Employment, Unemployment and Informalisation

1. Work, workers and the boundary of economic activity

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Why people work (Class 11, Employment: Growth, Informalisation and Other Issues, §6.1)

• To earn a living. Money that is only inherited "does not completely satisfy anybody".
• For self-worth. Work lets us relate to others in a meaningful way.
• To support dependants. People feel a sense of achievement when they meet the needs of those who depend on them.
• To build the nation. Every working person adds to national income. NCERT calls this the real meaning of "earning" a living.
• Gandhi wanted education and training through work, including craft. The chapter opens with his attack on the "craze" for labour-saving machinery, which throws "thousands" out of work. This links to technological unemployment (Section 9).
• Work at home can be traditional or modern:
• Traditional: weaving, lace-making, handicrafts.
• Modern: programming for the IT industry.

• Technology now lets villagers make factory goods at home. Footballs stitched in homes in Jalandhar, Punjab are sold by MNCs (Fig. 6.1).

• Work from home: making goods or providing services at home, from crafts to IT work. Millions of workers worked this way during COVID-19 (2020-21). NCERT's conclusion (§6.10) says outsourcing is making "the home … the workplace".

• Moonlighting: taking a second job along with a regular one, often without the main employer knowing. A dispute over it hit the IT sector in 2022, when some firms dismissed staff who were moonlighting.

Definitions

• Economic activities: any activity that contributes to gross national product (GNP). Anyone doing such an activity, in any capacity, is a worker.

• NCERT error: Class 11 builds GNP as GDP plus the "net earning" from exports and imports. That is wrong. GNP = GDP + net factor income from abroad (see national-income-accounting).

• Worker: anyone engaged in an economic activity, "high or low". This includes:

• the self-employed, not only people paid by an employer;
• helpers of main workers;

• people temporarily absent because of illness, injury, disability, bad weather, festivals or social and religious functions.

• Who is and is not a worker:

Person	Worker?	Why
Beggar, thief, smuggler, gambler (Ex. 3)	No	Their activity adds nothing to GNP. It is either a transfer or illegal.
Raj, a schoolboy who works on the family farm after school (Ex. 7)	Yes	Farm output counts in GNP, and helpers are workers.
Meena, a housewife who helps in her husband's cloth shop (Ex. 9)	Yes, for the shop work	She is an unpaid helper in a family enterprise. Her housework alone would not make her a worker.

• Workforce: all people engaged in economic activity, whether employed, self-employed or helpers.
• About 545 million in 2022-23 (Class 11). About two-thirds are rural and about 77% are men. The men's and women's figures include child labourers.
• Women are one-fourth of the rural workforce and one-fifth of the urban workforce.

• NCERT inconsistency: the same chapter gives 535 million for 2019-20 (Chart 6.4). Use each figure with its own year.

• Forms of payment:

Term	Meaning	Example
Wage	Paid by an employer for a specific period of work	Daily wage of a mason
Salary	Fixed regular pay, usually monthly	Bank cashier
Payment in kind	Non-cash pay for work done	Farm labourer paid in mangoes of equal value
Fee	Paid for professional advice or services	Doctor's or lawyer's fee

• Employee: a person who works for someone else for a wage or salary. Employer: a person who hires someone and pays them a wage (basic definitions are in economic-problem-systems).

2. Measuring the labour market: indicators, activity status and data sources

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Indicators and identities

• Labour force = employed + unemployed. The unemployed are people seeking work or available for it. People who are neither working nor seeking work are left out.
• Not in labour force: students, homemakers, retirees, rentiers (people living on rent or interest) and discouraged workers.
• Discouraged workers want a job but have stopped searching because they think no jobs exist.
• They are not counted as unemployed, so the unemployment rate looks lower than it really is.

• They also pull the LFPR down.

• Labour force participation rate (LFPR) = labour force ÷ population × 100.

• Worker-population ratio (WPR) = workers ÷ population × 100. It shows what share of people actually produce goods and services. Class 11 says "any study of employment must start with" the WPR.
• Unemployment rate (UR) = unemployed ÷ labour force × 100.

• Trap: the denominator is the labour force, not the population.

• The three are linked: WPR = LFPR × (1 − UR/100).

• Worked estimate (Class 11, Ex. 12, 1999-2000). Workers = population × WPR ÷ 100.

Region	Population (crore)	WPR	Workers (crore)
Rural	71.88	41.9	71.88 × 41.9/100 = 30.12
Urban	28.52	33.7	28.52 × 33.7/100 ≈ 9.61
Total	100.40	39.5	100.40 × 39.5/100 ≈ 39.66

Activity status: which reference period?

Approach	Reference period	Rule	What it captures
Usual status (UPSS, "ps+ss")	365 days	Principal status by the major-time rule, plus subsidiary work of 30 days or more	Chronic, long-term unemployment. Usually the lowest UR.
Current weekly status (CWS)	7 days	Employed if the person worked at least one hour on any day	Seasonal and short-term unemployment
Current daily status (CDS)	Each day of the week, in half-day units	Counts person-days, not persons	Work that comes and goes. Usually the highest UR.

• Principal status: the activity (working, unemployed or out of the labour force) on which a person spent the major part of the past 365 days.
• Subsidiary status: economic work done for at least 30 days in the year by someone whose principal status is different, e.g. a student who harvests for a month.
• Census categories (Census 2011):
• Main worker: did economic work for 183 days (six months) or more in the reference year.
• Marginal worker: did some work, but for less than 183 days.
• Non-worker: did no economic work at all. This covers students, homemakers, dependants, pensioners and beggars.

Data sources

• Census of India: every 10 years, based on the main/marginal worker split.
• NSO: the old NSSO ran large five-yearly (quinquennial) rounds until 2011-12. The National Statistical Office was formed in 2019 by merging the CSO and NSSO.
• Periodic Labour Force Survey (PLFS), since 2017-18:
• Until 2024 it gave annual usual-status figures plus quarterly CWS figures for urban areas only.

