Employment is the central link between economic growth and the well-being of the people. If growth does not create enough jobs, and if the jobs created are of poor quality, then the benefits of growth do not reach the majority. The study of employment tells us how many people are working, in which sectors they work, how much they earn, and whether the available labour force is being productively utilised.
In India, employment is studied through surveys conducted by the National Sample Survey Office (NSSO) and the Periodic Labour Force Survey (PLFS). These surveys measure indicators such as the worker-population ratio, the labour force participation rate, and the unemployment rate, and classify workers by status (self-employed, regular salaried, casual) and by sector (agriculture, industry, services; organised or unorganised).
This chapter deals with the basic concepts of employment, the indicators used to measure it, the growth and changing structure of employment in India, the trend of informalisation of the Indian workforce, and the government policies for employment generation.
2. Basic Concepts and Measurement of Employment
The important concepts in the study of employment are:
Worker-population ratio (WPR): The percentage of total population that is actually working. It indicates the proportion of the population engaged in economic activity.
Labour force: The number of persons who are working (employed) plus those who are seeking work (unemployed).
Labour force participation rate (LFPR): The percentage of the working-age population that is in the labour force.
Workforce: The number of persons actually working, i.e. the employed population.
Unemployment rate: The percentage of the labour force that is unemployed.
Workers by status: Workers are classified as self-employed, regular salaried employees and casual wage labourers.
Usual status: A person is considered employed on the usual status basis if he or she worked for a major part of the year (more than 183 days). This measure captures chronic employment.
Unemployment is a situation in which persons who are willing and able to work at the prevailing wage rate cannot find work. The types of unemployment in India are:
Open unemployment: A person has no work at all and is willing to work.
Disguised unemployment: More people are engaged in an activity than are actually needed, so even if some are removed, output does not fall. This is widespread in Indian agriculture.
Seasonal unemployment: Unemployment that occurs at certain seasons of the year, especially in agriculture.
Structural unemployment: Unemployment arising from a mismatch between the skills of workers and the requirements of the economy.
3. Employment in Sectors: Distribution of Workers
The distribution of workers in India reveals the structure of the economy:
By sector: A large proportion of Indian workers are still employed in agriculture, although this share has been declining. Industry and, especially, services employ a growing share of the workforce. The shift of workers from agriculture to industry and services is part of the process of structural change.
By status: A very large proportion of Indian workers are self-employed (working on their own farms or enterprises), a smaller proportion are regular salaried employees, and a significant proportion are casual wage labourers. The dominance of self-employment and casual work indicates the informal nature of much Indian employment.
Organised vs unorganised: The organised sector includes enterprises registered with the government, providing job security and social security benefits. The unorganised sector comprises small, unregistered enterprises and casual or own-account work, with no job security or social security. The overwhelming majority of Indian workers - over 80 percent - work in the unorganised sector.
4. Growth and Changing Structure of Employment
Over the decades, the Indian economy has grown, but the growth of employment has not kept pace, a phenomenon called jobless growth. The economy grew rapidly, especially after the 1991 reforms, but employment grew slowly, so that output per worker rose while the number of jobs lagged behind the growth of the labour force.
The structure of employment has changed in important ways:
Declining share of agriculture: The share of agriculture in employment has fallen, though it still employs the largest single group of workers.
Rising share of services: The services sector has become the largest contributor to both output and employment.
Informalisation: There has been an increase in informal employment - workers without job security and social security benefits - both in the informal sector and within the organised sector, where many workers are employed casually or on contract.
Rise of self-employment and casual work: A large part of the workforce is self-employed or engaged in casual work, with irregular incomes.
5. Informalisation of the Indian Workforce
Informalisation refers to the growing proportion of workers who work without any formal employment contract, job security or social security benefits. The trends are:
Work in the unorganised sector: Over 80 percent of Indian workers work in the unorganised sector - small farms, small shops, and unregistered enterprises - without any formal protection.
Informal workers in the organised sector: Even in the organised sector, many workers are employed on casual or contract basis, without the benefits enjoyed by regular workers. This is the process of informalisation within the organised sector.
Absence of social security: Informal workers have no provident fund, pension, health insurance or protection under labour laws.
The informalisation of the workforce is a cause of concern because it implies low wages, insecurity and poor working conditions for the majority of workers, and it weakens the purchasing power of the masses, limiting the market for goods and services.
6. Unemployment in India: Trends and Dimensions
Unemployment in India is primarily structural and open unemployment is relatively low, but the problem is widespread underemployment and disguised unemployment:
The unemployment rate measured on the usual status basis is relatively low, but this hides the fact that many workers are underemployed - they work fewer days than they would like.
