The current state of the labour market in India depicts the presence of low to moderate “underemployment”, a paper by the statistics ministry said on Wednesday, in an official acknowledgement of the dismal jobs scenario in the country.

The paper measures underemployment using a multidimensional approach, and not just based on hours worked by a person; and suggests that  quantifying underemployment could help in making important policy decisions.

The labour dynamics of a nation are frequently assessed by the volume of job seekers and the number of individuals who have successfully secured employment. However, we often overlook those who are employed but endure profound hardships due to various deficiencies in their working conditions, said the paper authored by Sonakhya Samaddar. 

“In the case of a developing nation like India, where the prevalence of working poverty is significant, it becomes imperative to transcend the conventional definition of unemployment and labour supply when formulating critical policy decisions,” the paper said, while adding that despite India’s unemployment rate standing at a mere 6.8% according to the Periodic Labour Force Survey (PLFS) data of first quarter of 2023, the underemployment metric was “unsurprisingly high”.

As per the paper, the overall underemployment score for India was observed to be 62.28 which suggests the presence of low to moderate underemployment in the economy. “The score can be used by policymakers to monitor improvement in India’s labour market, with for instance a target of 70 or higher which will be closer to 80 that was conceived as the adequate state of employment without any underutilization,” the paper said.

The urban underemployment score is 63.95 and rural one is 61.73. Also, the female underemployment score is 59.81 and for males, it is 62.50.

The author has computed the score of underemployment using data that captures the numerous inadequacies experienced by individuals in the workforce, encompassing low wages, insufficient full-time employment, and occupations that do not utilise their full skill set.  

Typically underemployment is measured using a low-working hour rule. The International Labour Organisation says that 40 hours per week is the most prevalent weekly hour standard. Almost half of 103 countries have adopted 40 hours per week or less, as the norm, said the report.

Developing countries like India tend to have longer working hours and hence, applying a cut-off of 40 hours or even 44 hours coupled with the other two conditions that a person should be willing to work additional hours and must be available to do so will yield only a very insignificant figure. “However, working for longer hours does not necessarily indicate adequate employment,” the paper said. 

Using a definition of underemployment stating that anyone working less than 40 hours per week and who is available to do additional work is considered so, only 1.2% of Indians can be categorized as underemployed. The figure for males is 0.09%, while for females it is 1.8%. Moving the cutoff from 40 to 44 hours as suggested by results in only a small change to the figures, to 1.6% for the total population, said the paper.

Therefore, it’s high time that we explore new dimensions of measuring underemployment which involve at least two more criteria for identifying inadequate employment, namely, wage, and skill-mismatch, the author said.