Unemployment and Underemploymentin Rural India

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SPECIAL ARTICLES

Unemployment and Underemploymentin Rural India

Satya Paul

This paper examines spatial and temporal variations in unemployment and underemployment in rural India.

It identifies some of the important correlates of rural unemployment There is a discussion of the existing approaches

to the measurement of unemployment and presentation of a conceptual framework for the measurement of

underemployment. An examination of the unemployed by different characteristics such as occupation, education,

level of consumption expenditure, age, etc, is also undertaken.

I

I n t r o d u c t i o n

THE purpose of this paper is two fold:firstly to examine spatial and temporal variations in unemployment and underemploy

ment, and secondly, to identify some of theimportant correlates of unemployment inrural India. The study has been based on theNat iona l Sample Survey data relating to the32nd round (Ju ly 1977 - June 1978) and 38thround (January - December 1983), The planof the paper is as follows. Section 2 discussesthe existing approaches of measuringunemployment and introduces a conceptualframework to the measurement of underemployment. Section 3 examines regionaland temporal variations in unemploymentand underemployment in rural India. Section 4 studies the correlates of unemploy

ment by examining the distribution of unemployed by their different characteristicssuch as occupation, education, level of consumption expenditure, age, etc. The relationship between poverty and unemployment isalso examined. The conclusions are presentedin Section 5.

I I

M e a s u r i n g U n e m p l o y m e n t a n d

U n d e r e m p l o y m e n t

Following the recommendations of theDantwala Committee [Government of India,

1979), three different approaches have beenadopted in the N-.tional Sample Surveys(NSS) for determining the activity status ofeach person in the population, 'aged 5 yearsand above'. These are: (a) usual status ap-

proach with a reference period of 365 dayspreceding the date of survey, (b) weeklystatus approach with a reference period ofseven days preceding the date of survey, and(c) daily status approach, the referenceperiod being each day of the seven dayspreceding the date of survey. According tothe usual status approach, a person isclassified as unemployed if he/she was not

working but was either seeking or wasavailable for work for a relatively longer timeduring the reference period of 365 days. Aperson is classified as employed if he/she was

engaged for a relatively longer period duringthe reference period, and all others areclassified as 'n ot in labou r force'. Thus, thisapproach identifies those who are chronicallyunemployed and their propo rtion in the totallabour force is taken as the rate of usual

status (chronic) unemployment. It is important to note that all the employed andunemployed taken together constitute thetotal labour force.1

The weekly status approach classifies aperson as unemployed if he/she has notworked for at least one hour on any one dayof the week but had been seeking work orhad been available for work at any time during the week. A l l those who have worked atleast for one hour on any day during theweek (even if they were idle for rest of entire period), are classified as employed. Thus,this approach seeks to capture only the week-

long full (open) unemployment.According to the daily status approach,

each person is assigned one or at the mosttwo activity statuses on each day of theweek. A person is considered employed forthe entire day if he/she worked for fourhours or more on the day. However, if he/sheworked for one hour or more but less thanfour hours, he/she is considered employedfor the half day and unemployed or 'not inlabour force' for the other half of the daydepending on whether he/she was seeking/available for work or not on the day. On theother hand, if a person was not engaged in

any gainful work even for one hour on theday but was seeking/available for work forfour hours or more, he/she was consideredunemployed for the entire day. But, if he/shewas available for work for less than fourhours, he/she was considered unemployedfor half day and 'not in labour force' for theother half of the day. A person, who hadneither any gainful work to do nor wasavailable for work even for half of the day,was considered 'not in labour force' for theentire day. Aggregating across half-day unitsover the week, total person-days unemployedand total person-days employed are counted

in the sample. Total person-days unemployedexpressed as the proportion of total person-days of the labour force provide person-dayrate of unemployment (PDUR). Since the

NSS data are collected in four sub-rounds(with equal number of households in eachround)2, the PDUR seeks to capture the(average) intensity of the underutilisation oflabour time.

Theextent of underutilisation of labour

time is only one facet of the problem ofunderemployment. What is equally important is to know the rate (incidence) ofunderemployment in the labour force. Thisrequires the identification of underemployment to which we now turn. Suppose a person, say i, worked for mlidays and reportedfor moi days during the reference week, thenhe/she may be considered unemployed orunderemployed if

In a recent paper, Visaria [1981] classifiesa person as unemployed if the underemployed person days in the reference weekexceed the number of employed person days.It can easily be verified that all those relatingto the category (0.50< ui 1) from Visaria'sset of unemployed. Clearly this set does notincorporate ail the underemployed.

