Unemployment: Why ILO Estimates Are Lower Than That Of NSSO
International Labour Organisation’s (ILO) estimates of unemployment in India for the last few years are much lower than all other reported numbers. These estimates cannot be relied upon for recent years as they are projections based on the historical relationship between economic growth and unemployment rates.
India’s unemployment crisis has been in the news ever since the leaked National Sample Survey Office (NSSO) data reported a four-decade high unemployment rate of 6.1 per cent in 2017-18. There have been arguments in favour and against the veracity of the data in the report, the opposition parties taking it up to to attack the ruling Bharatiya Janata Party (BJP), while economists like Surjit Bhalla are defending the government.
Many experts attribute the current unemployment situation in the country mainly to demonetisation and the faulty implementation of Goods and Services Tax (GST). However, last year, in an interview to Swarajya magazine the Prime Minister had claimed that the real issue was lack of data of jobs, rather than a lack of jobs. Hence, it is ironic that the government decided to withhold the recent NSSO survey report on the labour market scenario in the country.
According to the private organisation Centre for Monitoring Indian Economy (CMIE), 11 million jobs were lost in 2018, with the unemployment rate rising to over 7 per cent in the last few months. The Labour Ministry's report on the Fifth Annual Employment-Unemployment Survey (2015-16) showed that the unemployment rate had increased from 4.9 per cent in 2013-14 to 5 per cent in 2015-16.
However, the International Labour Organisation’s (ILO) estimates of unemployment in India for the last few years are much lower than all other reported numbers.
According to the ILO, India’s unemployment rate stood at 2.6 per cent in 2018, and its estimates remain same in 2019 as well.
Steven Kapsos, Head of Data Production and Analysis Unit, Department of Statistics, ILO, explained this anomaly to Asiaville. He said the ILO’s unemployment numbers for India are based on the official data reported by the NSSO.
“The ILO’s published labour statistics for India are based on official data reported by the NSSO,” Steven Kapsos said. “The last official NSSO unemployment data that we have is from 2012. The unemployment estimate that we have for that year is 2.7 per cent, as published on ILOSTAT. This figure is roughly, not perfectly, in line with international statistical standards for defining unemployment," he added.
However, he also pointed out that the ILO estimates for India should not be relied upon for recent years as they are based on the historical relationship between economic growth and unemployment rates.
“We also have a data series called ‘ILO modelled estimates’ which produces projections beyond 2012. However, these should not be relied upon for recent years for India, since they are essentially a projection from 2012, based on the historical relationship between economic growth and unemployment rates. Once we receive more recent statistics from the Government of India, we will update our figures published on ILOSTAT, including our modelled estimates.”
According to the official government data, the Indian economy has been growing at a healthy 7 per cent in 2018-19 (the slowest for the last five years). The government has been using this as a cover to deflect attention from the lack of jobs.
Jayan Jose Thomas, Associate professor of economics, IIT Delhi, said the unemployment situation is not getting reflected on the GDP numbers.
“This might have something to do with the way we calculate GDP, especially, informal sector GDP," he said. "It is estimated by the employment in informal sector times value added per worker in the informal sector. But the estimate of employment in the informal sector is still based on an old estimate of employment we have (based on NSSO survey on employment/ unemployment 2011-12). In that way we assume that the employment in informal sector is growing as fast as that in the formal sector, when we calculate the informal sector GDP, which is probably not the case. Especially, after demonetisation and GST, the employment in the informal sector might have declined.”
It is clear that reliable data on jobs is a must for assessing the economic condition of a nation. NSSO data is extensively used by various national and international organisations, including the ILO. Despite this, NSSO’s quinquennial (once in every five years) surveys were discontinued after 2011-12, considering its low frequency and time lag between data collection and availability of the results (as found out by the Task Force appointed by the government).
After that, annual Labour Bureau (LB) surveys used to provide employment-unemployment data till 2015-16. Even these surveys were eventually stopped, and a new regular employment-unemployment survey namely, Periodic Labour Force Survey (PLFS) was launched by the NSSO in 2017. It was the first PLFS report, which got leaked a few months back, that showed an unemployment rate of 6.1 per cent, the highest since 1972-73. The government responded to the report saying that it is not final or verified, but it hasn’t scrapped the data altogether either.
It is yet to be seen when the report will be made public, considering that the results of the Lok Sabha elections will be out on May 23rd.