9th Five Year Plan (Vol-1)
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Employment Perspective
Labour Force Growth and Employment Requirement || Quality of Employment || The Regional Dimension

Labour Force Growth and Employment Requirements

4.1 One of the most daunting challenges facing the Ninth Plan is to provide employment not only for the additions to the labour force during the Plan period, but also to reduce the back-log of unemployment accumulated from the past. This imperative needs to be seenin the context of both an acceleration in the growth rate of the labour force and a secular downward pressure on the employment intensity of the growth processes. Despite an expected reduction in the growth rate of population to 1.58 per cent per annum by the end of the Ninth Plan, the labour force growth reaches a peak level of 2.51 per cent per annum during the Ninth Plan period; the highest it has ever been and is ever likely to attain. Population is projected to increase by 78 million during the Ninth Plan period (1997-02) to a level of 1029 million by the end of the Plan. However, the age structure of the population changes in response to fertility behaviour experienced in the past, and projected for the future, so that the proportion of the population in the most active working age-group of 15 to 59 years goes up significantly during the Plan period. This is a reflection of the high rates of population growth observed during the late 1970s and early 1980s. Moderation in growth of population, which has been brought about by a decline in birth rate in recent years, starts getting reflected in decline in labour force growth only in the post Ninth Plan period.

4.2 The growth rate of the labour force is determined partly by the age structure of the population and the age and sex specific labour force participation rates that can be expected to obtain. The age profile of the population for the Ninth Plan period is presented in Table 4.1. As can be seen, the Ninth Plan period is likely to witness a sharp decline in the share of the population in the age group of 0 to 14 years, and a corresponding increase in the age group of 15 to 59 years, with the 60+ age group more or less retaining its share.

Table 4.1 : Age structure of population: 1997-2002 
                          (Per cent)
 Age-group              1997            2002
    0 -14               37.23           33.59
  15 - 59               56.07           59.41
       60+               6.70            7.00

4.3 The labour force participation (LFPR) by age and sex are given in Tables 4.2 and 4.3. As may be seen, participation in labour force varies across age-groups, rising sharply after 20 years age in case of males and 34 years in case of females. Furthermore, for any particular age-group, it tends to vary over time, the direction of change depending upon the benefit perceived by the individual from devoting time to an economically productive activity in contrast to pursuit of education or leisure. A crucial factor in the choice between joining and remaining in the labour force or otherwise is the availability of social security, either through the family or through other institutional structures. The most recent year for which labour force participation rates (LFPR) are available by age-groups is 1993-94. Variations in LFPRs during the past 16 year period are not uniform across age-groups; there is a substantial decline in LFPR in age group 15- 29, practically no change in 30 - 44 years, and a slight increase in the higher age groups.

Table 4.2 : Trends in  Labour Force Participation Rates   
                                 ( Per Thousand of Population)
        Age         Period             Male          Female
       Group                   Rural        Urban  Rural    Urban
      15-29       1977-78      879         746    515       257
                  1987-88      824         710    478       211
                  1993-94      804         684    455       204
      30-44       1977-78      990         990    619       324
                  1987-88      988         987    603       301
                  1993-94      990         986    600       300
      45-59       1977-78      963         940    538       291
                  1987-88      964         933    538       275
                  1993-94      968         937    543       283
      60+         1977-78      667         517    221       130
                  1987-88      670         482    220       123
                  1993-94      699         443    241       114
      All(15+)    1977-78      904         831    517       269
                  1987-88      879         810    496       239
                  1993-94      877         811    491       238
      Note:  Constituent shares in labour force in 1993-94 are
             Rural Male 0.499, Rural Female 0.270, Urban Male
             0.182 and Urban  Female 0.049.

Table 4.3: Participation in Labour Force by Age Group and by Sex: 1997 - 2012

                          (per thousand of populaltion)
 	 Age              Males                     Females
              1997  2002  2007   2012    1997    2002    2007   2012
      15-19   517   482   447    412     302      282     261    241
      20-24   871                        408
      25-29   975                        454
      30-34   988                        505
      35-39   990                        526
      40-44   986        (a)             538             (a)
      45-49   981                        524
      50-54   961                        476
      55-59   914                        411
      60 +    637                        205
      Note: (a) No change in labour force participation in age
                groups above 20 years.    