It follows from the above that no singleapproach would capture the different aspectsof unemployment and underemployment,A l l the alternative rates of unemployment,namely, usual status unemployment rate(USUR), PD UR , full (week long) unemploy

ment rate and the rates of underemploymentof different degrees, need to be computedto have a comprehensive view of unemployment. Thi s is wha t we attempt in this paper.

Econom ic and Pol itic al Weekly July 16, 1988 1475

where wi ll denote full (open)

unemployment, ui - 0 fu ll employmentand all other values of u ; lying between zeroand unity will denote underemployment ofdifferent intensities. For practical ease, wecan define three broad degrees of underemployment, namely,


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I l l

R e g i o n a l a n d T e m p o r a l V a r i a t i o n s

i n R u r a l U n e m p l o y m e n t a n d

U n d e r e m p l o y m e n t

Table 1 gives the rates of usual statusunemployment, person-day unemploymentand the rates of underemployment for ruralIndia for the years 1977-78 and 1983. The

rates for 1977-78 are based on NSS 32ndround data and those for 1983 on NSS 38thround data. The rates of underemployed inthe labour force are computed using weeklytime disposal data published in the form ofthe distribution of labour force and thenumber of unemployed days by the number

of days worked (specified with the intervalof XA day unit) in the week.

For 1977-78, the rate of usual status(chronic) unemployment is the lowest,followed by the rate of fu ll un employment.The person-day rate of unemployment is7,70. The rates of underemployment are,however, quite high: about I/5th of labourforce is found in the state of underemployment. The incidence of severe underemploy

ment is negligible whereas marginalunderemployment is relatively high.

The rates of unemployment and underemployment for females are higher thanthose for males (Table I). This shows thatemployment opportunities for females arefewer than those for males in rural areas.

Over the period 1977-78 to 1983, the rateof usual status unemployment has declinedsignificantly.Th echangesin therateso ffullunemployment and person-day unemployment are negligible. The rates of 'moderate'and 'severe' underemployment have increasedwhereas the rate of marginal underemployment declined considerably. This is an important change in the structure of underemployment which led the rate of overall

underemployment to decline by about twopercentage points over the period of fiveyears.

There are large variations in the rates ofunemployment and underemploymentacross the states (Table 2). These rates showthat the extent of unemployment and under-

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employment is the highest in Kerala and thesecond highest in Tamil Nadu. Assam,Himachal Pradesh and Rajasthan show verylow rates of unemployment and underemployment. In eight states (AndhraPradesh, Bihar, Karnataka, Kerala, MadhyaPradesh, Maharashtra, Tamil Nadu andWest Bengal), the rates of unemploymentand underemployment among females arehigher than the males; the picture is howeverthe reverse in Punjab, Himachal Pradesh and

Jammu and Kashmir (Table 3).

While several 'factors like natural assetsbase, agricultural productivity, wages, occupational structure, level of education, etc,might be responsible for differences in therates of unemployment and underemployment across the states,4 our research isrestricted to the examining the associationbetween rates of unemployment and agricultural productivity. A priori one would ex

pect a negative association between the two.

The existing evidence, however, does not support this hypothesis. In a study based onNSS 27th round (1971-72) data for 56 regionsof rural India, Lakdawala [1977] observeda positive and statistically significant correlation of 0.30 between PDUR and agricultural output per hectare (in rupees1970-71 to 1972-73). A recent study bySundaram and Tendulkar [1988] which isalso based on the same data, however,

showed no sign ificant relations hip between

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PDUR and agricultural output per hectare(AGHA). The study reports that coefficientof AGHA for PDUR in a multiple linear

regression model is negative (- 0.001663) butstatistically insignificant.

We regress USUR, PDUR and the rate of

'full unemployment and underemployment'(FAUR) separately on AGHA

5 using the

32nd round data for 17 major states. Thecoefficient of AGKA in equations (2) and

(3) is insignificant which implies that thereis no statistically significant association between PDUR and AGHA and between FAURand AGHA. The coefficient of AGHA for

USUR is positive and statistically significant(Eq 1). This supports the hypothesis that inthe absence of any unemployment dole,people in low a gricu ltura l. productivit yregions cannot afford to remain idle for along time; they either migrate to a neighbouring high productivity region or engagethemselves in low-paid activities. Theoutflow of labourers from agriculturally lessdeveloped regions to developed regions iswell known in India.

