operated their own farm or non-farm enterprises or were engaged independently in a profession or trade on own-account or with one or a few partners were deemed to be self-employed in the household enterprises. The essential feature of the self-employed is that they have autonomy (i.e., how, where and when to produce) and economic independence (i.e., market, scale of operation and money) for carrying out their operation. The remuneration of the self-employed consists of a non-separable combination of two parts—a reward for their labour and the profit of their enterprise. The combined remuneration is wholly determined by the sales of an output produced by selfemployed persons. Self-employed persons were categorized as own-account workers, employers and helpers in the household enterprise.

Regular salaried/wage employee: These were persons who worked in others’ farm or nonfarm enterprises (both household and non-household) and, in return, received salary or wages on a regular basis (i.e., not on the basis of daily or periodic renewal of work contract). This category included not only persons getting time wage but also persons receiving piece wage or salary and paid apprentices, both full time and part-time.

Casual wage labour: A person who was casually engaged in others’ farm or non-farm enterprises (both household and non-household) and, in return, received wages according to the terms of the daily or periodic work contract, was a casual wage labour.

Different activity status: The persons surveyed were classified into various activity categories on the basis of the activities pursued by them during certain specified reference periods. There were three reference periods for NSS survey. These are—(1) one year (2) one week and (3) each day of the reference week. Based on these three periods, three different measures of activity status are arrived at. These are termed as usual status, current weekly status and current daily status, respectively. The usual status is classified into two, viz, usual Principal Status (ps) and Subsidiary Status (ss).

Usual principal activity status: The usual activity status relates to the activity status of a person during the reference period of 365 days preceding the date of survey. The activity status on which a person spent relatively longer time (i.e., major time criterion) during the 365 days preceding the date of survey is considered as the usual principal activity status of the person. Based on this activity status persons are categorized as employed, unemployed and not in labour force.

Usual subsidiary economic activity status: The economic activity that was pursued for a relatively minor period, which is not less than 30 days, during the reference year was considered as his/her subsidiary economic activity. This may be the additional activity the person is engaged other than his usual principal activity (employed or unemployed).

Usual principal status and subsidiary status taken together (ps+ss): According to the usual status (ps+ss), such workers are those who perform some work activity either in the ps or in the ss. Thus, a person who is not a worker in the usual ps is considered as worker according to the usual status (ps+ss), if the person pursues some subsidiary economic activity for 30 days or more during 365 days preceding the date of survey.

Current weekly activity status: The current weekly activity status of a person is the activity status obtained for a person during a reference period of seven days preceding the date of survey. A person was considered working (or employed) if he/she, while pursuing any economic activity, had worked for at least one hour on at least one day during the seven days preceding the date of survey. A person was considered ‘seeking or available for work (or unemployed)’ if, during the reference week, no economic activity was pursued by the person but he/she made efforts to get work or had been available for work. A person who had neither worked nor was available for work any time during the reference week was considered as not in the labour force.

Current daily activity status: The current daily activity status for a person was determined on the basis of his/her activity status on each day of the reference week using a priority-cum-major time criterion (day-to-day labour time disposition). A person was considered ‘working’ (employed) for the full day if he/she had worked for four hours or more during the day. If a person was not engaged in any ‘work’ even for an hour on a day but was seeking/available for work for four hours or more, he was considered ‘unemployed’ for the entire day. A person who neither had any ‘work’ to do nor was available for ‘work’ even for half a day was considered ‘not in labour force’ for the entire day.

Labour Force Participation Rate (LFPR): The LFPR is defined as the number of persons/ person days in the labour force per 1000 persons/person-days.

Worker population ratio: The number of persons/person-days employed per thousand persons/person-days is referred to as WPR or Work Force Participation Rates (WFPR).

Distribution of usually employed by status of employment: Employed persons are categorized into three broad groups according to their status of employment. These broad groups are—(1) self-employed, (2) regular employees and (3) casual labour.

Industrial distribution of the usually employed: The major sectors (industry) of employment are—agriculture; mining and quarrying; manufacturing; electricity and water; construction; trade, hotel and restaurant; transport storage and communications; and other services.

Unemployment Rate (UR): The UR is defined as the number of persons unemployed per 1000 persons in the labour force (which includes both the employed and the unemployed). This, in effect, gives the unutilized portion of the labour force. Thus, it is a more refined indicator of the unemployment situation in a population than the Proportion Unemployed (PU), which is merely the number of the unemployed per thousand persons in the population as a whole.

