Unemployment Crisis: Over 45 Crore Indians Stop Seeking Work

  • It’s not always indicative of a strengthening economy when the unemployment rate declines.
  • According to the CMIE, more than 45 crore Indians who are of legal working age — or about the population of the US and Russia put together — do not desire a job anymore.
  • About 21 million women left the labor force altogether.

Recently, on June 3, 2022, a well-known politician made inflated statements regarding the unemployment rate in Uttar Pradesh. He boasted that the rate has decreased from 18 percent to a mere 2.9 percent. The truth of these assertions is a different matter, but today we’ll concentrate on how to avoid falling for such numbers that politicians frequently quote.

It would be foolish and presumptuous to immediately associate any sort of positive ideas with a low unemployment rate. Sure, it might indicate that more jobs are being created in the market or it could mean that the market has just become stagnant. When viewing the scenario through Indian spectacles, the latter seems to have greater merit.

6.6 percent was the unemployment rate in January 2022, which is lower than the pre-pandemic high of 7.2 percent in that month. The fall in the number of job seekers, rather than the creation of new positions, is what led to the decrease in unemployment. Due to their decision to give up hunting for work, there were 66 lakh fewer jobless persons in January 2022. As a result, they were no longer considered jobless, implying that in January, employment did not grow to include more jobless people. Instead, it witnessed a drop of 33 lakhs.

To put it in a more economic context- the labor force participation rate fell from 40.9 percent in December 2021 to 39.9 percent in January 2022. In other words, more than 60% of the employable population is not even looking for work. Therefore, it can be concluded that the unemployment rate does not accurately reflect the true status of the labor market.

According to recent statistics from the Mumbai-based Centre for Monitoring Indian Economy Pvt (CMIE), more than half of the 90 crore Indians of legal working age are not looking for jobs. Phrasing it rather accurately, it’s not that people don’t desire jobs, it’s that they have given up since there aren’t many positions available. The statistics are considerably more ominous for women. Between 2017 and 2022, around 21 million women withdrew from the labor force, leaving only 9% of their eligible population employed or searching for employment. The main factor is the lack of employment options, which impacts both men and women, although discrimination against women in the workplace is more prevalent in a market with limited employment prospects.

According to Arup Mitra, an economist at the Institute of Economic Growth, the practice is known as a discouraged dropout.

“When people do not get a job of desirable status or they understand that the job market is so bad that even after struggling they are not able to get anything so then they tend to withdraw from the labor market. They are tired and gradually it has an impact on the psychology of people”, he explained.

The decline in opportunities and replacement of better-quality jobs with lower-quality ones is cited by experts as a likely explanation for this. Additionally, many people have switched from regular and even temporary jobs to some type of self-employment, such as agriculture. The statistics inferred by CMEI support this. Employment in agriculture increased by 15.3 million in March 2022, which more than compensated for the staggering 16.7 million declines in non-agricultural occupations. This rise has been referred to by economists as “hidden unemployment,” where people, typically family members who formerly worked elsewhere, now perform unpaid family labor on their farms.

Also, let’s clarify the fact that the CMEI data precedes the covid upheaval in the country before anyone argues that the economic disaster we are currently experiencing is a result of the pandemic. Demonetization and the terrible GST implementation are only two of the numerous causes, in addition to the shock effects, the country experienced in the form of several lockdowns.

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