4.4 A continuation of the trend decline in labour force participation is projected in the age group 15 - 19 years over the perspective period. The decline may be even sharper if the thrust on education and literacy that is proposed for the Ninth Plan is realised to a substantial extent. As far as the base year (1996-97) projection of the LFPRs for the other age groups are concerned, these have been derived on the basis of the information pertaining to the 1987-88 and 1993-94 NSS data and the 1991 Census. It turns out that there is practically no difference between these figures and the 1993-94 NSS data. Assuming no significant change in participation rates occurring in other age groups in relation to the base year, the LFPRs by age and sex are given in Table 4.3. However, it is recognised that with improved health and longevity, the LFPRs in the older age groups, particularly 50+ years, may be higher than assumed. On the other hand, with improvements in the average economic conditions, the imperative to remain employed for survival reasons is mitigated. Thus there are contradictory forces operating in this regard, and it is implicitly being assumed that the net effect is not significant.

4.5 On the basis of the age and sex structure of the population and the LFPRs, the labour force is projected to increase by 52.4 million during the Ninth Plan period on the usual status concept, as shown in Table 4.4. As may be seen, the absolute number of persons in the 35-60 age group of labour force increases sharply during the Ninth Plan because of the change in age structure, which leads to 3 percent or higher growth occurring in labour force age groups 40 to 59, despite an expected reduction in the LFPR of this age-group. If the motivation to attain higher education levels or the expected level of economic well-being and social security do not materialise, the LFPR’s of lower age groups may turn out to be higher and put even further pressure on the labour market.

	Table 4.4 : Labour Force Projections by Age Groups
	 Age Group      1997        2002         Growth
                           ( Million )           ( % p.a.)
	   15-19          40.31      45.03         2.24
           20-24          55.45      62.91         2.55
           25-29          56.89      61.47         1.56
           30-34          52.64      58.88         2.26
           35-39          46.60      52.80         2.53
           40-44          39.56      46.04         3.08
           45-49          32.90      38.13         2.99
           50-54          25.86      30.27         3.20
           55-59          18.86      22.45         3.55
           60 +           28.15      31.64         2.37
           15 +          397.22     449.62         2.51

4.6 The labour force growth corresponding to the projected increase in population, change in its age structure and change in labour force participation for the perspective period is given in Table 4.5. It will be seen that the requirement of work opportunities increases by 52 million in Ninth Plan, followed by an increase of 58 million in the quinquennial 2002-07, and a mild reduction to 55 million in quinquennial 2007-12. Thus, although the rate of growth of the labour force is highest during the Ninth Plan period, the increase in the absolute number of persons in the labour force will peak during the post Plan quinquennium of 2002-07. Efforts will therefore have to be initiated for creating the conditions for absorption of the larger number of workers in the post-Plan period during the Ninth Plan period itself.

          Table 4.5: Population and Labour Force: 1997 - 2012
                                         (million- Ist April) 
  			1997        2002      2007      2012
        Population      951.18    1028.93  1112.86   1196.41
        Labour Force    397.22     449.62   507.94    562.91

