More Labour Market Indicators

The labour market is the backbone of any economy, driving productivity, innovation, and growth. It includes a wide range of elements, such as the demographics and skills of the workforce, as well as the complex interplay between the supply of and demand for labour.

Let's explore the key components that define and drive the labour market: the labour force, labour supply, workforce, unemployment, and participation rate. Each of these elements plays a crucial role in shaping economic policies, assessing societal well-being, and forecasting future trends in employment and productivity.

Labour Supply is the quantity of labour that individuals are willing to provide at a specific wage rate. For instance, you may be able to work 10 hours a day, but you are willing only to work for 6 hours a day on a particular day.

Thus, labour supply is, measured in terms of man-hours of work and it is always estimated to the wage rate.

Supply of labour can increase or decrease even when the number of workers remains constant. Because the supply of labour is measured in terms of man-days or person-days, where one person-days refers to 8 hours of work.

Labour Force on the other hand refers to the number of persons actually working or willing to work. It is not related to the wage rate.

And because it is measured in terms of the number of persons, thus the size of the labour force increases or decreases only when the number of persons actually working or willing to work increases or decreases.

Workforce refers to the number of people working and does not include those who are willing to work but not working. Thus, we can say,

Workforce = Labour force - Number of people not working but are willing to work.

Unemployment, as we discussed earlier in the previous chapter, is the condition where individuals who are capable of working, are actively seeking work but are unable to find any work.

Also, the above concepts - labour force and workforce can help the estimation of unemployment as follows:

Number of people unemployed = Labour Force - Workforce

The Rate of unemployment is estimated as under:

Rate of unemployment = Number of people unemployed / labour force x 100

Participation Rate refers to the proportion of the population that is actively engaged in the process of production or the process of value addition in the country and can be estimated as follows:

Participation Rate = Total Workforce / Total population x 100

Further, let's understand with the help of an example.

Suppose we have a small town with a total population of 1,000 people. Out of these, the following conditions apply:

• 600 people are in the labour force (they are either working or willing to work).
• 500 people are currently employed (the workforce).
• 100 people are unemployed (they are willing to work but currently do not have a job).

Now, let's apply the definitions and formulas.

Labour Supply: This is the total number of hours that individuals are willing to work at a specific wage rate. For simplicity, let's say that each person in the labour force is willing to work 8 hours a day.

Measurement in Man-Days: Since there are 600 people in the labour force, and each person is willing to work 8 hours a day, the total labour supply is 600 * 8 = 4,800 man-hours per day.

Labour Force: This is the number of people who are either working or willing to work. In our example, this is 600 people.

Workforce: This is the number of people who are actually working. In our example, this is 500 people.

Unemployment: The number of people unemployed is the difference between the labour force and the workforce.

Number of people unemployed = Labour Force − Workforce
= 600 − 500
= 100

Unemployment Rate: This is the number of unemployed people as a percentage of the labour force.

Rate of Unemployment = Number of people unemployed / Labour Force × 100
= 100 / 600 ×100
≈ 16.67 %

Participation Rate: This is the proportion of the population actively engaged in production or value addition.

Participation Rate = Total Workforce / Total Population × 100
= 500 /1000 ×100
= 50%

With the help of example, I hope you may be familiar with the major labour market indicators.

Current scenario

• According to the India Employment Report 2024, created jointly by the Institute for Human Development and the International Labour Organisation (ILO), India's working population increased from 61% in 2011 to 64% in 2021 and is projected to reach 65% in 2036. However, the percentage of youth involved in economic activities declined to 37% in 2022.

• According to the latest data from the Centre for Monitoring the Indian Economy (CMIE), an independent think tank, the unemployment rate in India stood at 9.2% in June 2024, a sharp increase from 7% in May 2024.

• CMIE's Consumer Pyramids Household Survey shows that female unemployment reached 18.5% in June 2024, exceeding the national average. This is up from 15.1% in the same period last year.

• At the same time, male unemployment stood at 7.8%, slightly higher than 7.7% in June 2023.

• While the Labour Participation Rate (LPR) rose to 41.4%in June 2024 from 40.8% in May and up from 39.9% in June 2023, the rural unemployment rate rose to 9.3% in June from 6.3% in May.

• The urban unemployment rate climbed from 8.6% to 8.9% LPR is made up of people working or willing to work and actively looking for a job among the total working-age population (15 years of age and above).

In India, the recent data from 2024 reveals significant trends: an increasing labour participation rate but also a rising unemployment rate, particularly among females and in rural areas. These insights highlight the dynamic and challenging nature of the labour market, underscoring the need for targeted policies to enhance employment opportunities and economic engagement across different demographics and regions.

To conclude, Labour market indicators are vital for policymakers to make informed decisions, design targeted interventions, and monitor economic health. By analysing data on employment, participation rates, and unemployment, policymakers can address challenges like skills mismatches and regional disparities. This helps create effective strategies for job creation, enhance productivity, and ensure social stability and economic growth.