CMIE data reveals India’s unemployment conundrum

The data on unemployment brought out by the Centre for Monitoring Indian Economy (CMIE) presents a grim picture. Not only has the unemployment rate increased sharply for some years now (the unfortunate uptrend started even before the Covid-19 pandemic), even a recovery in the GDP has not done much to improve the employment scenario.

The unemployment rate, which was 4.7 per cent in 2017-18, rose to 6.3 per cent in 2018-19. It shot up during the lockdown: in December 2020, for instance, it was 9.1 per cent. It has come down a little since, but not as much as one would have expected even from the truncated output recovery we have experienced. It was 8.3 per cent in December 2022, came down to 7.14 per cent in January 2023, went up again to 7.8 per cent in March and has risen further to 8.11 per cent in April 2023.

The GDP recovery has been stunted, but the GDP estimate for 2022-23 is still supposed to be 8.4 per cent higher than in 2019-20 and 12.95 per cent higher than in 2018-19. And yet, the unemployment rate at the end of 2022-23 was higher at 7.8 per cent (with the trend persisting into the new financial year) compared to 6.3 per cent for 2018-19. Since the workforce could not have increased in these four years by more than, or even as much as, 12.95 per cent, the obvious conclusion is that employment per unit of GDP has come down between 2018-19 and 2022-23.

This, in turn, could not have happened through any significant technical change in these activities over such a short period. One can infer, therefore, that the current higher unemployment rate compared to even pre-pandemic levels can be attributed to two factors: 1) the economic recovery has occurred primarily in sectors and activities that are not employment-intensive or, in other words, the recovery has bypassed the employment-intensive petty and small-scale sectors; 2) there have been significant lay-offs, either in response to lower demand or because of ‘austerity measures’.

The CMIE provides direct evidence of such lay-offs: it estimates that the actual number of employees declined from 409.9 million in February to 407.6 million in March. In 2019-20, the total number of employed persons in India was 408.9 million, which means that the absolute number of persons employed in March 2023 was lower than in 2019-20. This is a grim scenario, where, let alone creating additional jobs to absorb additions to the workforce, the economy is not able to support even the existing jobs.

Given this reality, it beggars belief that government spokespersons are claiming an improvement in the country’s employment situation.

They present two arguments: 1) that the CMIE data is unreliable and at odds with the findings of the Periodic Labour Force Surveys, which suggest an improvement in the employment situation; 2) demand for employment under the rural employment guarantee programme (MNREGA) has gone down.

Both these arguments are flawed. A major difference between the PLFS and CMIE data on employment is that the PLFS definition of employment includes unpaid work in domestic economic activities while the CMIE data does not. The problem with including unpaid work in domestic activities is that when there are lay-offs or reduced employment opportunities outside, that is, when family members are being excluded from the workforce and forced to remain at home sharing whatever work is available within the household, the PLFS will not show an increase in unemployment. In other words, it cannot distinguish between enforced confinement at home and gainful employment in domestic activities.

The CMIE data is free of this shortcoming, and while its exclusion of unpaid work in domestic activities means that it does not consider gainful employment in domestic activities, its data has the merit of consistently capturing what is happening to paid employment opportunities in the economy. Since these numbers go down in a period of growing unemployment, the CMIE data is a reasonably accurate picture of the overall unemployment scenario.

People who had gone off to their villages, following the loss of jobs and income, during the ill-conceived lockdown have reportedly returned in considerable numbers. That may have had an effect, as you’ll hear apologists for the government argue, on the demand for MNREGA jobs. They will not, however, tell you about the under-reported inconveniences workers have experienced in claiming their wages under the new and now mandatory NMMS (National Mobile Monitoring System) and the ABPS (Aadhaar-based Payment System). Even if there is a reduction in unemployment rates from lockdown levels, it still makes grim reading when seen against pre-pandemic numbers. The government’s failure or unwillingness or both to make timely MNREGA payments and to clear wage arrears is another reason why even the unemployed are reluctant to seek work under the scheme. The demand for work under MNREGA has, therefore, become a poor indicator of the extent of unemployment, and it’s ironic that while even the jobless are fighting shy of the scheme, the Union government is using their reluctance, and the consequent dip in demand for these jobs, to claim an improvement in the unemployment situation.

One normally expects unemployment figures to be correlated to the average real income figures for working people as a whole, and even with the average real income of self-employed workers. This is because the self-employed group is where the reserve army of labour is typically concentrated, and a decline in employment, resulting in a rise in the proportion of the reserve army, will tend to lower average real incomes in the self-employed sector.

The government’s own PLFS data shows that the average real income of self-employed workers in the April-June quarter of 2022, for which we have data, was below the level seen in April-June 2019, in both rural and urban India (Chandrasekhar and Ghosh, Macroscan). This only confirms the CMIE findings on unemployment.

India’s unemployment statistics also reveal the fundamental limitations of neoliberal capitalism in tackling the problem of unemployment in our country. The votaries of ‘economic liberalisation’ sold the people of India a dummy: since a certain degree of diffusion of economic activity did occur from metropolitan capitalist economies to a few small countries of East and Southeast Asia, resulting in a significant absorption of their relatively small labour reserves, they argued that this strategy could be successfully replicated everywhere, that if only things were ‘left to the market’ and the government withdrew from its interventionist role, except in favour of big capital, then India too would be on the road to full employment and prosperity.

A capitalist economy can never attain ‘full employment’ because it can never function without a reserve army of labour, but a substantial absorption of the labour reserves was promised under neoliberalism, which fooled even the progressive-minded. The obvious fallacy here, taking the third world as a whole, is that diffusion at the margin of some activities from the metropolis cannot possibly absorb our vast labour reserves; it might work in small countries with small labour reserves, but not in countries like India.

IPA Service. Courtesy: People’s Democracy.