India at Work: Employment Trends in the 21st Century

Executive Summary

We examine the trend and structure of employment in India since 1983, with a particular focus on the last two decades, during which many have identified relative stagnation in employment. By concentrating on the quantum of employment rather than various ratios, we can assess areas of growth and decline. We utilise five waves of National Sample Survey (NSS) Employment and Unemployment Survey (EUS), alongside various rounds of Periodic Labour Force Survey (PLFS) data collected during the period 2017–2018 and 2023–2024, to calculate the level and structural change in employment. We adjust the weights provided by the NSS in the dataset with population estimates from the Census of India up to 2011 and UN estimates for subsequent years to obtain the estimated number of the working population along with other characteristics.

Our analysis finds a steady increase in Principal Employment (calculated using Usual Principal Status [UPS]) since 1983, with a marked increase in general employment since 2017. Specifically, we find that during 2017–2024, Principal Employment rose by over 102 million, which, at 3.5% annually, is significantly higher than the estimated population growth during the same period. Furthermore, our analysis suggests a significant change in the structure of employment, as there are some sectors and segments where employment has been declining steadily. We also find that between 2017–2018 and 2023–2024, there has been limited growth in wages and salaries across most demographic segments, sectors, and forms of employment. Although there is conflicting evidence on inequality, given the low wage growth, a more important question relates to stagnating labour productivity, which requires deeper analysis.

Our novel approach, which focuses on the total number of those employed rather than unemployment rates across different demographic and employment segments, while also disregarding subsidiary employment, allows us to draw definitive conclusions about changing employment patterns. Concentrating on the period from 2017–2018 to 2023–2024, our analysis reveals that: (1) employment has been increasing steadily throughout this period; (2) female employment is rising faster than male employment; (3) there is relative stagnation in cropping sector employment; (4) the non-cropping sector, which includes livestock and higher-value agriculture, accounts for two-thirds of the employment growth; (5) employment growth is higher for those with greater educational attainment, ranging from 0.4% annually for illiterates to 6.1% annually for graduates and above; (6) of the 103 million additional employment during this period, an estimated 46 million are either employers or regular salaried workers; (7) own-account workers accounted for an additional 34 million, and unpaid family work stood at 23 million; however, we find that the bulk of this cannot be identified as distress work; (8) casual work, whether in public works or private, has stagnated throughout this period.

We therefore conclude that employment growth in India is robust but also bi-modal. On one hand, there is employment growth typically associated with greater productivity, such as that of employers and regular salaried work. On the other hand, there is significant growth in activities generally not considered highly productive, such as unpaid work in household enterprises and enterprise workers. We believe that the latter, particularly in family or own enterprises, has been supported by government programmes such as the Jal Jeevan Mission and Ujjwala, which have freed up time from household work, as well as schemes like the Pradhan Mantri Mudra Yojana (PMMY) that provide credit to household businesses. However, whether this shift is due to a lack of choices or greater availability of resources leading to increased entry into less productive work requires further study.

In additional work, we find that wage increases have been fairly low across this period, and in aggregate, wage growth has barely kept pace with inflation. Further analysis shows that low wage growth has been a distinct characteristic of almost all forms of employment and across most sectors. This lack of real wage growth over the seven-year period spanning 2017– 2018 to 2023–2024 is the most curious and worrisome aspect of India’s employment scenario.

Three key factors driving the changing structure of employment in India have not been sufficiently appreciated. First, employment growth has consistently been higher for those better educated, a trend evident throughout the 2000s, including the period 2017–2018 to 2023–2024. We also find that self-employment growth has been significant, likely influenced by the massive disbursements through the Mudra scheme (or PMMY) during the period 2017–2018 to 2022–2023. Additionally, employment growth in the agriculture sector is not in the cropping sector but in the non-cropping one, specifically related to livestock and fisheries. In other words, employment growth is more pronounced in areas of higher value-added and productivity. Overall, however, while employment is rising, wages are not, indicating that although opportunities may be increasing, productivity is not.