• From January 2025 it gives monthly CWS estimates for rural and urban areas, quarterly bulletins covering rural and urban areas, and calendar-year annual reports (verify current).

• Labour Bureau: surveys and wage indices.

• Employment exchanges (DGE&T): government offices where job-seekers register for notified vacancies.
• They record only formal vacancies. Many rural people never register, so they are a weak proxy for unemployment.

• The National Career Service portal now does this job.

• Payroll data from EPFO, ESIC and NPS: used as proxies for formal jobs.

• NCERT slip: Class 11 says there are "three sources" of unemployment data but then lists four (Census, NSO reports, PLFS, DGE&T). Survey design is covered in economic-data-statistics.

3. Who works: participation by gender and region, and women's invisible work

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Participation rates

• Table 6.1: WPR, 2023-24 (Class 11):

	Total	Rural	Urban
Men	56.4	56.3	56.4
Women	30.7	34.8	20.7
Total	43.7	45.6	38.9

• NCERT error: the chapter text still says "about 41 (41.1)" overall, about 42 rural and about 38 urban. Those are older figures. Use the table.
• Why rural WPR is higher than urban WPR:
• Rural people have limited resources, so they cannot afford to stay idle.
• Many skip school or drop out midway to join the workforce.

• Urban people study longer and can wait for jobs that match their skills.

• Why urban women have the lowest WPR:

• Only about 21 of every 100 urban women work, against 35 of every 100 rural women (2023-24).
• Where men earn high incomes, families discourage women from taking jobs.

• Social norms, safety and difficulty of travel also matter.

• Female labour force participation rate (FLFPR): women in the labour force as a share of all women. India's rate has long been low by global standards.

• PLFS figures (age 15+, usual status): about 23% in 2017-18, rising to about 42% in 2023-24 (41.7%; verify current).

• The rise comes largely from rural self-employment and unpaid family work. So is it empowerment, or distress (women working because household incomes fell)?

• U-shaped female labour force participation (Claudia Goldin):

• In early development, as household income rises, women's participation falls. Reasons: the income effect, stigma against manual work and longer schooling.
• It rises again once women get higher education and white-collar jobs.
• India is a global low outlier on this curve.

Invisible and unpaid work

• Unpaid work of women: cooking, fetching water and fuelwood, and work on family farms.
• It is often unpaid, or paid in kind.
• It is not counted as economic activity, so women workers are undercounted (Class 11).

• The chapter's "Work This Out" box asks whether housewives should be counted as contributing to GNP.

• Unpaid care work: unpaid caring for household members plus domestic chores. It is done mostly by women and is excluded from GDP.

• Care work is broader. It covers work that meets other people's physical, emotional and developmental needs:
• paid care, such as nurses and domestic workers;

• unpaid care at home.

• Time Use Survey 2024 (MoSPI): women spend several times more minutes a day than men on unpaid domestic and care work (verify figures).

• Double burden: women carry both paid work and unpaid domestic and care work.
• Feminisation of agriculture: women form a growing share of farm workers as men move to non-farm jobs.
• 64.4% of women workers are in the primary sector, against 36.3% of men (2023-24).

• Women still lack land titles, credit and recognition as farmers. They operate only a small share of holdings, per the Agriculture Census (verify figure).

• Gender wage gap: the difference between men's and women's average earnings.

• PLFS shows gaps in both regular and casual wages; ILO evidence confirms them.

• Causes: discrimination, occupational segregation (women crowded into certain jobs) and care burdens.

• Glass ceiling: an invisible barrier that stops qualified women (and minorities) from reaching top posts.

• Women in the formal sector:
• About one-sixth of formal-sector workers in 2012 (Box 6.1).

• About 20% of formal and 30% of informal workers in 2011-12 (Class 11).

• The care economy as a source of jobs is covered in sectors-of-economy.

4. Status of employment: self-employed, regular salaried and casual workers

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Status as a quality measure (Class 11, §6.4)

• Status of employment means the worker's position in the enterprise: self-employed, regular or casual.
• The WPR says nothing about job quality. Status shows one dimension of it.

• It shows the worker's attachment to the job and authority over the enterprise and co-workers.

• The construction trio (Class 11):

Worker	Status	Share of workforce (2023-24)	Features
Cement-shop owner	Self-employed: owns and runs an enterprise to earn a living	about 58%	The main source of livelihood
Construction worker	Casual worker: hired casually on others' farms or enterprises and paid for work done	about 20%	The most vulnerable group. Brick-making is an example (Fig. 6.2).
Civil engineer in a construction company	Regular salaried employee: hired by a person or enterprise and paid regularly	about 22%	More common in urban areas

• Unpaid family worker: a helper in a household enterprise run by a relative, without regular pay. Such workers are counted within the self-employed.
• Charts 6.1 and 6.2:
• Self-employment is over 50% for both men and women.
• Casual work is the second-largest source of work for women.
• Regular salaried jobs employ 21% of men and 16% of women.
• Rural areas have more self-employed workers, because most farming families own and cultivate plots.

• Urban areas have more regular employees, because urban enterprises need workers on a regular basis.

• Drill (Class 11 list):

• Self-employed: saloon owner, handloom weaver, cold-drink shop owner.
• Regular: SBI cashier; private-hospital nurse on a monthly salary for five years; rice-mill worker "paid daily but employed regularly".
• Casual: loading worker in a wholesale vegetable shop.

Status trends (Table 6.3, % of workforce)

Status	1972-73	1983	1993-94	2011-12	2017-18	2023-24
Self-employed	61.4	57.3	54.6	52.0	55.6	58.4
Regular salaried	15.4	13.8	13.6	18.0	21.1	21.7
Casual	23.2	28.9	31.8	30.0	23.3	19.9

• How to read the table:
• Casual work rose until the mid-1990s. That was casualisation.
• Casual work fell after that.
• Regular salaried work has risen since 2011-12.