5.2.1 Definitions Used in the Study

The NSSO has given four definitions of unemployment, viz, (1) usual principal activity status, (2) usual principal and subsidiary status (ps+ss), (3) current weekly status, and (4) current daily status. Among the four definitions, the usual principal and subsidiary status definition is the most suitable one in the Indian conditions due to the informal nature of employment. This definition covers all workers, viz, the workers who worked for a relatively longer part of the 365 days preceding the date of survey and also those who worked at least 30 days during the reference period of one year. To get the overall position of the regional as well as the national situation of employment, this definition is a better one. NSSO surveys also provide national- and state-wise estimates on employment based on the definition. In this chapter we have used the usual principal and subsidiary status definition (usual status (ps+ss)) to examine employment. NSSO data on employment is used for the analysis.

5.3 Worker Population Ratio

The WPR, the proportion of workers to the total population, is an indicator about the participation of population in the economic activities. A higher ratio indicates an increase in the rate of participation of people in the gainful economic activities. Economic, social and demographic factors influence the WPR.

Table 5.1 gives the sex-wise WPR for the rural and urban areas for 1977–78 and 2004–05. From the table we may draw the following observations regarding the trends and patterns of the ratio.

 

1. During the 1980s, there had been a decline in the ratio from 423 to 412. There was a decline in the ratio of both males and females during this period.
2. The ratio registered an increase during the early 1990s when the economic reforms were implemented in India since 1991. The WPR had increased from 412 in 1987–88 to 420 in 1993–94. This shows that the acceleration of economic growth due to reform had generated more employment opportunities in the economy.
3. During the second half of 1990s, there had been a fall in the WPR of the country. This may be due to the general recessionary situation of the Indian economy during the period.
4. However, there had been an increase in the ratio during the first half of the first decade of the present century. A notable development was an increase in the female WPR in rural as well as urban areas between 1999–2000 and 2004–05.
5. A review of the WPR for the rural and urban areas for the last two and a half decades suggests that the ratio was lower for the urban areas compared to the rural areas. This was mainly due to the very low WPR of females in the urban areas.
6. A gender-wise analysis suggests that the female WPR was lower compared to males in the rural and urban areas. The female WPR was lowest in the urban areas during the entire two and a half decades.

The NSSO surveys on employment suggest a wide variation of WPR among the different states. As economic, social and demographic factors vary between the states, the WPR also varies. The stage of economic development is also another factor influencing WPR. We present the states having the highest and the lowest WPRs in the Boxes 5.1 and 5.2. Among the states, the WPR for the rural areas was the highest in Andhra Pradesh and the lowest in Bihar. In the case of urban areas, the WPR was highest in the Himachal Pradesh and the lowest in Bihar. Himachal Pradesh had the highest WPR for the urban male and the rural female population. Bihar was the state having the lowest WPR for all the categories except for the rural female population.

 

Appendix 5.1 gives the sex-wise WPR for the rural and the urban areas for the year 2004–05. From the appendix, it is clear that there has been much variation in the WPR in the rural and urban areas among the states and union territories in India.

5.4 Growth and Structure of Employment

Table 5.2 presents the growth of the total and the sectoral employment using NSSO data between 1993–94 and 2004–05. From the table we may draw the following observations regarding the trends and patterns of employment.

1. It was argued by some economists that the Indian economy has been witnessing a jobless growth in the post-reform period. This argument has no empirical basis. The growth in employment between 1993–94 and 2004–05 indicates two trends. During the second half of the 1990s the growth was low, i.e., one per cent, indicating a slow pace of growth. But the Indian economy witnessed a substantial increase in the employment growth since 1999–2000 (2.8 per cent). More than two per cent growth per annum is a higher rate of employment growth.

    

   TABLE 5.2 Employment and Annual Compound Growth Rates (Usual Status (ps+ss)), 1993–94 to 2004–05

   

   Source: Employment Using Data of Various NSSO Rounds (1993–94, 1999–2000 and 2004–05).