(1 )U SU R= : -2.65 + 0.00357 AG HA

(-1. 12) (2.92) R2 = 0.36

(2) PD UR = 1.35+0.00351 A G H A

(3.77) (1.80) R2 = 0.18

(3) FAUR = 9.76+0.00570 A G H A(1.13) (1.28) R

2 = 0.09

(Values within parentheses are the t-values)

Table 4 reveals the changes in three ratesof unemployment (namely, PDUR, USURand weekly status) in 1983 over 1977-78 for

each state. However, the state-wise rates ofunderemployment for 1983 could not beworked out due to the non-availability ofNSS 38th round detailed data. The observed

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changes in the three rates of unemploymentin 1983 over 1977-78 are not uniform acrossthe states. In eight states, namely, AndhraPradesh, Gujarat, Haryana, Karnataka,Madhya Pradesh, Maharashtra, Rajasthanand Uttar Pradesh, all the three rates ofunemployment have declined. In all thesestates, the magnitude of decline in

unemployment rates for females is muchlarger than for males. In three states, namely,Assam, Himachal Pradesh and Punjab, allthe'three rates show an increase in unemployment over the period. In all otherstates, the usual status unemployment ratehave declined but the two other rates haveincreased, thus, indicating a change in the

nature of ru ra l une mptoyrnem ower its

period 1977-78 to 1983.

I V

Correlates of Unemployment

We now proceed to discuss the correlates

of unemployment by examining the distribu -

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tion of unemployed by their differentcharacteristics such as occupation, educati on, level of cons umpt ion expenditure, age,etc. However the distribution of underemployed could not be examined due to nonavailability of data.

PER CAPITA CONSUMPTION EXPENDITURE,

P OVERTY AND UNEMP LOYMENT

The estimates of the three rates of

unemployment by levels of per capita consumption expenditure (PCE) presented inTable 5 reveal several things, (i) There arewide differences in the three rates ofunemployment at the lower level of PCE, thedifference between them tends to convergeas we move on to higher PCE classes. Thisindicates that rates of unemployment amongthe poor households are relatively more sensitive to the concept of unemployment,(ii ) In the case of rura l all- Ind ia, Kerala and

Madhya Pradesh, the three rates of unemployment decline consistently as we movefrom the lower PCE class to the higher PCEclasses implying that levels of living andunemployment are inversely related, (iii) Forsix states (Assam, Himachal Pradesh,Jammu and Kashmir, Rajasthan, TamilNadu and Uttar Pradesh) no systematic relationship between PCE and unemploymentrate is observed, (iv) In some states, (Andhra

Pradesh, Gujarat and Punjab), the rates ofunemployment first increase up to thesecond or third PCE class and then show adeclining trend. The low rate of unemployment in the lowest PCE class is understandable in that these people are perhaps toopoor to remain idle, (v) In all other states,the unemployment rates decline consistentlyup to the eighth expenditure class and thenmove upwards. The upward trend in unemployment towards the end of the upper

tail of PCE distribution suggest that people in well -of f families prefer to remain idlefor relatively longer periods, in order tosearch for better jobs. Nevertheless, theunemployment rates among the poor6 arehigher than the average level in a majorityof states (compare Table 6 with Table 2).

In each state, poverty is much widelyspread than unemployment/underemployment (Tables 6 and 2). This phenomenon has

also been observed in some earlier Indianstudies [see, for example, Visaria (1981) andSundaram and Tendulkar (1988)]. Based onthe aggregate data for 56 agricultural regionsof India relating to the NSS 27th round(1972-73), Sundaram and Tendulkar founda positive and significant associationbetween poverty ratio (PR) and person-dayunemployment rate. As will be shown below,this hypothesis is not supported by the NSS32nd round (1977-78) aggregate data for 17major states. The values of the coefficientof correlation (r) between poverty ratio andperson-day unemployment rate and betweenPR and 'full unemployment and underemployment rate' are positive, r is negativebetween PR and usual status employmentrate. But in none of the cases the value ofr is statistically significant. Even the valuesof r between PR and unemployment ratesamong the poor are low and statisticallyquite insignificant (Table 7). Thus, thehypothesis of positive and significantassociation between poverty and unemployment supported by the NSS 27th round(1972-73) data is rejected by the NSS 32ndround (1977-78) data.

