The Indian labour market: An overview

Type Working Paper - ILO Asia-Pacific Working Paper Series
Title The Indian labour market: An overview
Publication (Day/Month/Year) 2008
The present study analyses the labour market situation in India over the last two decades. Given the growth profile, which has been quite robust in recent years, one pertinent question is whether India has experienced pro-poor growth. The paper examines a wide range of indicators, including workerpopulation ratio, sectoral shifts in the value added composition and occupational structure, growth in value added and employment, employment status in terms of self-employment, regular wage employment and casual employment, unemployment rates, formal-informal division of employment, employment elasticity and labour productivity, and finally, the head count measure of poverty. The paper argues that there was a missing link in terms of employment between the rise in economic growth and the reduction in poverty that took place during the 1990s. Though researchers believed that this was an outcome ofrising income and other positive changes taking place in the economy, the empirical evidence is not convincing. In the present decade, employment growth has picked up, but economic growth and employment generation both seem to be more beneficial to those located in the upper income strata than the poor. The faster employment growth in this decade is partly because of the revival of agriculture employment, which had decelerated considerably during the 1990s. The other feature is that some of the dynamic sectors have continued to grow rapidly, generating employment opportunities. However, most of the activities in these sectors are less likely to absorb the poor who are mostly unskilled, and hence the direct effects of growth on poverty are still not spectacular. All this is compatible with the fact that the extent of decline in poverty after 1993-94 has been much less than the extent of decline between 1983 and 1993-94. The 'employment problem' cannot be gauged in terms of open unemployment rate. It is rather the relative size of the low productivity informal sector that can throw light on the gravity of this problem. Even within the organized or formal sector, informal employment is on the rise, reducing the bargaining power of the labour considerably. Surprisingly, the composition of the workforce as per the status of employment shows a major shift in favour of self-employment in
2004-05. Besides, with the exception of 2004-05, the long term trend shows that casualization is on the rise in the case of rural males, rural females and urban males. And this has been by and large accompanied by a declining trend in regular wage employment among rural and urban males. These findings are unlikely to confirm that the Indian economy has been experiencing pro-poor growth.

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