Employment creation but quality challenges persist

- Increased social and institutional barriers keep women out of the labor market

Annual Periodic Labor Force Survey data for July-June 2022-23 released earlier in the week showed that the overall unemployment rate fell to a six-year low of 3.2 percent. Other things being equal, a decrease in the unemployment rate and an increase in the labor force participation rate indicate that jobs are being created in the economy. However certain questions may arise on the quality of employment. The labor force participation rate for those above 15 years of age has increased to 57.9 percent from 49.8 percent in 2017-18 in the latest survey. The figures have also seen an improvement at the current weekly level. There is still a lot to be desired in terms of quality.

For example, if we talk about the non-agricultural sectors, the percentage of people working in proprietorship and partnership setups considered unorganized has increased from 71.4 percent in 2020-21 to 74.3 percent in the latest survey. Although the situation has improved slightly, nearly 60 percent of employees do not have any written contract for their work. Employment in the unorganized sector is generally in small enterprises where large-scale work is not done. As a result the salary is also very low.

There are many long-term issues when it comes to job creation in India, both in terms of quality and quantity. A problem is also the low participation of women in the labor force. According to the latest data from the Periodic Labor Force Survey, if the labor force participation of women in urban and rural areas is combined, it will increase from 23.3 percent in 2017-18 to 37 percent in cases above 15 years of age in 2022-23. While in the latest survey the comparative figure for men was 78.5 percent.

In theory, the increase in women's participation is encouraging, but recent studies suggest that the increase in women's labor force participation rates may be the result of difficult circumstances. It is possible that a large number of women are joining the labor force to increase the income of families affected by the epidemic.

In such a scenario, the policy challenge for the government will not only be to create more meaningful employment but also to create the conditions conducive to increasing labor force participation. Increased participation will help productivity and growth. Economic growth alone does not reduce the gender gap in the labor market. If social and institutional barriers keep women out of the labor market, emphasizing female education alone will not automatically reduce the gender gap. Motherhood is also a big reason in a gender conservative society. Apart from this, women's aspirations for the future also play an important role.

In such a situation, the biggest task before Indian policy makers is to create more meaningful employment. Creating employment, especially in the organized sector, which encourages increased participation of women in the labor market. India's service-based economy is perhaps best placed to achieve this. Addressing issues related to the social environment, including women's safety, will also create an enabling environment for increasing women's participation in the labor force.