Recovery in labour market partial, says CMIE

India’s swift recovery after the Covid-19 lockdowns seems exhausting and discriminatory as incremental improvements in job generation have diminished drastically and salaried jobs have witnessed greater job losses than any other sector, the Centre for Monitoring Indian Economy said.

Further, the labour market recovery seems to be partial as the labour force participation rate of 40.5% in August 2021 is 2.1 percentage points lower than it was in 2019-20 while the employment rate was 2.2 percentage points lower.

“These two ratios are more important than the unemployment rate. They had fallen dramatically upon the imposition of the lockdown and have recovered swiftly but their recovery has remained partial seventeen months after the first lockdown,” CMIE said.

CMIE data shows that in the past 12 months, since September 2020, the net cumulative increase in employment has been just 44,483 or just 0.04 million on a base of over 400 million jobs. Also, much of the new employment is likely disguised employment as labour has moved from factories to farms during this period.

“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 said 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 added.

As per CMIE, employment in August 2021 was 397.8 million or 5.7 million lower than it was in 2019-20.

Calling the job market recovery so far as discriminating, CMIE said job losses are concentrated among salaried employees. As per the CMIE data, nealy 8.8 million salaried jobs have been lost till August and 2 million loss of employment to entrepreneurs.

These losses, however, 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 traders. “The recovery seems to have discriminated against salaried employees and entrepreneurs,” it added.

Further, the recovery of the labour market is highly skewed in favour of the rural markets. Data shows of the 5.7 million jobs lost between 2019-20 and August 2021, 3.7 million were lost in urban India, which accounts for 32% of all jobs, while only 1.9 million jobs were lost in rural India.

“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,” it added.

According to CMIE, the data available for the first three weeks of September show that the labour market indicators are improving. “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,” it added.

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