Shifts in the Indian Labour Market (an ongoing series)

There has been much debate and discussion about the deep shifts that have happened in India’s labour market these last couple of decades. As workers leave agriculture, or newer and younger entrants into the workforce look for non-agricultural work, the key issue is the ability of sectors outside agriculture to absorb the influx.To the extent they cannot, workers are forced into the ‘informal’ sector – largely low-paying, small scale jobs with little security and no benefits, in industries such as retail trade (running or working in, shops) for instance.

It should be pointed out here that 2011-12 has turned out to be a historic year for the Indian economy. It’s the first time that workers in agriculture were less than 50% of the workforce.

It used to be that the biggest employer outside agriculture was the manufacturing sector*, and that is still the case. In addition, sectors such as trade and transport were a big absorber so to speak, of informal labour. But arguably the other big story in the last decade has been the emergence of one other sector as a huge repository of labour outside agriculture and that’s construction.

The chart below shows the extent to which construction is displacing other sectors as an employer outside agriculture – among the biggest employers, it was the only one between 2004-05 and 2011-2012 to increase its share of the non-agricultural workforce. It’s now second only to manufacturing, but has rapidly narrowed the gap.

The emergence of the construction industry as a major employer is not just one of degree but of kind.

The chart below is an interactive one which shows the breakdown of the workforce by gender, region (rural or urban), and conditions of work – whether a worker is salaried and whether he or she has any kind of social security (provident funds, pension, maternity benefits etc). The flowing vertical lines show how each of those ‘dimensions’ (gender, industry etc) are linked together. By hovering over each of the lines, you can figure out for instance, what number of rural males are employed in construction as casual labour. You can vertically reorder the dimensions to change the flow. For instance, hovering over ‘industry’ changes the mouse to a vertical arrow which you can drag up or down. You can open the chart in its own page by clicking here.

The striking characteristic about the construction industry here is its big reliance on casual labour as opposed to the other categories of employment (‘self employment’ and ‘salaried’). A larger chunk of those employed in construction also tend to be those with no social security, even more so than manufacturing.

To be sure, the overall NSS data shows an increase in the proportion of the salaried workforce as compared to other categories between 2005 and 2012. Whether that pattern continues in the future, will partly depend on whether (a) construction continues to expand at the pace it has done so in the last decade and (b) whether conditions of employment in that sector become more or less ‘informal’.


*However, if all the services industry groups (trade, transport etc) are considered as one group, like manufacturing, then services is the biggest employer

‘NR’ under the social security dimension indicates data not available or not reported. Data on social security is only compiled for salaried employees or casual labour, not for the self-employed

All data based on the National Sample Surveys  for 2011-12 and 2004-05. The numbers are estimates by NSS of total populations in each categories. The employment criteria used here is the ‘usual status (ps+ss)’ one

For a big picture look at employment trends these last couple of decades, this paper in the EPW is a good reference

First chart made using R/ggplot2. Second chart uses d3 with Jason Davies’ parsets plugin

August 31, 2014

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