Employment, Unemployment and Labour Reforms

Concepts and measurement

Labour Force: people who are working or seeking/available for work.

• Labour Force Participation Rate (LFPR): the labour force as a share of the population.
• Worker Population Ratio (WPR): the employed as a share of the population.
• Unemployment Rate (UR): the unemployed as a share of the labour force.

Approaches to measuring activity (NSO):

• Usual Status, with a reference period of 365 days:
• Principal Status (PS): the major time criterion;
• Subsidiary Status (SS): work for at least 30 days.
• Current Weekly Status (CWS): a reference week; a person who worked at least one hour on any day counts as employed.
• Current Daily Status (CDS): half-day units.

Data sources:

• the Periodic Labour Force Survey (PLFS), since 2017–18;
• from January 2025, the PLFS releases monthly estimates (CWS) for all India, along with quarterly estimates covering rural areas too;
• earlier: the NSSO quinquennial employment surveys and the Labour Bureau surveys.

Other sources: EPFO payroll data, the Annual Survey of Industries, the Annual Survey of Unincorporated Sector Enterprises (ASUSE), and private data such as CMIE.

Types of unemployment

• Open unemployment: willing and able to work, but no job.
• Disguised unemployment: more workers than needed. Their marginal productivity is zero. It is common in agriculture.
• Seasonal unemployment: during agricultural off-seasons.
• Structural unemployment: a mismatch between skills and available jobs, for example as technology changes.
• Frictional unemployment: while moving between jobs.
• Cyclical unemployment: due to economic downturns.
• Educated unemployment: high among graduates.
• Underemployment: working fewer hours or below one's skill level.

Recent trends (PLFS)

Unemployment rate: under usual status (PS+SS), for those aged 15+, it fell from 6.1% (2017–18) to 3.2% (2022–23 and 2023–24).

Female LFPR: rose sharply, from 23.3% (2017–18) to about 41.7% (2023–24). Most of the rise was in rural self-employment, much of it as unpaid helpers in household enterprises. This has prompted debate about the quality of the work.

Employment structure (2023–24):

• Self-employment: about 58% of workers, up from 52% in 2017–18.
• Regular wage/salaried: about 22%.
• Casual labour: about 20%.

By sector: agriculture's share of employment rose from about 42.5% (2018–19) to about 46% (2023–24). This reverses the structural transformation expected in a growing economy, a pattern partly attributed to COVID-era reverse migration.

Youth unemployment (aged 15–29) is about 10%. It is much higher among graduates, at around 13–15%, which reflects both job shortages and skill mismatch.

Informality:

• About 90% of workers are informal: no written contract, social security or paid leave.
• About 50% of GDP is produced in the informal sector.
• The e-Shram portal (2021) has registered over 30 crore unorganised workers.

Why is job creation weak?

1. Jobless and capital-intensive growth in manufacturing and services. IT employs a small share of workers.
2. Manufacturing's share of GDP has stagnated at about 15–17%, against the "Make in India" target of 25%.
3. Skills mismatch: only about 4–5% of the workforce has formal vocational training (PLFS). Graduate employability is low (India Skills Report).
4. Rigid labour laws (before the codes) discouraged firms from growing beyond thresholds, the "dwarf firm" problem. Only a small share of firms employ more than 10 workers.
5. Low female participation in paid work, because of social norms, safety, care burdens and mobility.
6. Agriculture holds surplus labour.

Labour Codes

In 2019–20 Parliament consolidated 29 central labour laws into four codes:

1. Code on Wages 2019: a universal minimum wage, a national floor wage, and timely payment of wages, covering all workers.
2. Industrial Relations Code 2020:

• raises the threshold for prior government permission for layoffs, retrenchment and closure from 100 to 300 workers, with states able to raise it further;
• allows fixed-term employment;
• requires 14 days' notice for strikes in all establishments;
• provides for recognition of negotiating unions.

1. Code on Social Security 2020: brings gig and platform workers under social security for the first time; extends ESIC and EPFO coverage; creates social security funds.
2. Occupational Safety, Health and Working Conditions Code 2020:

• a single registration;
• allows women to work night shifts, with consent and safeguards;
• covers inter-state migrant workers (replacing the 1979 Act).

Implementation: labour is in the Concurrent List, so both the Centre and states must frame rules. The codes were brought into force on 21 November 2025 after a long delay. Many state rules and transitional issues are still being worked out; treat the details as per the latest notifications.

Arguments for the codes: simplicity, flexibility, wider coverage, and ease of doing business.

Concerns raised by trade unions:

• weakened job security;
• curbs on the right to strike;
• inspectors recast as "inspector-cum-facilitators";
• the reach of social security to gig workers depends on funding.

Employment-linked initiatives

• MGNREGA (2005): 100 days of guaranteed wage work for rural households.
• Deen Dayal Upadhyaya Grameen Kaushalya Yojana: skilling for rural youth.
• Skill India Mission, PMKVY (2015) and National Apprenticeship Promotion Scheme.
• Employment-Linked Incentive (ELI) scheme: announced in the 2024–25 Budget; approved as the Pradhan Mantri Viksit Bharat Rozgar Yojana (July 2025) to reward first-time employees and employers for new jobs. Check the implementation details.
• PM Internship Scheme (2024): internships in the top 500 companies for 1 crore youth over five years.
• Startups and MSMEs: the largest job creators.

Analysis: towards good jobs

What the evidence says: creating jobs needs labour-intensive manufacturing, such as textiles, apparel, footwear, food processing, toys and electronics assembly. This is where China, Vietnam and Bangladesh absorbed surplus farm labour.

Other needs:

• Services such as tourism, healthcare, care work and logistics.
• Urbanisation and construction.

Measures:

• reduce input tariffs that raise costs for exporters;
• link skilling to industry demand;
• invest in women's safety, transport and childcare;
• expand social protection.

The demographic dividend: it is expected to last until around 2040–2045, after which population ageing sets in. Without enough productive jobs, it may become a "demographic disaster".

Common prelims traps

• PLFS is conducted by the NSO (MoSPI), not the Labour Bureau.
• The IR Code raised the layoff threshold to 300, not 200.
• Disguised unemployment means zero marginal productivity, not the absence of a job.
• Labour is a Concurrent List subject.

Quick self-test

1. *What is the difference between LFPR and WPR?* LFPR includes those seeking work; WPR counts only the employed.
2. *Which code covers gig workers?* The Code on Social Security 2020.
3. *Why is rising female LFPR viewed with caution?* Much of it is unpaid helper work in rural household enterprises.

Practice: Mains question

*"India's challenge is not just creating more jobs, but creating better jobs." Discuss with reference to PLFS trends and the new labour codes. (250 words)*

Key term

Gig worker (Code on Social Security 2020): a person who works outside a traditional employer–employee relationship, such as a delivery or ride-hailing partner. Rajasthan's Platform-Based Gig Workers Act 2023 was the first state law.