• Self-employment has risen since 2017-18.

• Class 11 asks students to explain two things: the "moderate rise in self-employment" and the rise in regular salaried jobs.

• Possible reasons: formalisation and stricter PF/GST compliance; more women doing own-account and helper work; distress self-employment after COVID.

• Self-employment does not necessarily pay more than casual work (Class 11 exercise).

• Own-account workers and unpaid helpers can be working poor: they are employed, but earn too little to lift their households above the poverty line.

• Quality indicators beyond status:

• a written contract;
• social security (PF, pension, health cover);
• earnings and their regularity;
• hours of work and paid leave.

5. Where people work and how fast jobs grow: sectoral shift and jobless growth

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Sectoral distribution

The full analysis is in sectors-of-economy; this is a summary.

Sector	1972-73	1993-94	2011-12	2023-24
Primary (agriculture, mining)	74.3	64	48.9	46.1
Secondary (manufacturing, utilities, construction)	10.9	16	24.3	24.1
Services (trade, transport, other services)	14.8	20	26.8	29.8

• Where rural and urban people work (2023-24):
• Rural: 59.8% in primary, 21.4% in secondary, 18.8% in services.

• Urban: 60.9% in services, about one-third (32.4%) in secondary, only 6.7% in primary.

• The expected path of development: labour moves from agriculture to industry, then to services. Workers migrate from rural to urban areas along the way. Later, industry's share of jobs falls as services expand fast.

• Surplus labour means more workers than production needs.
• The Class 11 chapter on the Indian economy at independence says agriculture was "saddled with surplus labour and extremely low productivity".
• Planners hoped industrialisation would absorb these workers.

• After 70 years of planning, however, nearly half the workforce is still in the primary sector.

• Labour-intensive sectors are sectors where labour is a large share of cost. They are the main job creators:

• textiles and apparel, leather and footwear, food processing, construction and tourism;
• garment factories are a new source of factory jobs for women (Fig. 6.3).

Growth vs jobs (Chart 6.3)

• Employment growth is the yearly rate at which jobs grow.
• Across 1951-2023, GDP grew faster than employment.

• Employment grew at 2% a year or less, except in 1999-2005 and 2022-23.

• Jobless growth began in the late 1990s:

• employment growth fell back to the level of early planning;
• the gap between GDP growth and job growth widened;

• so the economy produced more goods and services without creating matching jobs.

• Employment elasticity = % change in employment ÷ % change in GDP. It shows how job-intensive growth is.

• India's figure is low and has been falling, roughly 0.1-0.2 in the 2000s and 2010s (RBI KLEMS-type estimates; verify current).

• Why holding job growth at 2% is hard (Class 11 prompt):

• The base is huge: 2% of about 545 million is more than 10 million new jobs a year.
• Growth has been capital-intensive (more machines, fewer workers).
• Growing services such as IT and finance favour skilled workers.

• Premature deindustrialisation: manufacturing's share of jobs peaked early (see sectors-of-economy).

• Scale of need: the Economic Survey 2023-24 says India must create about 78.5 lakh non-farm jobs a year until 2030 (verify current).

• NCERT outdated: the Class 11 summary still says "about three-fifth" of the workforce depends on agriculture (now about 46%). It also says post-reform service jobs are "mostly casual", but the casual share fell to 19.9% by 2023-24.

6. Organised and unorganised sectors: definitions, conditions and social security

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Definitions

• Organised (formal) sector, per Class 11: all public-sector establishments, plus private establishments with 10 or more hired workers.

• Its workers get social security and can join unions.

• Unorganised (informal) sector: everything else. This includes:

• farmers and farm labourers;
• owners of small enterprises and their workers;
• the self-employed who have no hired help;

• non-farm casual workers who serve several employers, such as construction and head-load workers.

• Class 10, Sectors of the Indian Economy defines the organised sector by registration and law. Organised enterprises are registered and follow laws such as:

• the Factories Act;
• the Minimum Wages Act;
• the Payment of Gratuity Act;

• the Shops and Establishments Acts.

• NCEUS (Arjun Sengupta, 2007): the unorganised sector consists of unincorporated proprietary or partnership enterprises with fewer than ten workers.

• Tick-list drill (Class 11):

Case	Sector
Hotel with 7 hired + 3 family workers	Informal (only 7 hired)
Textile shop with 9 workers	Informal
Bus company with 20 workers	Formal
Construction firm with 10 workers	Formal (the rule is 10 or more)
Private school with 25 teachers	Formal
Police constable, nurse in a government hospital, clerk in the electricity office	Formal (public sector)
Cycle-rickshaw puller	Informal
Temporary computer operator in a state government office	Formal establishment, but informal employment (Section 7)

• Scale:
• Box 6.1 (2012): about 30 million formal workers, of whom about 18 million were in the public sector. The government is the largest formal employer. Women were about one-sixth of formal workers. The data came from the Ministry of Labour through employment exchanges.
• 2019-20 (Chart 6.4): 59 of 535 million workers were formal, i.e. 59/535 × 100 ≈ 11%. So about 89% were informal.
• Economists link the reforms of the early 1990s to a fall in formal-sector employment.

Conditions: formal vs unorganised

Feature	Organised (Kanta)	Unorganised (Kamal)
Job security	Cannot be asked to leave without a reason	Can be dismissed at any time, with no compensation
Hours	Fixed (9.30-5.30); overtime is paid for extra hours	Long (7.30 am-8 pm); no overtime pay
Paid leave	Paid leave and paid holidays (Sundays off)	No pay for days not worked
Appointment letter	Yes	No
Benefits	Provident fund, medical allowance, gratuity, pension	None beyond wages

• Provident fund: retirement savings under rules set by the government. Employer and employee both contribute.
• Gratuity: a lump sum paid on retirement, resignation or death.
• It needs five years' continuous service, or one year for fixed-term employees under the Code on Social Security.

• It is paid at 15 days' wages per completed year of service.