    

2. During the second half of the 1990s, the agricultural sector registered a marginal growth rate. The sub-sectors—electricity and water and other services—recorded a negative growth rate. But since 1999–2000, all the above sub-sectors registered positive growth. The sub-sectors, viz, electricity, water and other services recorded a fairly good rate of growth.
3. A notable development in the growth of employment was a spurt in the growth of manufacturing and construction since 1999–2000. Industrial employment increased from 1.6 to 5.0 per cent and construction from 6.4 to 8.2 per cent.
4. The two sub-sectors, viz, (1) trade, hotels and restaurants and (2) transport, storage and communications registered a higher rate of growth of more than 3 per cent throughout the post-reform period.

On the whole, we can find that the slow pace of employment growth in the second half of the 1990s was followed by a phase of higher growth since 1999–2000.

5.4.1 Structure of Employment

The Indian economy had witnessed rapid changes in the structure of employment during the post-reform period. Table 5.3 presents the broad structural changes in the employment between 1993–94 and 2004–05. From the table we can draw the following observations.

 

1. There had been a continuous decline in the share of the primary sector comprising agriculture, mining and quarrying. This indicates a structural shift of labour from the primary to the non-primary activities.
2. A positive trend was the steady increase in the share of industrial (manufacturing) employment. This may be attributed to the industrial development and the generation of more industrial employment.
3. Construction is another activity which witnessed a substantial increase in the share of employment during the post-reform period.
4. The economic reforms have initiated a major change in the tertiary employment. Except for the other services, all the other sub-sectors such as trade, hotels and restaurants, transport and communications registered a steady growth in the share of employment during the post-reform period.
5. On the whole, the employment front witnessed faster structural changes in the postreform period compared to the pre-reform period. A notable development was the steady and substantial increase in the share of the secondary employment.

5.4.2 Rural Employment

In spite of the six decades of the planned economic development, the rural-urban disparities in development have not reduced much. India still remains a backward rural economy. Table 5.4 gives the structure of employment in the rural and urban areas in the post-reform period. Of the total workers, nearly 73 per cent were employed in the primary activities in 2004–05. The share of workers employed in the secondary sector was 13 per cent. Another 14 per cent workers were employed in the tertiary activities. Between 1993–94 and 2004–05 the only notable development was a moderate increase in the share of the secondary sector. Thus the economic reforms have not succeeded in effecting any major shift in the structure of employment or generating substantial nonprimary employment.

Table 5.5 presents a sex-wise distribution of the rural employment, based on the industrial classification of employment. The table gives the characteristics of rural employment of India. The main item of employment in the rural areas is agriculture and allied activities and 73 per cent of the workers are engaged in it. The other four categories of employment worth mentioning are manufacturing (8.1 per cent), construction (4.9 per cent), trade, hotels and restaurants (6.1 per cent) and transport and communication (2.5 per cent). A gender-wise distribution of workers shows that more females are engaged in agriculture, allied activities and industry compared to the males. On the other hand, the percentage of females employed in construction, trade, hotels and restaurants are less compared to the males. Between 1993–94 and 2004–05, the sectors which witnessed a growth in the share of employment in the rural areas are industry, construction, trade, hotel and restaurants and transport and communication.

Appendix 5.2 gives the sector-wise rural employment of the states and the union territories for the year 2004–05. There is much variation among the states with respect to the primary, secondary and tertiary employment. In some states, the share of the primary employment in the rural areas was more than 80 per cent, indicating underdevelopment. In seven states, the share of the primary employment ranges between 80 and 87 (Box 5.3). In Mizoram and Chhattisgarh nearly 87 per cent of the rural employment was in primary sector. On the other hand, three states have less than 50 per cent of rural employment in the primary sector (Box 5.4).

 

 

5.4.3 Urban Employment

Contrary to the rural areas, the employment situation in the urban areas is much different. A major share of urban employment is in the tertiary sector (57 per cent). One-third of the employment is in the secondary sector. The employment in the primary-related activities was only 10 per cent (Table 5.4). During the post-reform period, the changes in the structure of urban employment were also positive. While the share of the primary employment declined, the share of the secondary and the tertiary employment registered an increase. Thus contrary to the rural areas, the economic reforms have effected positive changes in the structure of the urban employment.

Table 5.6 presents the broad changes in the structure of male and female urban employment between 1993–94 and 2004–05. The table also gives the characteristics of the urban employment in India. The three major items of employment which constitute nearly 75 per cent of the total employment are manufacturing; trade, hotel and restaurant; and other services. The other three notable items are agriculture, construction and transport, storage and communication. A gender-wise distribution of urban workers showed that more females are engaged in agriculture, manufacturing and other services. On the other hand, the percentage of females employed in construction, trade, hotel and restaurant and transport, storage and communication are less compared to the males. Between 1993–94 and 2004–05, the sectors which registered a growth in the share of the urban employment are manufacturing, construction, trade, hotel and restaurant, transport and communication. On the other hand, the sectors which witnessed a fall in the growth of the share of workers are agriculture and other services.

