Employment and unemployment

The first principle

A country grows rich when its people move from work that produces little to work that produces more, so the question is never only how many people have a job but what kind of job it is. In India almost everyone who is poor must work to survive, which keeps open unemployment low, and the real problem shows up instead as low earnings, insecure work and too many people on too little land.

The core

How India measures work

• The Periodic Labour Force Survey (PLFS), run by the National Statistics Office (NSO) of the Ministry of Statistics and Programme Implementation (MoSPI) since 2017-18, is the official source. From January 2025 it gives monthly and quarterly estimates in current weekly status and an annual report on the calendar year, with a much larger sample of about 2.7 lakh households.
• The labour force is everyone aged 15 or more who is either working or seeking and available for work. The labour force participation rate (LFPR) is the labour force as a share of the population, the worker population ratio (WPR) is the employed as a share of the population, and the unemployment rate (UR) is the unemployed as a share of the labour force, not of the population. It follows that UR = (LFPR − WPR) ÷ LFPR.
• Usual status looks back over 365 days. Principal status is the activity of the major part of the year, and a person also counts as a worker in subsidiary status after at least 30 days of minor work, so the combined measure is usual status (principal plus subsidiary).
• Current weekly status (CWS) looks back over the last seven days, and a person counts as employed if they worked for at least one hour on any day of that week. CWS therefore catches seasonal and short spells that usual status smooths away.

A worked example

Take 1,000 persons aged 15 and above. Suppose 600 are working or seeking work and 400 are students, homemakers or retired. Of the 600, 570 have work and 30 are looking for it. Then LFPR = 600 ÷ 1,000 = 60 per cent, WPR = 570 ÷ 1,000 = 57 per cent and UR = 30 ÷ 600 = 5 per cent, which the shortcut also gives, since (60 − 57) ÷ 60 = 5 per cent. If 50 homemakers now start looking for work and none finds it, the WPR stays at 57 per cent while the UR rises to 80 ÷ 650, or about 12.3 per cent. A rising unemployment rate can therefore mean that more people have joined the search, not that jobs have been lost.

Kinds of unemployment

• Open unemployment is visible: a person wants work at the going wage and finds none. It may be frictional (between jobs), cyclical (a slowdown) or structural (skills that do not match the jobs on offer).
• Disguised unemployment is hidden: more people work on a farm than the work needs, so taking some away would not reduce output, and their marginal product is near zero. Underemployment means people work fewer hours than they want or below their skill, and seasonal unemployment follows the crop calendar.
• Educated unemployment is high because young graduates can wait for a salaried job, while the poor cannot wait and take any casual work.

Dimensions

• Economic. Growth that comes mainly from capital intensive industry and high skill services creates few jobs per unit of output, so the employment elasticity of growth, the percentage change in jobs for each percentage of growth, has stayed low and agriculture still holds the largest share of workers.
• Demographic. The working age share of the population will keep rising for roughly two more decades, and a demographic dividend is earned only if those young people find productive work; youth unemployment of 9.9 per cent and 13.6 per cent among urban youth in 2025 shows the risk.
• Gender. Women's participation is low because of care work, safety, distance to work, social norms and the lack of jobs near home, and much of women's work is unpaid help in a family farm or enterprise.
• Regional. Workers migrate from Bihar, Uttar Pradesh and Odisha to the industrial States, so portable rations and social security matter for labour.
• Technological. Platform work creates flexible jobs without an employer in the old sense, while automation and artificial intelligence threaten routine clerical and factory tasks, and self employed or casual workers have no employer to pay into a provident fund.

In practice

What the data say

• Annual figures. In calendar year 2025, for persons aged 15 and above in usual status, the LFPR was 59.3 per cent, the WPR 57.4 per cent and the UR 3.1 per cent; the female LFPR was 40.0 per cent against 79.1 per cent for men (NSO, PLFS Annual Report 2025). MoSPI cautions that the new sample design makes 2025 not strictly comparable with earlier years.
• Monthly figures. In CWS the UR for persons aged 15 and above was 5.0 per cent in August 2026, 4.1 per cent in rural areas and 6.8 per cent in urban areas, with an LFPR of 55.6 per cent (NSO, PLFS Monthly Bulletin, August 2026).
• Quality of work. In 2025, 56.2 per cent of workers were self employed, 23.6 per cent were regular wage or salaried employees and 20.2 per cent were casual labourers, so about three in four workers had no regular wage; agriculture employed 43.0 per cent and manufacturing only 12.1 per cent (PLFS 2025).
• Women. The female LFPR rose from 23.3 per cent in 2017-18 to 41.7 per cent in 2023-24 (PLFS, usual status), mostly in rural areas and much of it as self employment and unpaid help in household enterprises, while urban female participation stayed at about 28 per cent or less.