• Pension: a regular payment after retirement.

• Social security: protection through provident fund, gratuity, pension, maternity benefit, medical benefits and a safe workplace. The factory manager must provide drinking water and safe working conditions.
• Trade unions: organisations of workers that bargain with employers for better wages and social security.
• The Ahmedabad mill union also ran welfare activities for workers' families.

• The Trade Unions Act 1926 is now part of the IR Code.

• Collective bargaining: employers negotiating with groups of workers, usually through unions, over wages, conditions and benefits.

• Unorganised conditions (Class 11):
• no regular income and no government protection;
• dismissal without compensation;
• outdated technology and no accounts kept;

• workers living in slums as squatters.

• Since the late 1970s, developing countries including India have paid attention to informal enterprises because formal jobs were not growing. Through ILO-led efforts, the government began modernising informal enterprises and extending social security to their workers.

• The Kanta vs Kamal contrast is summarised above; the classification exercise is in sectors-of-economy.

7. Casualisation, informalisation and formalisation

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Casualisation and informalisation

• Casualisation of workforce: workers move from self-employment or regular jobs into casual wage work. This makes them highly vulnerable.
• NCERT outdated framing: Class 11 says people moved into casual work "over the last five decades". But its own Table 6.3 shows the casual share peaking at 31.8% in 1993-94 and falling to 19.9% by 2023-24.

• Class 11 asks: if a marginal farmer becomes a full-time labourer, or a permanent pharma worker becomes a daily-wage labourer, are they happier even if their daily earnings rise? Income is not the same as security.

• Informalisation: job quality declines as more workers end up without social security.

• Workers go 10-20 years without maternity benefit, PF, gratuity or pension.
• Private-sector pay is lower than public-sector pay for the same work.

• Planners expected the informal share to shrink as the economy grew. It did not: about 89% of workers were informal in 2019-20.

• Box 6.2: Informalisation in Ahmedabad (source: Jhabvala, Sudarshan and Unni, eds, Informal Economy at Centre Stage, 2003):

• The mills: over 60 textile mills employed 1,50,000 workers. They had secure jobs, a living wage, health and old-age cover, and a strong union that also ran welfare activities.
• The closures: mills across India began closing in the early 1980s. Mumbai's mills closed fast. Ahmedabad's closures stretched over about 10 years.
• The job losses: over 80,000 permanent and 50,000 non-permanent workers lost their jobs and were driven into the informal sector.
• The social fallout:
  • recession and communal riots;
  • alcoholism and suicides;
  • children withdrawn from school and sent to work;
  • a whole class pushed from the middle class into poverty.

• The shift in the home: the "balance of power" changed. The unemployed mill worker peels garlic while his wife earns by rolling beedis.

• Informalisation of the organised sector (Class 10, Sectors of the Indian Economy):

• Organised firms operate as unorganised units to evade taxes and labour laws.

• Organised-sector jobs have been lost since the 1990s, and those workers moved to low-paid unorganised work.

• Contract labour: workers hired through a contractor to work for a principal employer. They get lower wages and little job security. The Contract Labour Act 1970 is now part of the OSH Code.

• Big firms also outsource work as piece-rate jobs to very small firms or to homes (§6.10).
• Social discrimination in the labour market: most workers from SC, ST and backward communities are in the unorganised sector. On top of irregular, low-paid work, they also face social discrimination (Class 10).

Enterprise vs job, and formalisation

• The informal sector is defined by the enterprise: small, unincorporated and unregistered. This is the ILO's 15th ICLS (1993) approach.
• Informal employment is defined by the job: no written contract, paid leave or social security, whether the employer is formal or informal (ILO 17th ICLS, 2003; NCEUS).
• Example: the temporary computer operator in a government office.

• Informal employment is about 90% of India's workforce.

• Formal employment: a written contract plus social security (PF, pension, health cover).

• Formalisation of the economy: enterprises and workers moving into the registered, taxed and regulated economy. It is driven by:
• GST registration, which firms need to claim input tax credit;
• digital payments, which leave a record;
• Udyam registration of MSMEs;
• EPFO/ESIC enrolment;

• e-Shram registration of unorganised workers.

• The EPFO payroll debate: net additions to EPFO rolls are a debated proxy. Are they new jobs, or old jobs that have just been formalised?

• Decent work (ILO): productive work with fair income, security, social protection, rights at work and social dialogue, in conditions of freedom and dignity.
• Its four pillars are employment, rights at work, social protection and social dialogue.

• It is part of SDG 8.

• Trade-off: formalisation brings benefits and bargaining power, but also compliance costs that small firms may not be able to bear.

8. Unemployment in India: definitions, forms and migration

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Definitions and forms

• Unemployment, two definitions:
• NSO: people who, owing to lack of work, are not working, but who either seek work (through employment exchanges, intermediaries, friends or relatives, or applications to employers) or are available for work at the prevailing conditions and pay.

• Economists: a person who cannot get work for even one hour in half a day.

• Open unemployment: visible unemployment. People search newspapers, ask friends, stand at labour points for a day's hire, or register at exchanges. Fig. 6.5 shows unemployed mill workers waiting for casual jobs.

• Disguised unemployment: more people work on a task than it needs.
• The marginal product of the extra workers is zero, so withdrawing them does not reduce output.
• It is common on Indian family farms. It is hidden, because everyone looks busy.
• Class 11 example: a farmer with 4 acres needs 2 workers plus himself, but uses 5 workers plus his wife and children.
• A late-1950s study found about one-third of farm workers were disguisedly unemployed. Sugarcane cutters are the chapter's example (Fig. 6.6).
• Class 10, the Laxmi case: Laxmi's family of five works 2 ha of unirrigated land, growing jowar and arhar.
  • All five work all year because they have nowhere else to go.
  • Their labour effort is divided, so no one is fully employed.
  • If two members take jobs on landlord Sukhram's land or in a factory, family income rises and farm output does not fall.
• Urban version: painters, plumbers and repair workers who do not find work every day, and cart-pushers and street sellers who "spend the whole day but earn very little".