 

 

Appendix 5.3 gives the sector-wise urban employment of the states and the union territories for the year 2004–05. There is much variation among states with respect to the primary, secondary and tertiary employment. A notable aspect of the urban employment is that except for a few, all the states have a share of more than 50 per cent urban employment in the tertiary sector. We may also identify the industrially less developed and more developed states based on the sectoral employment in the secondary sector. In the 10 states, the share of the urban secondary employment was more than 33 per cent (Box 5.5). It ranged between 33 and 44 per cent. Gujarat is ranked as the first state with respect to a high share of industrial employment. It is followed by Tamil Nadu, Jammu and Kashmir and Himachal Pradesh. On the other hand, in the five states, the share of the urban secondary employment was less than 15 per cent (Box 5.6).

5.4.4 Self-Employed, Regular Employed and Casual Labour

The employment may be categorized into three broad groups on the basis of the category of employment, viz, self-employed, regular employed and casual labour. Self-employed workers are also termed as own-account workers. They include the workers who work in their own farm or non-farm enterprises as own-account worker, employer or helper. The remuneration of the self-employed consists of two things, viz, (1) a reward of their labour and (2) the profit of their enterprise. Of the total rural employment, self-employed accounted for 60.2 per cent in 2004–05. Between 1993–94 and 2004–05 there had been an increase in the share of self-employment (Table 5.7). In the urban areas, self-employment accounted for 45.4 per cent of the total urban employment. The share of the urban employment also registered an increase in the post-reform period. This shows that the employment structure of the Indian economy is characterized by informal and petty producers in both the rural and the urban areas. Compared to males, more females belonged to the category of self-employed.

 

 

The regular workers are those who work in the farm or non-farm enterprises and receive salary or wages on a regular basis. All categories of regular workers who receive wages or salary and paid apprentices belonged to this category. The growth in the share of workers is an indicator of the positive structural shift of employment. But this shift is not taking place with respect to the rural employment. Of the total rural employment, the share of the regular employed was 7.1 per cent in 2004–05. There had been only a marginal increase in its share during the post-reform period (Table 5.7). On the other hand, nearly 40 per cent of the urban workers belonged to the category of the regular employed. But the share of the urban regular workers to the total urban workers has not changed between 1993–94 and 2004–05 (Table 5.7). This indicates that in spite of the rapid economic changes in the economic front there has not been much change in the structure of employment.

The casual workers are temporary workers who are employed on a casual basis and receive wages according to the daily or piece-wage basis. They are not eligible for any nonwage benefits as in the case of the regular workers. Nearly one-third of the rural workers and 15 per cent of the urban workers were casual labours in 2004–05 (Table 5.7). A positive change that had been taking place in the structure of employment was a gradual decline in the share of casual labours in the rural and urban areas in the post-reform period (Table 5.7). A male-female break-up shows that a higher share of females worked as casual labours compared to the males.

Appendix 5.4 gives the distribution of the self-employed, regular employed and casual workers in the states and the union territories for the rural and urban areas for 2004–05.

5.5 Characteristics of Employment and Wage Rate

5.5.1 Age Composition of Workers

Age composition of workers will give us an idea about the young, the middle-aged and the old workers in the workforce. A classification of the workers on the age basis showed that more than one-third of the rural male workers were youth belonging to the age group of 15–29 years (Table 5.8). Another 56 per cent of the male rural workers belonged to the age group of 30–59. The share of the old age workers was small (8.3 per cent). In the case of the rural female workers, the age pattern was almost similar. In the urban areas, more than one-third of the male workers were young and belonged to the age group of 15–29. Only a few old people were working in the urban areas (Table 5.8). One major difference in the age group of the urban workers was the lower share of the young female workers belonging to the age group of 15–29.

