Labour market recovery after second wave vanishing; salaried jobs being lost, employment generation waning

Unemployment rate on basis of 30 day moving average as on September 23, 2021 is 7.3 per cent. In September 2020, it was 6.68. The crisis has thus worsened over the last 12 months

Representative Image (Photo Courtesy: Social Media)
Representative Image (Photo Courtesy: Social Media)
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Dr Gyan Pathak

After the second wave of COVID-19 subsided in May, the labour market in India started showing recovery. However, within four months, the recovery has started vanishing, with salaried jobs diminishing and employment generation waning. Moreover, the data on jobs may seem to be promising if we don’t dive deep into it, but in reality, it conceals the alarming situation on the ground.

The latest data released by CMIE shows that the labour market recovery was partial and the labour force participation rate of 40.5 per cent in August was 2.1 percentage points lower than it was in 2019-20. Not only that, even employment rate was 2.2 percentage points lower than the last year.

It may be mentioned here that these had fallen dramatically upon imposition of lockdown, especially after the second wave. When compared with the condition during the first wave, the recovery shows only a partial improvement even after seventeen months.

These two data are most important, the CMIE report has said, even more important than the unemployment rate. The recovery so far seems exhausting. Moreover, it is discriminatory, since the incremental improvements in job generation have diminished drastically and salaried jobs have witnessed greater losses than any other sector in the labour market. Much of the new employment is most likely disguised employment as labour has moved from factories to farms during this period, the report has emphasized.

Job market recovery is discriminating, the report said, because job losses are concentrated among salaried employees. Nearly 8.8 million salaried jobs have been lost till August and there has been 2 million loss of employment to entrepreneurs.

As for cumulative increase in employment in the past 12 months, i.e. between September 2020 and August 2021, the net cumulative increase was only 44,483, or just 0.04 million on a base of over 400 million jobs. Moreover, much of these new employment is likely disguised employment as labour has moved from industries to agriculture.


“This lack of momentum in the addition of jobs to the stock before reaching the employment level of 2019-20 indicates a premature exhaustion of the recovery process,” CMIE has emphasized in its weekly labour market analysis. “This is serious because while the creation of additional jobs has stalled, the flow of additions to the stock of working age population continues,” it said.

In August 2021, employment in the country was just 397.8 million which was 5.7 million lower than it was in 2019-20.

These job losses, especially of the salaried class, indicate the deterioration quality of available jobs not only in business and industries, but also in agriculture, since people who lost their jobs shifted to low paying agriculture in large numbers, increasing the burden on agriculture sector, and reducing the incomes for all engaged in agricultural activities.

The losses in the salaried jobs have been partially offset by a 4.7 million increase in employment in farming and 0.7 million increase in employment as daily wage workers and small trades or self employment.

Not only this, the recovery of the labour market is also highly skewed. Since the migrant workers have left urban areas in large numbers, the rural areas have now more people. It was but natural that rural markets are showing improvement. Thus, labour market have been skewed in favour of the rural markets.

Data shows that 5.7 million jobs have been lost in the last one year up to August 2021. Out of these, 3.7 million were lost in urban areas which account for 32 per cent of all jobs. Only 1.9 million jobs were lost in rural areas.

The report added, “Rural India’s saviour has been the agricultural sector. This absorbed additional labour of the order of 4.6 million between 2019-20 and August 2021.” The data for three weeks of September 2021 is now also available showing some improvement.

However, the CMIE report points out, “They are likely to be small and it is unlikely to move the needle much on the fact that the recovery is still incomplete and seems exhausted.”

Unemployment rate on the basis of 30 day moving average in India as on September 23, 2021 is 7.3 per cent. For urban areas, it is 9 per cent while for rural areas it is 6.5 per cent. One year before, in September 2020, these figures were 6.68, 8.45, and 5.88 per cent respectively. The unemployment scenario has thus worsened in the last 12 months.

It should also be noted that the first COVID-19 wave had started subsiding after September 2020.

(IPA Service)

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