• The zero-marginal-product mechanics are in production-and-costs; the Lewis model is in growth-theories-business-cycles.

• Underemployment takes two forms:

• Visible: fewer hours than a person wants.
  • Example: Victor gets only 2 hours of work a day and spends the rest of the day looking for work (Class 11, Ex. 19).
  • By CWS he counts as employed, but he is underemployed.
  • Such people are likely doing casual odd jobs: loading, delivery, repairs.
• Invisible: low productivity, or a job that underuses a person's skills.

• Class 10 MCQ: underemployment occurs when people are "working less than what they are capable of doing".

• Seasonal unemployment: farm work is seasonal, so there is no work for part of the year.

• Villagers migrate to towns in the lean season.

• They return home when the rains begin, because the sowing season brings farm work again.

• Educated unemployment: unemployment among people with secondary or higher education.

• In India it rises with education. Graduates' UR is around 13% (verify).

• Causes: skill mismatch, and educated people queuing for scarce regular or government jobs (see human-capital).

• Youth unemployment (ages 15-29 in Indian surveys; 15-24 internationally):

• About 10% in PLFS 2023-24, against 3.2% for everyone aged 15+ (verify).

• ILO-IHD India Employment Report 2024: youth are about 83% of the unemployed, and the educated share among unemployed youth is rising (verify).

• Key point from Class 11: the poor "cannot remain completely unemployed for very long".

• They take unpleasant, unclean or dangerous jobs that nobody else will do.
• So India's low open UR can coexist with poor job quality.

Migration links

• Rural-urban migration: workers move from villages to cities, pushed by unemployment and pulled by development. It is often seasonal.
• Circular migration: repeated temporary moves between home and work areas, without settling permanently. Examples: brick kilns, sugarcane cutting, construction.
• Distress migration: migration forced by crop failure, debt or disaster, not drawn by good opportunities.
• Reverse migration: migrants return from cities to their villages.
• This happened on a huge scale during the 2020 COVID lockdown.
• MGNREGA acted as a cushion.

• Agriculture's share of the workforce rose in 2019-21, which is a reversal of structural change.

• Portability of welfare for migrants is covered in Section 11.

9. Unemployment in macroeconomic theory

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Taxonomy

Type	Cause	Example / cure
Voluntary unemployment	People choose not to work at the prevailing wage, or wait for a better job	A graduate waiting for a government job
Involuntary unemployment	People are willing to work at the prevailing wage but find no job (Keynes)	Workers in a slump
Frictional unemployment	Short spells while searching for or switching jobs. It exists even at full employment.	Better information cuts it: job portals, National Career Service
Structural unemployment	Long-term mismatch of skills or location caused by changes in technology or economic structure	Ahmedabad mill workers; handloom weavers displaced by powerlooms. Needs reskilling.
Cyclical unemployment	Deficient aggregate demand in a recession. It falls when the economy recovers.	Deflationary gap (income-determination-keynes). Fiscal/monetary stimulus helps.
Technological unemployment	Workers replaced by machines, automation or AI	Gandhi's epigraph; AI and jobs debate in the Economic Survey 2024-25 (verify)

• Natural rate of unemployment = frictional + structural.
• It is the rate consistent with full employment, and the economy tends towards it in the long run (Friedman-Phelps). It is linked to NAIRU, the non-accelerating-inflation rate of unemployment.
• So full employment does not mean zero unemployment.

Dynamics and linked ideas

• Hysteresis: high unemployment persists after a recession.
• The long-term unemployed lose skills and contacts.
• This raises the natural rate.

• Example: the post-COVID "scarring" debate.

• Okun's law (Okun, 1962): when unemployment rises, output falls below its potential by a larger proportion.

• Rule of thumb: each 1 percentage point of unemployment above the natural rate goes with an output gap of about 2-3%.

• It fits India poorly. Here shocks push people into low-productivity work, not open unemployment, so output falls while UR barely moves.

• Efficiency wage: a wage paid above the market-clearing level to raise effort and loyalty and cut turnover. Examples: Ford's $5 day (1914) and the Shapiro-Stiglitz shirking model.

• Wages then do not fall to clear the market, so it causes involuntary unemployment.

• Labour arbitrage: moving work to places with cheaper labour, e.g. by offshoring.

• India's IT-BPM sector grew on this.

• It is now exposed to reshoring (work moving back to rich countries) and AI.

• Conclusion: these textbook categories fit India only partly. Disguised unemployment, seasonal unemployment and underemployment outweigh open unemployment. The core problem is the quality of jobs, not just their number.

10. Labour laws and the four labour codes

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Framework

• Labour laws regulate wages, working conditions, industrial relations, safety and social security.
• Constitutional basis. Labour is on the Concurrent List, so both the Centre and the states make laws:
• Entry 22: trade unions; industrial and labour disputes.
• Entry 23: social security and social insurance; employment and unemployment.

• Entry 24: labour welfare, including working conditions, provident funds, workmen's compensation, pensions and maternity benefit.

• Directive Principles:

• Art. 39(a): an adequate means of livelihood.
• Art. 41: right to work.
• Art. 42: just and humane conditions of work, and maternity relief.
• Art. 43: a living wage.

• Art. 43A: workers' participation in management (added by the 42nd Amendment, 1976).

• Fundamental Rights:

• Art. 23 bans forced and bonded labour.

• Art. 24 bans child labour in factories, mines and hazardous work.

• Class 11: labour laws let a small regular workforce protect its rights, form unions and bargain. Informal workers remain weakly covered.

• The four codes. 29 central laws were consolidated into four codes: 1. Code on Wages, 2019 2. Industrial Relations (IR) Code, 2020 3. Code on Social Security, 2020 4. Occupational Safety, Health and Working Conditions (OSH) Code, 2020

• All four came into force on 21 November 2025 (verify current, including state rules).

