PLFS Data: The Myth of Job Creation in India

Despite jobs being a highly crucial political issue, especially in the ongoing election year, there was no chest-thumping for this monumental achievement of creating 4.3 crore jobs in a year. What explains this?

(Photo: The News Minute)

The Narendra Modi government instituted a periodic labour force survey (PLFS) in 2017-18 to annually bring out three important employment-related numbers. The three data points are:

• The labour force participation rate (LFPR) is the proportion of people in the active labour market (labour force), i.e., those who are either employed or actively looking for jobs.

• The worker-population ratio (WPR) measures the proportion of the population considered actually employed.

• The unemployment rate (UR) is the ratio of number of people in the labour force not able to get employment.

The PLFS year is from July to June and the 2023-24 data was recently released.

The WPR for all persons (male and female in both rural and urban areas) is reported to have increased from 41.1 percent in 2022-23 to 43.7 percent in 2023-24. For an estimated population of 145.09 crore in 2023-24 (143.81 crore in 2022-23), the late WPR ratio implies the creation of 4.31 crore jobs in 2023-24. Wow!

In the 2024-25 Budget, the finance minister promised to spend about Rs two lakh crore on employment-linked incentive (ELIs) schemes to create 2.1 crore jobs over five years. The PLFS is reporting the creation of 4.31 crore jobs in one year. Do we even need ELIs?

Despite jobs being a highly crucial political issue, especially in the ongoing election year, there was no chest-thumping for this monumental achievement of creating 4.3 crore jobs in a year. What explains this?

Is the PLFS data on job creation a reality, a myth, or a charade?

Job 'Creation' Unleashed     

The employment rate or the WPR was only 34.7 percent in the first year of the PLFS (2017-18) with the male employment rate being 52.1 percent and the female employment rate abysmally low at 16.5 percent. For the estimated population of 135.97 crore in 2017-18, 48.18 crore Indian residents were considered to be employed according to the PLFS.

The number of persons employed grew by 1.35 crore in 2018-19. There was an explosive increase of 4.53 crore persons employed in 2019-20, otherwise a tepid economic growth year (GDP growth of only 3.7 percent). With the WPR increasing to 38.2 percent (35.3 percent in 2018-19), the number of persons employed had grown to 53.06 crore (estimated population 138.90 crore) in 2019-20.

In the two Covid-19 impacted years 2020-21 and 2021-22, employment creation continued unabated, though at a slower and erratic rate. The WPR increased to 39.8 percent in 2020-21 but declined slightly to 39.6 percent in 2021-22. With the population increasing, these two years also saw an increase of 2.76 crore and 0.63 crore in the number of persons employed respectively.

Hefty job creation in 2022-23 seems to have occurred with the all-persons WPR jumping to 41.1, which meant the creation of 2.65 crore new jobs. And the year 2023-24 turned out to be an all-time best year for new job creation, barring 2019-20. The WPR/employment rate for males rose to 56.4 percent and for females to 30.7 percent.

With this fabulous increase in employment, India’s employed workers increased from 47.18 crore in 2017-18 to 63.41 crore in 2023-24, adding as high as 16.23 crore jobs in six years!

Is an average annual addition of 2.70 crore jobs created in six years, not enough evidence of India shining?

Crunching the Data

The enormous increase in India’s WPR (as per the PLFS) has come about with both the building blocks — LFPR and unemployment rate — contributing. Growth in the LFPR signifies more people joining the labour force, which boosts the WPR. A reduction in the unemployment rate contributes to job growth because there are a lesser number of people in the workforce not finding jobs.

The PLFS reported India’s LFPR for the total population to be at 36.9 percent in 2017-18, which means India’s labour force was at 50.17 crore. There was a big lop-sidedness in India’s labour force though, with 55.5 percent of males and only 17.5 percent of females.

The female workforce increased massively in all the six intervening years, with the female LFPR increasing to 31.75 percent in 2023-24. The male LFPR also grew but slowly to 58.2 percent. The all-persons LFPR at 45.1 percent meant that India’s all-age labour force increased to 65.44 crore. In 2023-24, India’s labour workforce was 15.27 crore more than in 2017-18.

The first edition of the PLFS reported India’s all-persons unemployment rate at 6.1 percent, which for the labour force of 50.17 crore, meant that 3.06 crore persons were not able to find work during the year 2017-18.

The unemployment rate fell consistently and significantly, as per the PLFS, after 2017-18 until 2022-23, declining to 5.8 percent, 4.8 percent, 4.2 percent and 4.1 percent in the next four years and to 3.2 percent in 2022-23. In 2023-24, it remained unchanged at 3.2 percent. An unemployment rate of 3.2 percent is as good as no unemployment.

An unemployment rate of 3.2 percent in 2023-24 for the total labour force of 65.44 crore means that only 2.09 crore persons looking for jobs remained unemployed that year. India achieved the extraordinary feat of reducing the absolute number of unemployed people from 3.06 crore in 2017-18 to 2.09 crore in 2023-24, a reduction of about 0.95 crore.

The increase in labour force by 15.27 crore and the reduction in unemployed persons by 0.95 crore gave India an additional 16.23 crore jobs in six years!

The Myth

Now, let us look at where the increase in employment has taken place.

Firstly, the increase is predominantly in female employment. The male employment ratio/WPR increased from 52.1 percent in 2017-18 to 56.4 percent in 2023-24 at a compounded annual growth rate (CAGR) of 1.33 percent. The female employment ratio, on the other hand, galloped from 16.5 percent to 30.7 percent during this period at a whopping CAGR of 10.90 percent per annum. An 11 percent increase in female employment every year on a trot for six years!

Secondly, the increase is predominantly in rural areas. While the urban WPR went up from 33.9 percent in 2017-18 to 38.9 percent in 2023-24 at a CAGR of 2.32 percent, the rural WPR increased from 35 percent to 45.6 percent during this period at nearly double the CAGR of 4.51 percent. The rural female employment rate rose by a CAGR of 12.14 percent. Rural areas are creating most of the jobs in India in this age of industrialisation, technology, and urbanisation!

Thirdly, agriculture witnessed the largest shift of workers with an annual CAGR of 0.7 percent. There was also some increase (0.4 percent and 0.3 percent per annum) in the construction and trade and commerce industry, which also employs a significant number of casual workers. Curiously, the proportion of workers in manufacturing declined by (-) one percent per year. Agriculture is the torch-bearer of job creation in India in this day and age!

Fourthly, the PLFS divides the employed persons into three broad categories:

• Self-employed

• Regular wage/salaried

• Casual workers

The self-employed category has a curious sub-category in India (yes, there is no such class globally) of unpaid helpers in household/family enterprises. The biggest increase in the last six years is in the proportion of workers employed in the unpaid helper category, which saw a compounded growth of 6.10 percent per annum. The share of employment in salary jobs and casual work actually declined by (-) 0.82 percent and (-) 3.75 percent per annum respectively. A big chunk of new jobs was created in India in the class of unpaid helpers in family enterprises.

In that case, isn’t India's fabulous job creation in the last six years a myth?

There is no real gain in only drumming up the number of employed persons by adding up persons who receive no wages or in sectors that don’t make any major value addition.

Wageless jobs don’t improve the consumption standards of the population, which is evidenced by the fact that India’s consumption grew by only about 4.5 percent in the last five years.

Stop the charade. Count only the jobs that pay.

(The author is former Economic Affairs Secretary and former Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)