UNEMPLOYMENT BY OCCUPATION

GROUNDS

Table 8 gives the person-days unemployment rates by occupation groups ofhouseholds. The occupation groups are;(1) self-employed households , (2) self-employed non-agricultural households,(3) agric ultura l labour households, (4) otherlabour households, and (5) other households.7 For rural India as a whole, theperson-days unemployment rate is found tobe lowest among the self-employed households and the highest among agriculturallabour households. Person-days unemploy

ment rate among females is higher thanamong males in all the occupation categoriesexcept self-employed agricultural households. Agricultural labour households alonecontribute about 61 per cent towards totalperson-days unemployment in the rural area.

The occupational distribution of person-days unemployment is not uniform acrossstates. While in about half of the states, theperson-days unemployment rates amongfemales are higher than among males inmost of the occupations, the picture in theother half is reverse. In Assam, HimachalPradesh and Jammu and Kashmir, theagricultural labour households showrelatively very low rates of unemploymentand their contribution towards total person-days unemployment is also very low: 12 per



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cent in Assam, 7 per cent in HimachalPradesh and 3 per cent in Jammu andKashmir. But in all other states, agriculturallabour households contribute 31 to 74 percent towards total person-days unemployment. It can thus be inferred that anyeconomic programme which ensures fullemployment to all the unemployed inagricultural labour households would considerably ease the situation of unemploy

ment in the rural sector.

UNEMPLOYMENT RATES BY LEVELS OF

E DUCAT ION

Table 9 shows the rates of usual status(chronic) unemployment by levels of education. In rural India as a whole, the rate ofchronic unemployment is the highest (21.68)among the 'graduates and above' and secondhighest among those who have passed thesecondary schooling. The unemploymentrate is the lowest (2.06) among illiterates.This is understandable in view of the factthat illiterates are not professionals and

therefore accept whatever jobs they get.While the unemployment rates among the

educated are higher than the illiterates ineach state, their magnitude differs across thestates. For instance, the unemployment ratesamong the 'graduates and above' range from8.50 to 45.95 per centthe lowest being inMadhya Pradesh and the highest in TamilNadu. In six states (Andhra Pradesh,Haryana, Karnataka, Kerala, Tamil Naduand West Bengal), the unemployment ratesamong the 'graduates and above' are higherthan the .corresponding figures at the al l-India level.

Thus, educated unemployment in therural sector is quite a serious problem andneeds to be tackled on a priority basis.

AGE DI S TRI BUTI ON OF UNEMP LOYED

Table 10 gives the usual status (chronic)and person-days unemployment rates by age-group. It is seen that unemployment ratesin the age-group (15-29) are the highest forboth males and females. The contributionof this group towards total chronic unemployment is also very high: 91 per centin the case of males and 57 per cent in the

case of females. As expected, the chronicunemployment rates among children and theaged are very low. The rates of person-dayunemployment also show a similar picture.In an earlier study, Paul [1988] has foundthat the pattern of age-distribution ofunemployed does no! vary significantlyacross the states.

Conclusions

This study has analysed inter-regional andinter-temporal variations in unemployment

and underemployment based on alternativeapproaches using the NSS 32nd (1977-78)and 38th (1983) rounds survey data for ruralIndia. On the methodological side, it is

Econom ic and Poli tica l Weekly July 16, 1988 1481

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households contribute about 16 per centtowards tot al person-days unemploymentin the rural areas. In three states (namely,Assam, Himachal Pradesh and Jammuand Kashmir), the contribution of agricultural labour households towards totalperson-day unemployment is low, whereasin all other states their contributiontowards total person-days unemploymentvaries from 31 per cent to 74 per cent.

From this it can be inferred that anyeconomic programmewhich ensures fullemployment to all the unemployed inagricultural labour households wouldconsiderably ease the situation of unemployment in rural sector.

5 The unemployment rates vary with thelevels of educat ion. In the ru ral sector asa whole, the usual status unemploymentrate (USUR) is the lowest (2 per cent)among illiterates and the highest (22 percent) among the 'graduates and above*. Insome states, the USUR among the'graduates and above' is very high: for

instance, in Tamil Nadu it is 46 per cent,in Haryana 32 per cent and in Kerala 30per Lent. This suggests that educatedunemployment is really a serious problemand should be tackled on a priority basis.


argued that the problem of underemployment has,two aspects: one, the overallunder utilisation of labour time and theother, the incidence of underemployed inlabour force. While the first aspect is wellcaptured by the person-day rate of unemployment, the second aspect is taken careof by introducing a conceptual frameworkfor measuring the incidence of underemployed. Three degrees of underemploy

ment are defined and their incidenceexamined. The main findings that emergefrom our analysis may be stated as follows:

1 The problem of underemployment is moreserious than chronic or full unemployment in rural India. About l/5th of therural labour force was underemployedduring 1977-78, 'Severe underemployme nt ' wasleast,prevalent and 'mar ginalunderemployment' was most prevalent.