• Tripartism: government, employers and workers' organisations working together on labour standards.

• It works mainly through the Indian Labour Conference.
• Critics say there was little tripartite consultation on the codes.

Key provisions

• Wages (Code on Wages):
• A universal minimum wage for all employees, not only those in "scheduled employments".
• A floor wage set by the Centre. States cannot fix minimum wages below it. It may vary by region.
• The wage ladder, from lowest to highest (Committee on Fair Wages, 1948; Art. 43):
  • minimum wage: enough for subsistence;
  • fair wage: between the two, depending on the industry's capacity to pay, productivity and prevailing wages;
  • living wage: enough for a decent life, including education, health and some comforts.

• Need-based minimum wage: calculated from the needs of a standard working-class family (food, clothing, housing, fuel, education and medical costs).

  • Its basis is the 15th ILC (1957) norms plus the Reptakos Brett (1991) additions.
  • The Anoop Satpathy committee (2019) proposed a national minimum of about ₹375 a day (verify).

• Industrial relations (IR Code):

• Lay-off: a temporary failure to give work because of a shortage of power or materials, a breakdown, or similar reasons.
• Retrenchment: ending a worker's service for any reason other than punishment, retirement or ill-health. It requires notice and compensation.
• Closure: the enterprise shuts down permanently.
• Hire and fire: the IR Code raised the threshold for prior government permission before a lay-off, retrenchment or closure from 100 to 300 workers. States may raise it further. This flexibility is the headline change.
• Standing orders: rules on job classes, hours, leave and discipline. Their threshold also rose from 100 to 300.
• Fixed-term employment: a written contract for a fixed period.
  • Wages and benefits are on par with permanent staff.
  • Gratuity is payable after one year.
  • The end of the term is not retrenchment.
• Strike notice rules now apply to all establishments, not just public utilities.
• A negotiating union or council represents workers in talks with the employer.

• A worker re-skilling fund receives 15 days' wages for each retrenched worker.

• Labour market flexibility: how easily firms can adjust jobs, hours and wages, e.g. through temporary or contract hiring.

• For: the rigid rules in Chapter V-B of the old Industrial Disputes Act are blamed for small firm sizes, heavy use of contract labour and capital intensity.
• Against: flexibility weakens job security, bargaining power and labour standards, and risks a "race to the bottom".

• Globalisation's demand for flexible labour is covered in globalisation-mnc.

• Compliance:

• Inspector raj: excessive, discretionary inspections, leading to harassment, rent-seeking and heavy compliance costs.
• The codes replace inspectors with an inspector-cum-facilitator. The role is partly advisory, and inspections are randomised and web-based (the Shram Suvidha portal).

• Registrations, licences and returns are unified.

• OSH Code:

• The "factory" threshold rose to 20 workers with power / 40 without (from 10 and 20).
• Women may work night shifts, with their consent and safeguards.
• Inter-state migrant workers are covered.

• The contract-labour threshold rises to 50.

• Workers' rights, as a business responsibility: fair pay, safe conditions, non-discrimination, training, health care and paid leave.

• Child labour: work that takes away childhood, schooling and health.
• The Child and Adolescent Labour (Prohibition and Regulation) Act, 1986, as amended in 2016, bans employing children under 14.
• The one exception is helping a family enterprise outside school hours.
• It also bars adolescents aged 14-18 from hazardous work.

• Class 10: about 60% of India's population is aged 5-29. Only about 51% of them attend school or college. Many of the rest, especially under-18s, may be child labourers.

• Bonded labour: forced work to repay a debt or advance, often across generations, with no freedom to leave.

• It was abolished by the Bonded Labour System (Abolition) Act, 1976.
• Debt bondage still persists in brick kilns and agriculture.

11. Protecting unorganised, gig and platform workers

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Who is vulnerable (Class 10, Sectors of the Indian Economy)

• Why they need protection: organised jobs are growing slowly, and firms dodge labour laws. So workers are pushed into low-paid, insecure, exploitative unorganised work.
• Rural unorganised workers:
• Landless agricultural labourers: they own no land and depend on landowner-employers for both work and credit.
• Small and marginal farmers: small farmers operate 1-2 ha; marginal farmers operate under 1 ha.
  • Class 10 says they are "nearly 80% of rural households".
  • The Agriculture Census 2015-16 put them at about 86% of operational holdings (verify against the 2021-22 census).
• Sharecroppers.
• Artisans: weavers, blacksmiths, carpenters and goldsmiths.

• Farmers need timely seeds and inputs, credit, storage and marketing outlets.

• Urban unorganised workers:

• Workers in small-scale industry. These firms need help buying raw material and marketing their output.
• Casual workers in construction, trade and transport.

• Street vendors, head-load workers, garment makers and rag pickers.

• Protection is needed on wages, safety and health (Class 10, Ex. 22). It serves both economic and social development, since SC, ST and backward-community workers also face discrimination.

Gig and platform workers, and universal social security

• The Code on Social Security, 2020 defined these groups in law for the first time:
• Gig worker: a person who works and earns outside the traditional employer-employee relationship.
• Platform worker: a gig worker who finds customers or clients through an online platform, e.g. delivery or ride-hailing.

• Aggregator: a digital intermediary or marketplace that connects buyers of a service with its providers.

• Funding: aggregators contribute 1-2% of annual turnover, capped at 5% of the amount they pay to gig and platform workers, into a social security fund.

• Oversight: a National Social Security Board oversees schemes for life and disability cover, health, maternity and old age.
• NITI Aayog (2022) estimated about 77 lakh gig workers in 2020-21, rising to about 2.35 crore by 2029-30 (verify).
• Coverage drives (verify current):
• e-Shram (2021): a national database of unorganised workers with 30 crore+ registrations. Each worker gets an e-Shram UAN (Universal Account Number).
• PM-SYM (2019): a contributory pension of ₹3,000 a month at age 60 for unorganised workers. Atal Pension Yojana (2015) is a second pension option.
• PM-JAY health cover for gig workers registered on e-Shram (Budget 2025-26).
• Extension of ESIC coverage.

