Working Paper No-1: Measures of Labour Force Participation and Utilization

FOCUS

The National Commission for Enterprises in the Unorganised Sector (NCEUS) was set up in 2004 by the United Progressive Alliance (UPA) government as an advisory body and a watchdog for the informal sector.

The NCEUS found that the measurements of the labour force and unemployment used by various agencies, particularly the Planning Commission (now the NITI Aayog), did not capture the complexities and dimensions of employment. So it asked Prof. J. Krishnamurty and Dr. G. Raveendran to review the methodology for the measurement of employment suggested by the Dantwala Committee in its 1970 report for the government. The authors reviewed existing literature on the subject and analysed unit-level data of the Employment-Unemployment surveys of the National Sample Survey Organisation (NSSO) in the last three five-yearly rounds. 

In this working paper from 2008, they suggest a new set of measures for the labour force, the workforce, unemployment, part-time employment and underemployment. The authors believe that adopting these measures will achieve the best use of available information for policy analysis. 

    FACTOIDS

  1. The labour force is typically measured using the ‘usual principal activity status’ (UPS). A person belongs to the labour force if s/he has either been working or looking for work for the major part of the 365 days preceding the survey.

  2. UPS measures exclude those who are employed and/or unemployed for a total of less than six months. People working intermittently are not included unless their days of work and unemployment totalled over half the reference year.

  3. Usual Principal and Subsidiary Status (UPSS) is a hybrid concept that was introduced to widen UPS. It includes those outside the labour force who didn’t work for the major part of the year but had been employed for some time, even 30 days.

  4. Current Weekly Status (CWS) measures have been used in Indian workforce surveys from before 1970 primarily because agencies like the International Labour Organization use estimates of employment and unemployment rates based on a weekly reference period.

  5. Under CWS, a person is in the workforce if s/he has either worked or is seeking and/ or available for work for at least one hour during the reference period of a week preceding the survey.

  6. The Dantwala Committee proposed the use of Current Daily Status (CDS) rates to study the intensity of work. These rates are computed using information on employment and unemployment recorded on 14 half-days of the reference week.

  7. The Planning Commission’s Task Force on Employment Opportunities, chaired by Dr. Montek Singh Ahluwalia, which submitted its report in July 2001, reviewed and used estimates based on all four measures: UPS, UPSS, CWS and CDS. It stated that CDS is widely agreed to be the one measure that most fully captures open unemployment in the country.

  8. UPSS and CWS, as they are currently used, have limited value in estimating trends in employment and unemployment and projecting (the growth of) the labour force. This is because people normally outside the labour force are included in it if they spend more than 30 days a year (UPSS) or one hour a week (CWS) in an economic activity.

  9. This paper proposes a modified CWS (hereafter MCWS) based on ‘major time criterion’. This approach was used many years ago by Prof. Pravin Visaria in an exercise involving re-tabulation of NSS data for some states.

  10. Labour force estimates based on MCWS include only those who were in the labour force for the major part of the week. A member of the MCWS labour force would have been working, unemployed or a combination of both for at least 3.5 days in the reference week.

  11. ‘Severely unemployed’ (SUE) persons are defined as those reporting unemployment for 3.5 days a week or more – that is, for half or more of the week.

  12. In 2004-05, part-time workers (PTWs) accounted for 5.35 per cent of the total CWS workforce. The percentages are higher for rural areas and among women. Among rural women, for instance, around 10 per cent of the CWS workforce is comprised of PTWs.

  13. To estimate underemployment, a new measure is proposed: the ratio of the workforce consisting of those who have worked for 3 days or less but more than 0.5 days in the week, and those who were unemployed for 0.5 days or more as per the CWS. This will exclude those who did not report any availability for additional work.

  14. Three types of underutilisation of labour time are identified for use in analysis and policy. These are the severely unemployed (unemployed for 3.5 days or more in the week), the part-time workers (working for 0.5 to 3 days in the week), and the underemployed (part-time workers reporting 0.5 or more days of unemployment). 

    Factoids and Focus compiled by Ragini Rao Munjuluri.

AUTHOR

J. Krishnamurty, G. Raveendran

COPYRIGHT

National Commission for Enterprises in the Unorganised Sector, New Delhi 

PUBLICATION DATE

01 Jan, 2008

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