Employment Opportunities during the Ninth Plan and Beyond

4.7 In measuring employment / unemployment in a country like India, certain specific features of the workforce need to be taken into account. The structure of workforce with dominance of self-employment and primary sector, where work-sharing is common, also tends to depress unemployment rates in general and chronic, long-period unemployment rates in particular. Inadequacy of the measure of unemployment in terms of open unemployment has, therefore, been well recognised in the measurement and analysis of unemployment in India. The National Sample Survey Organisation (NSSO), which provides estimates of the rates of unemployment on the basis of its quinquennial surveys, therefore, uses three different concepts. A person is considered unemployed on Usual Status (US) basis, if he/she was not working, but was either seeking or was available for work for the major part of the reference year. On the basis of a week as the reference period, a person is considered unemployed by Current Weekly Status (CWS), if he/she had not worked even for one hour during the week, but was seeking or was available for work. The third concept of unemployment is the Current Daily Status (CDS), which is in terms of total person days of unemployment, and is the aggregate of all the unemployment days of all persons in the labour force during the reference week. The US unemployment rates is generally regarded as the measure of chronic open unemployment during the reference year; the CWS unemployment rates also measure chronic unemployment, but with the reduced reference period of a week. The CDS is considered to be a comprehensive measure of unemployment, including both chronic and invisible unemployment.

4.8 Of the three concepts used to study disposition of time in order to arrive at estimates of labour force and employment - usual status, current weekly status and current daily status - the usual status concept covering the principal and subsidiary workers is the closest to the concept used in the Census to enumerate workers. By including even those who are not principal workers but work in a subsidiary capacity, e.g., students, pensioners, etc., the usual status concept comprehensively covers all those engaged in or seeking economic activities. In a situation where social security in the form of a reasonable and assured support as allowance for unemployment is not guaranteed, those who take to work in a subsidiary capacity do so generally out of economic compulsion. Hence both the Principal and the Subsidiary workers need to be considered in estimating both the labour force and employment. Moreover the usual status concept; with one year as the reference period over which disposition of time to activities is seen in classifying an individual as being in or out of labour force, and those in labour force as being employed or seeking work, yields more stable estimates of employment in contrast to the other two concepts which have shorter reference periods of a week or an average day of the week respectively. Taking the usual status concept as the reference, it is possible to study the nature and characteristics of those employed, using the information available from the data compiled on current weekly and current daily status concepts bases. Projections of labour force and employment have therefore been made on the usual status concept, and qualified, where necessary, on the basis of the other two concepts.

4.9 Given the existing base of information, two independent and unrelated sets of data have to be used for estimating the relationship between employment and output : (i) estimates of employment and unemployment prepared on the basis of allocation of time by an individual to different activities; and (ii) estimates of output made using national income concepts. Data for the former is collected through quinquennial National Sample Surveys, and for the latter through the system of National Accounts. Although there are some conceptual differences between the two sources of data, they can be used so long as the differences remain consistent over time. The relationship between the two variables, i.e. output and employment, at the sectoral level has varied over time, but has been observed to have remained within a reasonable range if the effect of economic shocks, such as droughts, are accounted for. Thus it is possible to econometrically estimate with some margin of error, the elasticity of employment on a sectoral basis which can then be utilised for projecting employment both at the sectoral and at the aggregate level for the Ninth Plan period. These elasticity estimates are provided in Table 4.6, but it needs to be recognised that these estimates can change depending upon the economic structure and composition of growth at the sub-sectoral level.

Table 4.6 :  Elasticity of Employment to GDP
Sector                       Employment Elasticity
               1972-73  1977-78    1983    1987-88     1983      1997
                 to       to        to       to         to        to
               1977-78   1983    1987-88   1993-94   1993-94     2002
                                Actuals                     Projected
1.Agriculture*  0.75    0.45     0.45      0.53       0.50       0.50
2.Mining  and       0.94    0.80     1.00      0.39       0.67       0.60
3.Manufacturing 1.00    0.67     0.29      0.42       0.33       0.25
4.Electricity   1.00    0.73     0.73      0.33       0.50       0.50
5.Construction  0.33    1.00     1.00      0.00       1.00       0.60
6.Wholesale  and  
  Retail Trade  1.00    0.78     0.63      0.59       0.60       0.55 
  Storage  and 
  Communication 0.74    1.00     0.25      0.68       0.47       0.55
  Real Estate,
  Insurance  and   Business
  Services      0.00    1.00     0.11      1.00       0.90       0.53
  Social and
  Services      0.73    0.83     0.27      0.92       0.59       0.50
 All Sectors    0.59    0.53     0.38      0.43       0.40       0.38
  * On the basis of 3 year moving average of GDP at 1980-81 prices.

