Explainer | India at Work

How does the government measure employment in India?

The National Sample Survey Organisation conducts large sample surveys across the country, querying households on the principal activity of each household member.  Individuals employed for the majority of the last 365 days are considered to be principally employed, and information is collected on what activity they undertake as well as their earnings.   In addition, data is also collected for those activities where a person may be employed for a minimum of 30 days, and this is termed as subsidiary employment.  It so happens that a large part of the subsidiary employment is work within the household enterprise including unpaid work.

What is the right way to measure employment in India?

Amaresh Dubey and I have argued repeatedly that the government should only consider principal employment as the core measure of employment in India.  And increasingly, other researchers are also coming to the same conclusion.  This is because subsidiary status employment is at best, additional work, and someone who does not have a principal status job for the last year but is employed in a minor subsidiary activity should not be considered to be employed.  The objective of economic policy is to ensure good quality, wholesome jobs, not those that are add-ons and pay little and therefore principal employment is the right metric.

Figure 1: Employment Growth between 1983 and 2023–2024

Source: NSS data are various rounds of EUS and PLFS from NSSO, GoI.

Is employment increasing in India? Since when?

Principal employment has been growing in India since the reforms period.  There has been no period since the early 1990s when jobs have not increased.  Moreover, principal employment has grown the most during the early 2000s and now during the period 2017-18 to 2023-24.  During these two periods, employment growth has been higher than population growth.  The period 2017-18 to 2023-24 has especially seen the highest growth in reported employment in the last few decades.

Figure 2: Annualised Growth of Population and Employment

Source: EUS and PLFS, NSSO, GoI, various rounds.

Are wages and salaries also growing?

Wages and salaries have also been growing; however, the growth has only been marginally higher than inflation.  Therefore, though employment has increased, the employed person’s ability to spend has not increased much.  There could be many reasons for this.  One factor may be related to productivity. Wages typically tend to grow most when productivity grows; therefore, if productivity growth is limited, wage growth is also curtailed. Another could be simply related to supply and demand dynamics, when the supply of workers is large, wages tend not to grow as much.  However, this is a short-term phenomenon; wages rise much faster than inflation in the long run when productivity increases are large.

What kinds of employment are growing the most?

The data are very clear: in the period 2017-18 to 2023-24, there has been consistent job growth across almost all major demographic and occupational segments.  However, there are some components where growth is much higher.  There is a very strong link between educational attainment and employment growth, in that the higher the educational level, the higher the employment growth.  Therefore, it was the lowest for the illiterates and highest for those with a graduate or higher degree.  Employment growth has also been very high for women and in urban areas.   All major age segments studied have seen a rise in employment, apart from children under 14 years, where it has been falling considerably.  Agriculture employment grew at 2.6 per cent annually, manufacturing at 2.8 per cent, services at 4.4 and construction at 5 per cent annually during this period.  However, within the agriculture sector, the bulk of the growth has been emanating from the non-cropping sector, such as livestock rearing.  Employment growth during this period has been in line with what one would expect in a modernising economy, where those with better education and skills find greater employment avenues.

Figure 3:  Annualised % of Employment Growth by Education Attainment Between 2017–2018 and 2023–2024

Source: PLFS, NSSO, GoI, various rounds.

Why is employment growth so high and deep in the period 2017-18 to 2023-24?

While high growth has been sustained for some time now, the greater growth in employment in recent years can be explained by greater government action.  Recent years have seen the institution of very large welfare schemes, plugging of leakages in those that existed before, and also programs aimed at supporting very small entrepreneurs.  On the welfare side, programs such as Jal Jeevan Mission and Ujjwal now cover the bulk of households in the country, and with access to tap water in the home and energy for cooking, and also electricity in every village, a significant part of the time of women has presumably been released from household work.  The spread of the PM Mudra scheme that disbursed upwards of Rs 5 lakh crore in 2023-24, and the loan disbursements to women’s SHGs were about 2.1 lakh crore.  In addition, the rise of Direct Cash Transfers in recent years would also have given a kickstart to local economies.  Taken together, self-employed in what is called own account work, those employing and also those employed would increase, as is seen.

Figure 4:  Growth of PMMY Loans

Source: Mudra (2024).

Will this employment growth continue?

Overall, employment has been growing for some time now, and there is a well-known and direct link between economic growth and employment opportunities.  Therefore, as long as we can sustain economic growth, some employment growth is expected to continue.   However, this is not a perfectly proportional relationship, and many other factors impact the extent of employment growth.  These include aspects such as the sectoral distribution of growth.   For instance, agriculture and related sectors, such as livestock and horticulture, create more employment, and so do construction and some types of services.  Organised sector growth, though desirable from many perspectives, tends to create fewer jobs than the unorganised sector.  Labour-intensive manufacturing creates such as garments, gems, and jewellery etc., creates far more jobs than other types of manufacturing.   Moreover, credit-driven employment growth can continue only for so long and will need both higher and more equitable economic growth for it to be sustained.

If employment growth for educated is so high, why are there so many educated unemployed?

Since the early 2000s, seats for higher education have grown substantially in India, leading to a very large number of those who are better educated.  Therefore, even if a job is available, many educated youth are not willing to work for a low wage.  In India, especially, those working in entry-level jobs in the government tend to get substantially greater compensation than those in the private sector.  This sets the expectations high for many youth who prefer not to take up a job with a lower wage.   Therefore, high employment growth and high unemployment can coexist if wages are not commensurate with expectations.