Data from the Centre for Monitoring Indian Economy (CMIE) shows that India’s labour force participation rate (LFPR) has fallen to just 40% from an already low 47% in 2016.
What does the data suggest?
This suggests not only that more than half of India’s population in the working-age group (15 years and older) is deciding to sit out of the job market, but also that this proportion of people is increasing.
What is ‘Labour Force Participation Rate’?
- According to the CMIE, the labour force consists of persons who are of age 15 years or older, and belong to either of the following two categories:
- are employed
- are unemployed and are willing to work and are actively looking for a job
- There is a crucial commonality between the two categories — they both have people “demanding” jobs. This demand is what LFPR refers to. While those in category 1 succeed in getting a job, those in category 2 fail to do so.
- Thus, the LFPR essentially is the percentage of the working-age (15 years or older) population that is asking for a job; it represents the “demand” for jobs in an economy. It includes those who are employed and those who are unemployed.
- The Unemployment Rate (UER), which is routinely quoted in the news, is nothing but the number of unemployed (category 2) as a proportion of the labour force.