An invisible hand

Somesh Jha filed a revealing report on the unemployment situation in 2016-17 in this newspaper last week. What was most revealing was not the unemployment rate in the year which has gained a notoriety of its own because of demonetisation. What was most revealing was that the Labour Bureau's employment / unemployment report for 2016-17 was deliberately held back from release by the government.

This was the sixth report on the subject by the Labour Bureau. The first was conducted in 2010. The Bureau has conducted six large household surveys in as many years.

Unlike the NSSO, the Labour Bureau has been very quick in conducting labour market surveys and relatively quick in releasing results from the same. Its 5th survey that covered a respectable sample of 156,563 households was completed in nine months from April through December 2015 and the report was released in another nine months, in September 2016.

If the Labour Bureau had conducted a survey during 2016-17, then, going by the Bureau's past record, its report should have been released latest by December 2017. So, the report was overdue by over 12 months.

Somesh Jha reveals that the report was apparently held back by the government. If this is true, it was certainly not a very wise thing to do.

The report does not paint an extraordinarily grim picture. For example, it states that the unemployment rate was 3.9 per cent in 2016-17. While this is higher than in 2013-14 (3.4 per cent) and 2015-16 (3.7 per cent), it was lower than the level in 2012-13, which was 4 per cent.

These variations are not damaging enough to warrant a censoring of their release. Now that Somesh's reportage has exposed the invisible hand of the government, it only makes matters worse for the government -- and unnecessarily.

Data presented by Somesh Jha in his report show a small increase in the labour participation rate -- from 52.4 per cent in 2015-16 to 52.8 per cent in 2016-17. I believe the labour participation rate is a more important indicator of the labour market situation in India than the unemployment rate. Any increase in the labour participation rate is a cause for celebration.

Labour Bureau data show that male labour participation rate, which had been falling steadily from 2011-12 till 2015-16, rose in 2016-17. Its a shame though that female labour participation rate continued to fall.

The rise in male labour participation is in sync with the good agriculture year that 2016 was. But, the simultaneous fall in female labour participation is telling. Female labour participation rate fell from 27.4 per cent in 2015-16 to 26.9 per cent in 2016-17 and unemployment among women rose from 5.8 per cent to 6.1 per cent. Less women entering the labour force could be because of education or customs or fears. But, the few numbers that enter the labour force suffer a higher unemployment rate than men. This latter phenomenon is a reflection of gender bias in employment.

It is evident that the estimates are based on the usual status (ps + ss) which considers a respondents' status for an entire year. This is too liberal. As a result, unlike CMIE's CPHS, these estimates are not suitable for understanding impact of short term shocks like demonetisation.

Besides, although the data are referred to as of fiscal year 2016-17, they are not associated much with demonetisation which happened in the same year.

The Labour Bureau's employment / unemployment surveys are usually conducted during a period that is less than 12 months. This is often criticised as it does not factor the seasonal nature of employment in India. The relevance of this criticism, however, should be decreasing. The stress of unemployment is more universal and seasonality now plays only a marginal role. Note that labour participation rate in urban India is low and unemployment rate is high and the share of urban India has risen substantially in recent times.

The 2016-17 survey of the Labour Bureau was conducted during April - December 2016. Assuming that the questions were similar to the ones administered in earlier rounds it is likely that the reference period was of the entire one year period before the date of the survey. In such a case, the demonetisation effect in the revealed data would be miniscule.

We may therefore infer that unemployment was rising and labour participation rates were generally falling independent of demonetisation and independent of government regimes.

The reported deliberate delay in releasing of the Labour Bureau's report raises questions on the release of NSSO's employment / unemployment survey (now the Periodic Labour Force Survey) results which should have been completed in March or June 2018 and was expected to be released by December 2018. Its delay may now raise suspicion of an invisible hand of the government attempting to control the narrative in an election year.


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