Laws and schemes

• The four labour codes came into force on 21 November 2025 and replace 29 Central labour laws: the Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020 and the Occupational Safety, Health and Working Conditions Code 2020. They give one definition of wages, a statutory floor wage set by the Centre, appointment letters for all workers, gratuity for fixed term employees after one year, night shifts for women with consent and safeguards, and the first legal recognition of gig and platform workers, whose welfare fund draws 1 to 2 per cent of an aggregator's annual turnover, capped at 5 per cent of what it pays such workers. Firms with fewer than 300 workers may now lay off or retrench without government permission, against 100 before. States must frame their own rules, because labour is in the Concurrent List.
• e-Shram, a national database of unorganised workers launched in 2021, has more than 30 crore registrations (Ministry of Labour and Employment), and it is the base for reaching such workers with social security.
• The Employment Linked Incentive scheme, approved in July 2025 with Rs 99,446 crore and launched as the Pradhan Mantri Viksit Bharat Rozgar Yojana, pays first time employees up to Rs 15,000 and pays employers up to Rs 3,000 a month for each new worker, for jobs created between August 2025 and July 2027, with a target of more than 3.5 crore jobs.
• Skilling runs through the Ministry of Skill Development and Entrepreneurship (2014), the Pradhan Mantri Kaushal Vikas Yojana (2015) for short term training and apprenticeship schemes that place trainees inside firms. The rural safety net of guaranteed wage work, created by the Mahatma Gandhi National Rural Employment Guarantee Act 2005, now rests on the Viksit Bharat – Guarantee for Rozgar and Ajeevika Mission (Gramin) Act, 2025, which repealed it and raised the guarantee from 100 to 125 days a year.

Issues and way forward

• Jobs without productivity. Workers left agriculture for construction and petty trade more than for factories, so the move out of farming has not raised earnings much; labour intensive manufacturing in textiles, leather, food processing and electronics assembly, helped by the production linked incentive schemes and cluster infrastructure, is the standard remedy.
• A skills mismatch. Most workers have no formal training, so training has to be tied to employers through apprenticeships and placement, not counted by certificates issued.
• Low female participation in towns. Urban women stay out because of safe transport, childcare and flexible hours rather than lack of education; crèches, women's hostels near industrial clusters, safe public transport and the night shift provisions of the codes address the cause.
• Informality and thin protection. Most enterprises are small and unregistered, so the codes cover few of them in practice; simple registration, portable benefits linked to e-Shram and a working social security fund for gig workers are needed, along with State rules that do not dilute the codes.
• Data gaps. The 2025 break in the PLFS series means comparisons across it must be read with care.

Common confusions

• Unemployment rate and unemployment as a share of population. The UR divides the jobless by the labour force; dividing by the whole population gives a much smaller and wrong number.
• Usual status and current weekly status. Usual status asks what a person did for most of the last year, while CWS asks about the last week and counts even one hour of work, so the two give different rates for the same economy.
• Informal sector and informal employment. The informal sector is a set of small unregistered enterprises, while informal employment is a job without social security, which can exist even inside a large formal firm, such as a contract worker in a factory.

For the exam

• Keyword bank: labour force participation rate, worker population ratio, usual status, current weekly status, disguised unemployment, structural unemployment, jobless growth, employment elasticity, informal employment, female labour force participation, demographic dividend, labour codes, gig and platform workers, apprenticeship, e-Shram.
• Previous year questions: Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: India's unemployment rate was only 3.1 per cent in usual status in 2025, yet about three in four workers were self employed or casual and 43 per cent still worked in agriculture (PLFS 2025), so the problem is the quality of jobs more than their number.
  • Introduction with a law: The four labour codes in force from 21 November 2025 replaced 29 Central laws and for the first time brought gig and platform workers into the law on social security.
  • Conclusion: India's demographic dividend will be earned in factories, workshops and offices that pay regular wages, so growth has to be steered towards labour intensive sectors and skills tied to employers.
  • Conclusion: Raising women's participation through safety, childcare and jobs near home is the single largest addition India can make to its workforce.