Daily News Analysis

RELIABILITY OF EMPLOYMENT RATES

20th June, 2022 Economy

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Context

  • Recently, the National Statistical Office (NSO), which functions under the Union Ministry of Statistics and Programme Implementation, released the annual report on the basis of the Periodic Labour Force Survey (PLFS) conducted during July 2020-June 2021.

 

Findings

  • The survey said the unemployment rate saw a decrease from 4.8% in 2019-20 to 4.2% in 2020-21, meaning that 4.2% of adults who looked out for jobs could not get any work in rural and urban areas of the country in 2020-21.
  • In rural areas, the rate is 3.3% while in urban areas the unemployment rate was recorded at 6.7%. This report, which also gave details of internal migration, said 11.8 people out of 100 samples migrated to other States during the period of survey.

 

What is the methodology of the PLFS?

  • A rotational panel sampling design has been used in urban areas, which means each selected household in urban areas is visited four times. There was, however, no revisit in rural areas and the samples were drawn randomly in the form of two independent sub-samples.
  • The sample size for the first visit during July 2020-June 2021 in rural and urban areas was 12,800 first-stage sampling units (FSUs) consisting of 7,024 villages and 5,776 urban frame survey blocks. Out of this, 12,562 FSUs (6,930 villages and 5,632 urban blocks) were surveyed for canvassing the PLFS schedule.
  • The number of households surveyed, according to the NSO report, was 1,00,344 (55,389 in rural areas and 44,955 in urban areas) and the number of persons surveyed was 4,10,818 (2,36,279 in rural areas and 1,74,539 in urban areas).
  • The PLFS gives estimates of key employment and unemployment indicators like the Labour Force Participation Rates (LFPR), Worker Population Ratio (WPR) and Unemployment Rate (UR).

 

Concerns

  • Experts have raised questions about the approach and methodology of the PLFS.
  • International Institute of Migration and Development said the PLFS or any such survey cannot produce decent data on migration. 60 crore people in the country could be migrants due to changing policy trends favouring urbanisation. Another issue that is being flagged is that the PLFS cannot compare a normal year with an abnormal, pandemic-hit year.
  • Indian School of Business, argued that a second visit to the rural households could have provided a bigger and larger picture of unemployment that was not captured by the PLFS.
  • By comparing the lower rate of economic growth during 2020-21 to the PLFS report on unemployment presents a contradiction as according to the Central Statistics Office, India’s GDP growth fell over 7.3% during 2020-21.

 

Importance of data

  • Historically, data collated by the Indian government agencies were well accepted globally.
  • Though, of late, several questions have been posed on the data released by the Centre and various State governments.
  • The country needs reasonably good data for evidence-based policies to address issues such as unemployment and farmers’ distress.
  • Governments need data to understand economic and social behaviour of the people. For example, if the survey says unemployment has decreased, there are chances that the government systems become lethargic in addressing the situation. According to researchers, even empirically, the employment and the quality of employment have come down.
  • The data is used basically for planning governmental intervention in various sectors such as agriculture, infrastructure, animal husbandry For drafting any policy, data has to be used in a context. If the reality is not reflected in data, public may reject such data. In classical Keynesian terms, any rate of unemployment below 5% is not considered as unemployment. The report raised questions among experts and critics about its efficacy in formulating policies against unemployment and for creating quality employment.

Explained | Are the unemployment numbers reliable?  - The Hindu