Disguised unemployment is widespread in agriculture, where too many people work on too little land.
Unemployment is higher among the educated, especially educated women.
Rural unemployment is largely seasonal and disguised; urban unemployment is more often open and educated unemployment.
The Periodic Labour Force Survey (PLFS) provides the current official estimates of employment and unemployment in India. In recent years, the unemployment rate and the labour force participation rate have been matters of public debate, with concerns about the quality and quantity of employment generation.
7. Government Policies and Employment Generation
The government has pursued employment generation through both general and specific measures:
Growth strategy: Faster economic growth is the most important means of generating employment.
MGNREGA: Guarantees 100 days of wage employment to rural households, providing a safety net and building rural assets.
Mahatma Gandhi National Rural Employment Guarantee Act and other wage employment programmes for the rural and urban poor.
Self-employment programmes: Programmes providing credit, training and support for self-employment, such as the Pradhan Mantri Mudra Yojana and the Deen Dayal Upadhyaya Grameen Kaushalya Yojana for skills.
Skill India: Skill development programmes to make the workforce employable.
Start-up India and Make in India: To promote entrepreneurship and manufacturing employment.
Rural development programmes: Bharat Nirman and other programmes that create rural infrastructure and employment.
Quick Revision Tables
Concept
Meaning
Worker-population ratio
% of population that is working
Labour force
Employed + unemployed seeking work
LFPR
% of working-age population in labour force
Unemployment rate
Unemployed as % of labour force
Usual status
Worked for major part (over 183 days) of the year
Type of Unemployment
Feature
Open
No work at all, willing to work
Disguised
More workers than needed; removal does not reduce output
Seasonal
Occurs in certain seasons
Structural
Skill mismatch with economy's needs
Mind Map
graph TD
A["EMPLOYMENT"] --> B["Concepts and measurement"]
A --> C["Structure"]
A --> D["Trends"]
A --> E["Informalisation"]
A --> F["Unemployment"]
A --> G["Policies"]
B --> B1["WPR, LFPR, unemployment rate"]
B --> B2["Usual status"]
C --> C1["Sector: agriculture, industry, services"]
C --> C2["Status: self-employed, regular, casual"]
C --> C3["Organised vs unorganised"]
D --> D1["Jobless growth"]
D --> D2["Rising services, falling agriculture share"]
E --> E1["Over 80% in unorganised sector"]
E --> E2["Contract workers in organised sector"]
F --> F1["Open, disguised, seasonal, structural"]
G --> G1["Growth, MGNREGA, Skill India"]
Important Diagrams (SVG)
Diagram 1: Types of Unemployment in India
Diagram 2: Jobless Growth - Output vs Employment
Common Mistakes
Confusing the worker-population ratio with the labour force participation rate; WPR is the % of total population working, LFPR is the % of working-age population in the labour force.
Believing disguised unemployment means no work at all; it means more workers than needed, so removing some does not reduce output.
Forgetting that over 80 percent of Indian workers are in the unorganised sector.
Thinking jobless growth means zero employment growth; it means employment grows much slower than output.
Confusing usual status with current status; usual status requires working for a major part of the year (over 183 days).
Believing unemployment in India is mainly open; it is mainly disguised, seasonal and structural.
Assuming the organised sector provides most jobs; the overwhelming majority work in the unorganised sector without job security.
Exam Tips
Define worker-population ratio, labour force, LFPR, unemployment rate and usual status.
Distinguish the four types of unemployment with examples.
Describe the sectoral and status distribution of Indian workers.
Explain the meaning of jobless growth with its causes.
Explain the informalisation of the workforce and its consequences.
Describe the organised and unorganised sectors and the share of each.
List the government programmes for employment generation such as MGNREGA, Skill India and the Mudra Yojana.
Conclusion
This chapter studied employment, the critical link between growth and well-being. We learned the concepts used to measure employment - the worker-population ratio, labour force, labour force participation rate, unemployment rate and usual status - and the types of unemployment in India, particularly the pervasive disguised and seasonal unemployment in agriculture. We examined the distribution of workers by sector and status, and the division between the organised and unorganised sectors, noting that over 80 percent of Indian workers are in the unorganised sector. We analysed the trends of jobless growth and the informalisation of the workforce, which leave the majority of workers without job security or social security. Finally, we reviewed the government's employment strategies, from growth and MGNREGA to skill development. The quality of work and life also depends on the infrastructure that supports the economy - power, transport, communication and banking - which is the subject of the next chapter.