4.10 As has been noted, the growth of labour force accelerates in the Ninth Plan period in comparison to the preceding decade, which requires a commensurate increase in the pace of creation of additional work opportunities in this period. This factor needs to inform every aspect of formulation of the Ninth Plan.

4.11 It has been explained in Chapter 2 that the growth target for Ninth Five Year Plan needs to be 6.5% per annum on an average. The sectoral structure of growth corresponding to the target of 6.5% growth in GDP, as given in Chapter 2, along with the estimated sectoral elasticities, yield an increase in work opportunities during the Ninth Plan period as shown in Table 4.7. The projections of labour force and work opportunities created during the Ninth Plan lead to a reduction in the average rate of unemployment during the Ninth Plan period as compared to the Eighth Plan (table 4.8).

Table 4.7 :  Projections of Work opportunities 1997-2002
Sector                GDP Growth         Work opportunities
                       (% p.a.)              ( Million )
                      (1997-02)           1997       2002
1.Agriculture            3.9            238.32     262.48
2.Mining  and                7.2              2.87       3.54
3.Manufacturing          8.2             43.56     48.22
4.Electricity            9.3              1.54       1.93
5.Construction           4.9             14.74      17.03
6.Wholesale  and             
  Retail Trade           6.7             34.78      41.67
  Storage  and  
  Communication.         7.3             11.96      14.57
8.Financing, Real                            
  Estate, Insurance
  and Business
  Services               8.5              4.55       5.68
9.Community,             7.1             38.98      46.41
  Social and
  Personal Services
  All Sector             6.5            391.30     441.52

 Table 4.8: Labour Force and Employment in Eighth and
	    Ninth Plan Periods 
                  8th Plan(1992-97)      9th Plan (1997-02)
     Labour Force           374.2              423.4   
     Employment             367.2              416.4    
     Unemployment             7.0                7.0    
     (rate) (Percent)       (1.87)             (1.66)
      Note-1 to Table 4.9 applies.

4.12 Every effort would need to be made in attaining full employment in the post-Plan period. Since labour force growth is expected to be at its peak in the Ninth Plan period, attainment of near full employment by the year 2007 may not be an unreasonable target provided that the conditions are created for further acceleration in the growth rate and the intensity of labour absorption is not substantially reduced both sectorally and in terms of the sectoral structure of growth. It is estimated that full employment by 2007 is contingent upon acceleration in growth of employment in post Ninth Plan period to 2.8 per cent compared to a realised growth of 2.36 per cent (1978-94) and projected at 2.44 per cent in the Ninth Plan. This would require GDP to grow at 7.7 per cent per annum during the post-Plan period - which is well within the realm of feasibility, as shown in Chapter 2.

     Table 4.9 : Population, Labour Force and Employment   
 	      1978(a)  1983(b) 1994(a)  8th Plan   9th  Plan   10th Plan
		  	        (1992-97)     (1997-02)  (2002-07)
                                             (f)          (f)          (f)   
Population(c)      637.6    718.2   895.0    951.2    1028.9       1112.9
                           (2.19)  (2.12)   (1.89)     (1.58)      (1.58)
Labour Force       255.8   286.6    368.5    374.2     423.4        478.8
                           (2.09)  (2.42) 
Employment         249.1   281.2   361.5     367.2     416.4     474.7(d)
                           (2.23)  (2.42)   
Unemployment         6.7     5.4     7.0       7.0       7.0      4.1 (e)
Rate (%)             2.63    1.89    1.89      1.87      1.66     0.86(e) 

Notes :
1. Estimates of labour force and employment are on usual status concept and pertain to 15 years and above.
2. Figures in brackets are compound growth rates in the preceding period.
(a) As on Ist January
(b) As on Ist July
(c) Population at the terminal year of the plan
(d) Required to attain near full employment.
(e) Unemployment reduces to negligible level by the year 2007
(f) Labour force, employment and unemployment are stated as annual averages during the Plan period.
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