2 The rates of unemployment and underemployment vary from state to state.These rates are highest for Kerala, secondhighest for Tamil Nadu and relatively very

low for states like Assam, HimachalPradesh and Raiasthan. The NSS 32nd

round data for 17 major states shows nosignificant relationship between person-days unemployment rates and agriculturalproductivity and also between 'fullunemployment and underemploymentrates1 and agricultural productivity.The relat ionsh ip between usual status(chronic) unemployment and agriculturalproductivity is positive and significant.This only supports the hypothesis that in

the absence of unemployment doles people in agricu ltura lly less developed regionscannot be expected to stay idle for long;they either migrate to the neighbouringdeveloped regions or accept very low paid

jobs .

3 The rates of unemployment and underemployment for females are higher thanthat for males. This shows that the jobopportunities for females are limited inthe rural area.

4 The person-day rate of unemployment ishighest among agricultural labour house

holds and lowest among self-employedhouseholds. The agricultural labour


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Notes

[The author is grateful to M L Dantwala,V M Dundekar, A Vaidyanathan, T S Papolaand S R Hashim for useful comments and suggestions on an earlier draft of this paper. Theresponsibility for the remaining errors lies wi ththe author only.]

1 The old and disabled, rentiers, pensioners,remittance recipients, beggars, prostitutes,students and all those engaged in domesticduties fall in the category of 'not in labourforce'. SeeSarvekshana,Vol V, Nos 1 and 2,July-October 1981.

2 Since the details of sampling design of theNSS are given inSarvekshana,Vol V, Nos 1and 2, July-October 1981, a discussionthereon is avoided here.

3 These degrees of underemployment were firstoutlined in Krishna [1976] but no empiricalestimates were reported perhaps due to thenon-availability of data.

4 Some of these factors have been consideredin Sundaram and Tendulkar [1988], Thequestion of wage-rate differentials has beendiscussed in Hashim and Paul [1987].

5 The state-wise figures of agricultural outputper hectare are taken from Central StatisticalOrganisation [1985].

6 'Poor' are defined as those whose PCE (permonth) is less than the poverty cut-off lineof Rs 55.77 per month specified by PlanningCommission [Government of India, 1984].

7 It may be noted that alt these occupationcategories of households taken together coverthe entire rural population. Definitions ofthese occupational categories are given inSarvekshana, Vol V, Nos 1 and 2, July-October, 1981.

R e f e r e n c e s

Government of India, Planning Commission(1970),Report of the Committee of Expertson Unemployment Estimates, (Chairman:M L Dantwala), New Delhi,

, (1984),Reports of the Study Group on theConcepts and Estimation of Poverty Line,New Delhi.

Central Statistical Organisation (1985), State-wise and Group-wise Estimates of Outputfrom Agriculture, December 1985 (Ministryof Planning).

Hashim, S R and Satya Paul (1987), Aspectsof Employment and Unemployment in

Rural India', Presented at the 'InternationalWorkshop on Rural Unemployment' (June29-July 3, 1987), held at NIRD, Hyderabad(India). Appeared inRural Unemploymentedited by Afro -Asian Rural ReconstructionOrganisation, New Delhi, 1988.

Krishna, Raj (1976), Rural UnemploymentA Survey of Concepts and Estimates forIndia,World Bank Staff Working Paper No234, April, Washington.

Lakdawala, D T (1977), 'Growth, Unemployment and Poverty', Presidential Address tothe All India Labour Economic Conference,Tirupati, December 31, 1977.

Paul, Satya (1988), 'Unemployment and

Underemployment in Rural India1 presentedat the Silver Jubilee Conference of theIndian Econometric Society held in

Bangalore, January 4-6, 1988.Sundaram, K and Suresh D Tendulkar (1988),

'Towards an Explanation of Inter-RegionalVariations in Poverty and Unemploymentin Rural India' in T N Srinivasan and

P K Bardhan (eds);Rural Poverty in SouthAsia,De lhi, Oxford University Press, 1988.

Visaria, Pravin (1981), 'Poverty and Unemployment in India: An Analysis of RecentEvidence1,World Development,Vol 9, No 3.

Economic and Pol itic al Weekly July 16, 1988 1483

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Unemployment and Underemploymentin Rural India