 

5.5.2 Education Level of Workers

The quality of the workers will be judged on the basis of the level of their education. With the economic and educational development, more workers will acquire the skills to work as skilled and professional workers. An examination of the educational level shows that one-third of the rural male workers and two-thirds of the rural female workers were illiterate (Table 5.9). Twenty-nine per cent of the male and 18 per cent of the female workers had an educational status—literate and up to primary. Only a small portion of the workers had an educational level above the secondary level. Only 9.4 per cent of the rural male and the 2.8 per cent of the rural female workers had an educational level above the secondary level. This indicates that the rural employment in India is dominated by the unskilled illiterate or literate workers. In spite of the educational development of India during the last six decades, the rural workers still remain as unskilled, without much modern skills.

 

 

The situation is slightly better in the urban areas. Compared to the rural areas, the share of the illiterate male workers in the urban area is lower. However, more than one-third of the urban female workers are illiterate. The share of the urban workers with an educational level of middle and secondary is higher compared to the rural areas (Table 5.9). Fifteen per cent of the male and seven per cent of the urban female were educated up to the secondary level. The share of workers having an educational level of higher secondary, diplomas, graduation and above is also higher in the urban areas compared to the rural areas.

5.5.3 Wage Rate

The NSSO survey gives data on the daily wage rate of the regular and the casual workers. Table 5.10 presents the average daily earnings of the regular workers having different educational levels for 2004–05. In the case of the rural workers, there is a considerable difference in the wage rate of the male and the female workers. While the daily wage rate of the male workers was 144.93, the wage rate of the female was 85.53. The difference in the wage rate was high in the case of illiterate persons. The rural female workers get less than half of the wage rate of the male workers. In the case of the educated categories of labour also, the female workers get a lower wage.

 

 

TABLE 5.11 Average Daily Wage for Rural Casual Workers Engaged in Public Works, All India (2004–05)

Category	Rural (Rs)
Average daily wage rate of male	65.33
Average daily wage rate of female	49.19
Average daily wage rate of persons	59.33

 

The wage rate in the urban areas is higher than in the rural areas. Compared to rural areas, all categories of workers having different educational levels get higher wages in the urban areas. But here also there exists much difference between the male and the female daily wages. In both, the rural and the urban areas, the educated, i.e., persons with the secondary or the higher level of education gets higher wages compared to the non-educated.

The NSSO survey also gives the data on the daily wage of the casual workers engaged in the public works and other than public works. According to the NSSO Survey 2004–05, the average daily wage of rural casual workers for all India was Rs 59.33 (Table 5.11). There is much difference between the male and the female workers. While the male got Rs 65.33, the female got Rs 49.19, per day.

The daily wage of the casual workers engaged in private works was lower than that in the public works (Table 5.12). The female worker got only Rs 34.94, as daily wage in the rural areas. This shows that the wage rate prevailing in the rural areas for men and women for unskilled and manual works is generally low. The wage rate in the urban areas is slightly higher. But there is also a wage difference between the male and the female workers. From the above NSSO data, it is clear that the daily wage rate of the casual workers in India is very low by any standard.

 

TABLE 5.12 Average Daily Wage of Casual Workers Engaged in Works Other than Public Works, All India (2004–05)

Category	Rural(Rs)	Urban(Rs)
Average daily wage rate of male	55.03	75.10
Average daily wage rate of female	34.94	43.88
Average daily wage rate of persons	48.89	68.68

5.6 CONCLUSION

The above analysis is concluded with the following observations—During the 1980s, there had been a decline in the WPR indicating a decline in the participation of population in the economic activities. The ratio registered an increase in the early 1990s followed by a decline in the second half of the 1990s. But the WPR recorded an increase in the first half of the present decade. Thus the economic development in the post-reform period had helped to increase the WPR in the rural and the urban areas of India.

Though the growth of employment was lower during the second half of the 1990s, the economy achieved a higher rate of growth during the first decade of the present century. Industry, construction, transport and communication are the sub-sectors which have been witnessing higher growth in employment. The broad structural changes witnessed during the post-reform period were a steady decline in the share of the primary employment and a continuous increase in the share of the secondary and the tertiary employment.

A notable feature of the structure of employment in India is its informal and casual nature. Except for a small share, the rest of the employment is in the category of selfemployed and casual labour in the rural areas. Only in urban areas can one find a sizeable regular employment. The quality of Indian workers in the rural areas was very poor as one-third of the male workers and two-thirds of the female workers are illiterate. Generally the wage rate of all the categories of casual workers is very low. Among the casual workers, the wage rate of the female workers is much less compared to the male workers.

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