Context: NSSO has released Periodic Labour Force Survey for the year 2022-23. As per the report, India’s unemployment rate in urban areas decreased to 6.6% in April-June (Q1FY24), down from 6.8% in Q4FY23. 

Considering the importance of availability of Labour force data at more frequent time intervals, National Sample Survey Office (NSSO) launched Periodic Labour Force Survey (PLFS) in April 2017. 

The objective of PLFS is to estimate key employment and Unemployment indicators like Labour force participation rate, unemployment rate and Worker-population ratio etc.

This is the sixth Annual Report being brought out by NSSO on the basis of data collected in Periodic Labour Force Survey for the period July 2022 – June 2023.

Key findings of the PLFS report:

• Labour force participation rate: 

The LFPR in urban areas increased from 47.5% in April-June 2022 to 48.8% in April-June 2023.

• Worker-Population Ratio:

• Unemployment rate:

UR in urban areas decreased from 7.6% in April-June 2022 to 6.6% in April-June 2023 for persons of age 15 years and above

Unemployment measurement Methodology:

Unemployment is measured through labour force surveys using the following indicators: 

• Usual Principal Status (PS): It measures the status of activity on which a person has spent relatively longer time of the preceding 365 days prior to the date of survey. E.g., An individual who is reported to have been employed for more than a total of six months will be treated as employed. 
• Usual Principal and Subsidiary Status (PS+SS): According to this approach all individuals who are either unemployed or outside the labour force, but have worked for a minor period of not less than 30 days during the reference year are classified as subsidiary status workers.
• Current Weekly Status (CWS): In this approach current activity status relating to the week preceding the date of survey and those persons are classified as unemployed who did not have gainful work even for an hour on any day in the preceding week.

The Periodic Labour Force Survey (PLFS) conducted by the National Statistical Office (NSO) measures the unemployment status using Usual status (PS+SS)and Current weekly status (CWS) annually. 

Issues with unemployment methodology:

• Definition of Unemployment: 
  • A definition of unemployment that focuses on actively searching for a job may underestimate the true picture in a developing economy. Because:
    • Decisions to search for work are constrained by social norms like patriarchy. 
    • Unemployment cannot be restricted to merely those “searching for work” in a country where seasonal unemployment is prevalent. During non-agricultural seasons, some workers might not venture out into labour markets and actively seek work, but would be available for employment if suitable opportunities arise.
  • The definition of unemployment, which equates ‘work’ with economic activity in monetised economy, doesn’t include unpaid care work done by women. 
• UPS limitations: 
  • Not suitable to measure seasonal or Cyclical unemployment:
    • UPS approach, which emphasises on majority time criterion, may not reflect the true picture of unemployment in India where there is prevalence of seasonal employment and most of the workers are informal.  
    • It can measure chronic unemployment where individuals remained unemployed for a relatively longer period of the year, but fails to measure cyclical unemployment due to temporary fluctuations in business cycle. 
  • Recall Errors: Usual status requires a recall over a whole year of what the person did. But for those engaged in irregular and multiple forms of work, it becomes a challenge and may result in recall errors. 
• CWS limitations: 
  • In Indian labour markets, where the demand for labour is non-uniform throughout the year with regional variations, CWS either under-estimates or over-estimates the unemployment status. 

• Disguised unemployment: The existing approaches fail to estimate the extent of under employment and disguised unemployment which are prevalent in Indian economy, especially in agrarian sector.
• Regional variations: The periodic labour surveys conducted by NSO do not take into account of the regional variations in nature and extent of unemployment. For instance, unemployment is a rural phenomenon in several states, while in others it is concentrated in urban areas. 

Measures to improve:

• Revise the definition of “labour force” and “worker” to include persons not engaged in care economy and also individuals not actively seeking work due to barriers like social norms or lack of short-term gainful employment in rural areas. 
• The labour survey should be conducted multiple times throughout the year to overcome the challenge of non-uniformity of demand for labour throughout the year. 
• Since CWS overestimates labour force and workforce, it should be replaced with Modified CWS(MCWS), which include only those who were in the labour force for the major part of the week, for a better picture.