Prof Arvind Panagariya (AP) in his 2nd May article (here) in the Times of India edit page has argued that the number of new job seekers on an annual basis cannot be more than 7.8 million between 2016 and 2021. His article is a rebuttal to the claim made by India’s main opposition party that around 12 million new job seekers are entering the Indian labour force every year. He has used Labour Force Participation Rate (LFPR) and the projected incremental population per annum in the age group 15 and above to arrive at this number. Disregarding the issue of applicability of LFPR for the purpose at hand, his computation suffers from an obvious mistake- that is to compute flow from change in stocks between start and end of points of a time period. The measure of population is a stock measure as on a date. To work out new entrants or inflow to this inventory we also need to measure the outflow of people from this inventory- that is death. The overall death rate for Indian population is estimated to be 7.3 per 1000 of population. Although death in the age group above 15 could be higher than this, let us apply the same to the initial stock of person – that is 928.6 million. So the number of person entering this age group ( 15 and above) would stand corrected to 21.6 million instead of 15 million worked out by AP. Applying LFPR of 503 per 1000 persons , the estimated number of job seekers works out to around 11 million.
It must be also noted that LFPR is not a parameter that results from the behavioral characteristics of the population. In the jargon that AP would be comfortable with, I would call it an endogenous variable, decided by the job prospect, income level and many other characteristics. Its use as a predictor of number of job seekers is questionable. In fact he himself has underscored the conundrum of very low and declining LFPR of rural females. The 5th Annual Employment-Unemployment Survey, conducted by Labour Bureau in the year 2015, puts the female LFPR at a measly 23.7 % at all India level. For China, the comparable figure is 63.9. But for males, the LFPR figures for these two countries are close to each other. Cultural and social mores cannot explain such huge difference in female LFPR, when women from the poor households are always ready to work, provided they get regular employment. Self-employment cannot be an acceptable option for young females in many cases because of lack of safe environment for them. The gender gap in self-employed workers under “Usual Principal Status” is little more than 8% at all India level.
Instead of using population data and LFPR, we can look into some of other hard data. For example, let us consider the Gross Enrolment data by level of schooling, given in the annual publication- Educational Statistics at a Glance- by the Ministry of Human Resources Development. The latest publication gives the total enrolment for undergraduate studies in the year 2014-15 as 27 million students. Let us assume that average period for undergraduate studies as 4 year. Thus we may expect that every year an inflow of around 6.8 million young educated Indian entering the job market. Even if we assume 60% of this 6.8 million enters the job market this would imply the number of UG qualified job seekers would not be less than 4 million very year. So AP must provide more robust statistics to conclude that a figure of 11 or 12 million jobseekers can be considered as overestimation by a “solid 50%”. He needs a more solid ground for making that statement.
Note: Labour Force Participation Rate – This is defined as the number of person /person days in the labour force per 1000 persons/person days. The labour force comprises both employed persons and job seekers (unemployed). A person is included in the labour force if he or she is either engaged in economic activity for a relatively longer part of the reference period ( usually one year) or making “tangible effort” to seek “work” or available for “work”. Full time students are not considered as part of labour force. There are five categories of employment; self-employed, regular wage/ salaried employee, contract worker or a casual labour. In our calculation we have taken LFR rate (50.3%) from the Fifth Annual Employment Unemployment Survey of the Labour Bureau.
Dr. A.K.Nag was a senior executive of the Reserve Bank of India, the central bank and the monetary authority of the country. He was also one of the main architects of the RBI's enterprise wide data warehouse, a pioneering effort for any central bank anywhere and many other such one-of-its-kind projects.