Women’s entry into labour force rises post-COVID. But is it all good?

Almost entirely, the net new job created in manufacturing hired females (perhaps due to electronics and increased textile manufacturing).

The National Sample Survey Office (NSSO) of the Ministry of Statistics and Programme Implementation (MOSPI) has been conducting quarterly and annual employment surveys since 2017, which is called as Periodic Labour Force Survey (PLFS). The quarterly surveys are primarily restricted to urban households while the detailed annual survey encompasses both rural and urban India. The latest survey, conducted during July 2022-June 2023, is based on a sample of 1,01,655 Indian households (55,844 households in rural areas and 45,811 in urban areas). India is estimated to inhabit ~308 million households (Source: ICE 360 Surveys, Price 2020). While the sample size can be widened, nevertheless, it is still important to study the employment trends in India as it helps to understand the dislocations in employment during the COVID-19 pandemic and its consequent impact on Indian households.

The key highlight of the survey is a material jump in the number of people who are actively looking to work in India. These job seekers have found a source of employment, and thus despite the increase in active job seekers, the unemployment rate (people employed/employment seekers) has almost halved from 6.1 percent in 2018 to 3.2 percent in 2023. So, what does this mean? Is it yet another data to underscore the economic strength? Does it mean that India emerged stronger on the other side of the pandemic? Does it add to comfort on household income and spending?

Rise In Labour Force Participation

Not so much. And here it gets important to study the deeper nuances of the data. First the basics. The latest PLFS survey underscored a material improvement in India’s Labour Force Participation Rate (LFPR) to 42.4 percent from 36.9 percent in 2017-18. Worker Population Ratio (WPR) has improved from 34.7 percent in 2017-18 to 41.1 percent in 2022-23. LFPR is the share of a country’s population actively looking for work and WPR is the proportion of the population employed. Assuming India’s population to be 1.4 billion (Source: World Bank), it means there are 605 million people (approximately) who want to work (in the labour force) and ~590mn people who have jobs in India.

The first important takeaway is that post the pandemic, India’s labour is behaving diametrically opposite to the western economies (the US in particular). In the US, cash handouts by the government during the pandemic had incentivised its people to leave the workforce and this had eventually landed them in deeper trouble of demand-led inflation and meteoric rise in interest rates. In India, the government’s support was targeted at specific households and for specific needs (food, healthcare, loan guarantee). This has rather improved the willingness to work or the need to enter the labour force. So far so good, as India needs to improve the willingness to work to tap its demographic dividend. Even after this improvement, India’s LFPR for people above 15 years of age is 57.9 percent while most key economies have LFPR above 62 percent.

In the last five years, India’s population increased by ~50-60 million, but as per the PLFS survey, 100 million new people started to look for work and 111 million people found jobs. This is another healthy development when compared to China. Like India, China did not pursue over-the-top fiscal and monetary policy. But China’s population is struggling to find work leading to a higher unemployment rate. On the other hand, India’s unemployment rate has dropped to 3.2 percent compared to 6.1 percent in 2018.

Low Quality Of Jobs

So far so good. However, the quality of work is a very important aspect. Sixty-five percent of new workforce addition was by rural females of which ~80 percent got agriculture jobs. Farm jobs tend to offer low wages and could be very seasonal. Further, Indian agriculture already suffers from disguised unemployment. People who are not absorbed by any other industry find a temporary shelter in agriculture. To add, there are additional colours available on the category of employment by PLFS — self-employed, casual labour and salaried employees. Without going into too much detail, the data highlights that unpaid helpers account for a lion’s share of the increase in the female workforce.

In simple words, perhaps high inflation and adverse living status post the COVID pandemic had forced females to enter the workforce. The fact that most of them lack adequate education has led them to either work in agriculture or work without pay to support the prime earner in the household. Thus, such an increase in employment does not mean a parallel increase in household income.

However, not everything stands gloomy. The positives are that even manufacturing and construction combined created ~30mn additional jobs. Another interesting insight is that, almost entirely, the net new job created in manufacturing hired females (perhaps due to electronics and increased textile manufacturing). Construction jobs largely hired rural males.

So, what do we conclude? Many more Indians are now working. Females are entering the workforce. While a majority of them had to settle for low-paying agriculture jobs or work without pay in household enterprises (as an additional working hand), there have been some bright spots too — 86 percent of net new hiring in the manufacturing sector are females while men join construction.

The COVID-19 pandemic has had a significant impact on household income and savings – more so in the lower-income strata, thereby altering their behaviour. We have also seen a rise in personal loans, a fall in household financial savings, visibly lower consumer confidence right after the pandemic and contained demand for goods. That said, many of these metrics have been improving in the last one year. Confidence is gradually rising and has surpassed the COVID-19 lows. The latest RBI consumer confidence survey highlights a significant recovery in employment conditions. Inflation has receded to a more acceptable level. These are healthy outcomes and combined with rising consumer confidence should lead to a recovery in mass consumption trends.

Namrata Mittal is Chief Economist, SBI Mutual Fund. Views are personal, and do not represent the stand of this publication.