• State laws: Rajasthan (2023), Karnataka (2025) and others.

• Universal social security: extending cover to all workers, including informal, gig and platform workers, not just the organised sector.

• NCEUS pushed for it.

• The Unorganised Workers' Social Security Act, 2008 is now subsumed in the Code.

• Portability of benefits: workers can carry their entitlements across jobs, employers and states. Examples:

• the UAN for provident fund;
• the e-Shram UAN;

• One Nation One Ration Card, which lets migrants draw rations anywhere.

• Debates:

• Employee or independent contractor? The UK Supreme Court's Uber ruling (2021) held that drivers are "workers" entitled to basic rights.
• Algorithmic management: apps set pay, targets and ratings, and can deactivate workers without human review or appeal.
• Minimum earnings and heat-stress protection for delivery riders.

12. Generating employment: strategies, programmes and the rural job guarantee

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Strategies and programmes

• Employment generation: creating new jobs through public investment and support.
• Class 10's toolkit, built around Laxmi:
• Irrigation: a well, paid for by the government or a bank loan, lets her grow a rabi wheat crop. One hectare of wheat employs 2 people for 50 days. A dam and canals would multiply this across many farms.
• Rural roads, transport and storage help farmers sell their crop. This creates jobs in transport and trade too.
• Cheap bank credit replaces the high-interest moneylender, so she can buy seeds, fertiliser and pumpsets on time.
• Agro-industry in semi-rural areas:
  • a dal mill for arhar and chickpea;
  • cold storage for potatoes and onions;
  • honey collection centres near forests;
  • fruit and vegetable processing.
• Education: a Planning Commission (now NITI Aayog) study estimates about 20 lakh jobs in education alone.
• Health: more doctors, nurses and health workers in rural areas.
• Tourism: more than 35 lakh additional jobs every year (same study).

• Regional craft industries and IT.

• Matching exercise (Class 10):

Farm problem	Remedy
Unirrigated land	Canals built by the government
Low prices for crops	Cooperative marketing societies
Debt burden	Bank credit at low interest
No job in the off-season	Agro-based mills
Forced to sell to local traders right after harvest	Government procurement of foodgrains

• Direct and indirect employment generation (Class 11, §6.9):
• Direct: the government employs people in its departments and runs industries, hotels and transport companies. Dam construction is an example (Fig. 6.7).

• Indirect: a government steel company raises output. The private firms that buy its steel then raise their output and hire more too.

• Employment generation programmes: anti-poverty schemes that create jobs while building services and assets:

• primary health and education;
• drinking water and nutrition;
• housing and sanitation;
• rural roads and wasteland development.

• Scheme detail is in poverty-inequality.

• Current levers (verify current):

• Pradhan Mantri Viksit Bharat Rozgar Yojana, the 2025 employment-linked incentive (ELI) scheme, worth about ₹99,446 crore. It gives incentives to first-time employees and to employers who add staff.
• PM Internship Scheme.
• PMEGP, which funds micro-enterprises.
• DAY-NRLM, which supports self-help group livelihoods.

• Skill India.

• Green jobs: decent jobs that protect or restore the environment. Examples: renewable energy, energy efficiency, waste management and the circular economy. A just transition protects coal-dependent workers. Care jobs are another new source of work.

Right to work and the rural guarantee

• Right to work: everyone should be able to earn a living through work.
• In India it is a Directive Principle (Art. 41), not a Fundamental Right.

• It is given legal force through a wage employment guarantee: a statutory promise of a set number of days of unskilled manual work to rural households who ask for it.

• MGNREGA 2005 (Mahatma Gandhi National Rural Employment Guarantee Act):

• Rollout:
  • notified in September 2005;
  • launched on 2 February 2006 in 200 districts;
  • extended to all rural districts from 2008.
  • NCERT outdated: Class 10 says "about 625 districts".
• Guarantee: 100 days a year of unskilled manual work for every rural household that asks.
• 15-day rule: work must be given within 15 days of an application.
• Unemployment allowance: if the government fails to give work, it must pay an allowance. It is at least one-quarter of the wage for the first 30 days and at least one-half after that.
• Women: at least one-third of beneficiaries must be women.
• Works: priority goes to works that raise land productivity (water conservation, land development).
• Accountability: Gram Sabhas conduct social audits.
• Record:
  • it is a self-targeting safety net, because only the needy take hard manual work;
  • it put a floor under rural wages;
  • women's participation is high;
  • it cushioned COVID reverse migration.

• Critiques:

  • payment delays;
  • wages below state minimum wages;
  • leakages;
  • weak assets;
  • budget rationing of a right that was meant to be demand-driven.

• The 2025 replacement: Viksit Bharat–Guarantee for Rozgar and Ajeevika Mission (Gramin) Act (VB-G RAM G) (all details: verify current):

• Guarantee: raised to 125 days.
• Cost sharing: Centre and states split costs 60:40, or 90:10 for North-Eastern and Himalayan states.
• Seasonal pause: states may notify up to 60 days a year in peak sowing and harvest seasons, when works stop so farm labour is available.
• Funding: normative allocations to states. States bear any spending above them.
• Planning: through Viksit Gram Panchayat plans in four areas: water security, core rural infrastructure, livelihood infrastructure and climate resilience.
• Retained: the unemployment allowance and time-bound wage payment.

• Monitoring: technology-based.

• The debate:

• More days, but a capped right rather than a demand-driven one.
• A heavier fiscal and federal burden on states.
• Farm-labour availability vs workers' choice during the seasonal pause.

• The removal of Gandhi's name.

• Class 10 asks why both Acts are called a "right to work". Because work is a legal entitlement: the state must give it on demand or pay an allowance.

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Exam angles

Prelims: high-yield facts and traps

• Formulas:
• WPR = workers ÷ population × 100.
• LFPR = labour force ÷ population × 100.
• UR = unemployed ÷ labour force × 100.

