Labour, Jobs and Employment – Harmonization of labour laws, gender gap, unemployment, etc.

Unemployment: Measurement Challenges in Developing Economies


From UPSC perspective, the following things are important :

Prelims level: Periodic Labour Force Survey (PLFS)

Mains level: Read the attached story

Central Idea

  • The Periodic Labour Force Survey (PLFS) in 2017 revealed India’s highest-ever recorded unemployment rate at 6.1%.
  • The 2021-22 PLFS indicated a reduction to 4.1%, still higher than some developed economies like the U.S., where unemployment rates varied from 3.5% to 3.7% between July 2022 and July 2023.
  • Comparing India and the U.S. unemployment rates is complex due to their vastly different economies.


About Periodic Labour Force Survey (PLFS)

Established 2017 (The PLFS was initiated in 2017 as part of the larger National Sample Survey (NSS) program)
Administered by National Sample Survey Office (NSSO), Ministry of Statistics and Programme Implementation, Government of India
Objective To collect data on labor force participation, employment, and unemployment in India.
Key Data Collected – Workforce Participation

– Employment Types and Sectors

– Unemployment

– Demographic and Socioeconomic Characteristics

Significance Provides vital information for policymaking, research, and analysis related to the labor market in India.
Frequency Periodic surveys conducted at regular intervals.


Defining Unemployment

  • Unemployment, as per the International Labour Organization (ILO), involves being jobless, available for work, and actively seeking employment.
  • The unemployment rate is the ratio of the unemployed to the labor force, but it can decrease if the economy lacks job creation or people stop job hunting.

Measuring Unemployment in India

  • In developing economies, like India, social norms can limit job search decisions.
  • The 2009-10 National Sample Survey Organisation (NSSO) survey revealed that many women who engaged in domestic work would work if opportunities were available within their households but are not considered unemployed since they aren’t actively seeking jobs.
  • Measuring unemployment in India is complicated due to the informal job market, where individuals hold various roles throughout the year.

Different Metrics for Classification

  • The Usual Principal and Subsidiary Status (UPSS) and the Current Weekly Status (CWS) are two major measures for classifying individuals in India.
  1. UPSS considers an individual employed even if they worked for more than 30 days in a subsidiary role.
  2. CWS counts an individual as employed if they worked at least one hour on one day within the past week.
  • UPSS typically yields lower unemployment rates than CWS since finding work over a year is more likely than in a week.

Impact of Informal Economy

  • The low bar for classifying individuals as employed means that unemployment rates are lower in rural areas than urban regions in agrarian economies.
  • Definitions may ‘underestimate’ unemployment but are designed to capture the informal economy’s nuances.

The Lockdown Effect

  • The lockdown in March 2020 disrupted the Indian economy, but PLFS unemployment rates did not reflect this immediately.
  • UPSS status may still consider those who lost jobs during the lockdown as employed if they spent most of the previous year working.
  • CWS criteria show higher unemployment rates due to shorter reference periods but may not fully capture the long-term impact of the lockdown when aggregated across different periods.


  • Unemployment is becoming a significant factor in upcoming elections, making it crucial to understand its definition and measurement complexities in developing economies.

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