The challenge is more productive employment

Why in the News

India has cut extreme poverty to 2.6% in 2023, measured on the World Bank’s $3 a day line. The lack of more productive, better paying non-farm jobs now blocks the path to mass prosperity, so shifting workers from low to high productivity work is one of India’s biggest development challenges.

What is productive employment, and why does it matter now?

1. Productive employment: It is work in which each worker produces more output, so the job can pay better. It is like moving goods by truck instead of by hand: the same hours deliver more.
2. Low-output work: Farm work and informal enterprises produce little per worker in India, so the people they employ stay poorly paid even as poverty falls.
3. The takeaway: Escaping poverty has raised living standards, but prosperity depends on moving workers into jobs that produce and pay more.

How far has poverty fallen?

1. Lower-middle income line: At the $4.2 a day line used for lower-middle income countries, poverty fell from more than half of Indians to about one in six, per the World Bank.
2. Broad-based gain: Living standards improved across the rural-urban divide and in most States.

Is the workforce moving into better jobs?

1. Rising participation: The labour force participation rate, the share of adults working or seeking work, rose to about three in five, per the Periodic Labour Force Surveys (PLFS). More women entering work explains much of the rise.
2. Farm dependence: Agriculture, the less productive sector, still employs around 43% of India’s workforce.
3. Low-end services: Employment has expanded steadily in less productive, low-end services instead of in manufacturing.

How does India compare with Asian economies that grew richer?

1. Smaller farm workforces: Only about a fifth of China’s workers and a quarter of Vietnam’s work in agriculture, per the World Bank.
2. Manufacturing route: Other Asian countries moved up the income ladder as manufacturing absorbed their workers. Indian manufacturing has not absorbed its millions of low skilled and unskilled workers.

Why is the poorest belt the hardest test?

1. Concentrated poverty: The World Bank places 57% of India’s poor in the “belt stretching from Uttar Pradesh to West Bengal”.
2. Fewer local jobs: Per capita incomes in this region tend to be below the national average, and it offers fewer job opportunities.
3. Income ladder: To reach upper-middle income and then high income status, India needs to move its workforce from low to high productivity jobs.

Challenges

1. Informal non-farm work: Roughly three-fourths of non-farm workers are employed in informal enterprises, which also have low productivity.
2. Women’s job quality: Many women joining the labour force work in agriculture or are self-employed, not in better paying non-farm jobs.
3. Migration as the main outlet: In the poorest belt, workers reach non-farm jobs mainly by migrating to high income regions.

Way Forward

1. Labour-absorbing manufacturing: Expand manufacturing that can employ low skilled and unskilled workers, the route other Asian economies used.
2. Jobs in the poorest belt: Create non-farm work between Uttar Pradesh and West Bengal, so migration is not the main route out of farming.
3. Productive informal enterprises: Raise productivity in informal non-farm enterprises, so the workers they employ can earn more.

Conclusion

India’s development task has moved from lifting incomes above a survival line to changing the kind of work people do. The marker to watch is whether higher productivity jobs, rather than farms and low-end services, absorb the women entering the labour force and the workers of the poorest belt.

Key numbers

1. Poverty at $4.2 a day (World Bank): 57.7% in 2011 to 16.1% in 2023.
2. Labour force participation rate (15 years and above, PLFS): around 59% in 2025.
3. Agriculture’s share of workers (World Bank): China 21.68%, Vietnam 25%.

Back2Basics: Periodic Labour Force Survey (PLFS)

1. What it is: A household survey that measures employment and unemployment in India.
2. Who runs it: The Ministry of Statistics and Programme Implementation (MoSPI).
3. Current Weekly Status (CWS): Under this approach, a person’s activity status is decided on the basis of the preceding seven days.
4. Monthly estimate: India’s official unemployment estimate is now released every month on the CWS approach.

Matching Previous Year Question

“[2016, GS2, 12 marks] Demographic Dividend in India will remain only theoretical unless our manpower becomes more educated, aware, skilled and creative. What measures have been taken by the government to enhance the capacity of our population to be more productive and employable?”