• WPR = LFPR × (1 − UR/100).

• Discouraged workers are outside the labour force. "Discouraged workers raise the unemployment rate": FALSE. They lower the measured rate.

• Reference periods:
• Usual status: 365 days. Principal status by major time, plus subsidiary status if 30 days or more.
• CWS: 7 days. 1 hour on any day counts as employed.
• CDS: each day in half-day units. It usually gives the highest UR.

• Census: main worker 183 days or more; marginal worker under 183 days.

• Data points (verify current):

• WPR 2023-24: 43.7 overall (rural 45.6, urban 38.9); women 30.7; urban women 20.7.
• Status: self-employed 58.4%, regular 21.7%, casual 19.9%.
• Sector: primary 46.1%, secondary 24.1%, services 29.8%.
• Formal share: about 11% (59 of 535 million, 2019-20).
• PLFS 2023-24 (age 15+, usual status): UR 3.2%, LFPR 60.1%, female LFPR 41.7%.

• PLFS gives monthly CWS estimates from January 2025. NSO was formed in 2019 by merging CSO and NSSO.

• Thresholds:

• Formal sector: public, or private with 10 or more hired workers. NCEUS unorganised: unincorporated, under 10 workers.
• Gratuity: 5 years' service (1 year for fixed-term), 15 days' wages per year.
• IR Code: prior-permission and standing-orders threshold 300.
• OSH Code: factory threshold 20 (with power) / 40 (without); contract labour 50.
• Aggregator levy: 1-2% of turnover, capped at 5% of payouts.

• 29 laws → 4 codes, in force 21 November 2025.

• Type-matching:

• Disguised: zero marginal product on family farms (Laxmi).
• Seasonal: the farm cycle.
• Frictional: job search.
• Structural: skill or location mismatch (Ahmedabad).
• Cyclical: recession.
• Technological: automation or AI.
• Natural rate = frictional + structural.
• Okun's law: unemployment ↔ output gap.
• Hysteresis: persistence.

• Efficiency wage: involuntary unemployment.

• Constitution:

• Art. 41 (right to work) is a DPSP. "Right to work is a Fundamental Right": FALSE.
• Art. 43: living wage. Art. 43A: workers' participation in management. Art. 23: forced labour. Art. 24: child labour.

• Labour is on the Concurrent List (entries 22-24).

• Schemes:

• MGNREGA: 100 days; 15-day rule; unemployment allowance (¼ of the wage, then ½); at least one-third women; social audit by Gram Sabha; launched 2 Feb 2006 in 200 districts.

• VB-G RAM G: 125 days; 60:40 cost sharing (90:10 for NE and Himalayan states); up to 60-day seasonal pause (verify).

• Traps:

• Unpaid homemakers are not counted as workers, but unpaid helpers in family enterprises (Meena) are.
• Beggars, thieves, smugglers and gamblers are not workers.
• "Disguised unemployment is visible": FALSE. Everyone appears to be working.
• "UR = unemployed ÷ population": FALSE.
• A 9-worker shop is informal; a 10-worker firm is formal.
• A job in a formal establishment can still be informal employment.
• "Casualisation has risen steadily since 1972": FALSE. The casual share peaked at 31.8% in 1993-94 and fell to 19.9% in 2023-24.
• "GNP = GDP + net exports": FALSE (an NCERT slip). GNP = GDP + net factor income from abroad.

Mains: GS-III themes

1. Jobless growth and low employment elasticity. - Causes: capital-intensive growth, skill-biased services, premature deindustrialisation, rigid regulation. - Jobs strategy: labour-intensive manufacturing, MSMEs, agro-processing, tourism, care work, construction and skilling.

2. Quality over quantity of jobs. - Informality (about 90%), casualisation and the working poor. - What drives formalisation (GST, EPFO, e-Shram) and where it stops. - Whether the labour codes strike the right balance between flexibility and security.

3. Female labour-force participation. - Measurement problems with unpaid and care work. - The U-curve, social norms, safety and the double burden. - Is the post-2017 rise empowerment or distress?

4. Educated and youth unemployment. - Skill mismatch and queuing for government jobs. - How to realise the demographic dividend (see human-capital).

5. Gig and platform work. - Flexibility vs precarity. - What the Social Security Code and state laws actually deliver. - Algorithmic management, and the employee-status question.

6. The rural job guarantee. - MGNREGA's record vs VB-G RAM G's redesign. - A rights-based design vs fiscal discipline. - The Centre-state cost burden. - Farm-labour availability vs workers' choice.

7. Migration. - Seasonal, circular and distress migration. - Lessons from COVID reverse migration. - Portable welfare: ONORC and UAN.

8. Labour law reform. - The hire-and-fire threshold of 300. - Fixed-term employment. - Inspector-cum-facilitator vs inspector raj. - Weak tripartism and the "race to the bottom" risk.

Current-affairs hooks

• Data releases:
• PLFS monthly and quarterly bulletins and calendar-year annual reports.
• Monthly EPFO payroll data.

• Time Use Survey releases.

• Reports and budgets:

• ILO World Employment and Social Outlook.
• ILO-IHD India Employment Report.
• The Economic Survey's employment chapter (non-farm job needs; AI and jobs).

• Union Budget job schemes: PM-VBRY/ELI, PM Internship Scheme.

• Labour codes:

• State-level rules and notifications.
• Union protests.

• Revision of the floor wage.

• Rural job guarantee:

• VB-G RAM G rollout.
• Centre-state cost-sharing disputes.

• Notifications of the seasonal pause.

• Gig and platform work:

• e-Shram milestones.
• PM-JAY cover for gig workers.
• New state gig-worker laws.
• Platform-worker strikes.

• Heat-stress advisories.

• Recurring debates:

• International Labour Conference sessions.
• AI-led technological unemployment and labour arbitrage in IT-BPM.