Economy
Poverty, Unemployment and Inclusive Growth
Unemployment: Types, Measurement and Trends
Types of unemployment, usual vs weekly vs daily status, LFPR-WPR-UR, PLFS and its 2025 revamp, India's jobs challenge and Chhattisgarh's labour market.
Prerequisites
- Measuring Poverty and Inequality — poverty and unemployment feed each other.
- Sectors of the Economy — why most of India’s workforce is still in agriculture even though most output comes from services.
The Hook: The Brick Kiln Train
Connect
Every year after the paddy harvest, crowded trains leave Bilaspur and Champa for brick kilns in Uttar Pradesh, Punjab and Jammu. The men and women on board are not “unemployed” in the survey sense: most of them worked on their own fields for months. Yet they leave because the fields cannot employ them for the rest of the year.
Back in Raipur, a postgraduate who has been preparing for CGPSC for three years is counted as unemployed. So why is India’s unemployment rate only about 3%, while the jobs problem feels so much larger? The answer lies in how unemployment is measured and what kind of unemployment India has.
Why it matters: Prelims tests definitions (disguised vs seasonal, UPS vs CWS vs CDS, LFPR vs WPR) and the PLFS. Mains asks about jobless growth, women’s participation, educated unemployment and migration from Chhattisgarh.
Basic Definitions
$$\text{Labour force} = \text{Employed} + \text{Unemployed (seeking or available for work)}$$| Indicator | Formula | What it tells you |
|---|---|---|
| Labour Force Participation Rate (LFPR) | \( \frac{\text{Labour force}}{\text{Population}} \times 100 \) | How many people are working or looking for work |
| Worker Population Ratio (WPR) | \( \frac{\text{Employed}}{\text{Population}} \times 100 \) | How many people are actually working |
| Unemployment Rate (UR) | \( \frac{\text{Unemployed}}{\text{Labour force}} \times 100 \) | Share of the labour force without work |
Denominator trap
The unemployment rate is a share of the labour force, not of the population. A woman doing unpaid domestic work who is not seeking a job is outside the labour force, so she does not raise the unemployment rate at all. This is why a low UR can coexist with a low WPR.
Types of Unemployment
| Type | Meaning | Typical Indian example |
|---|---|---|
| Disguised (प्रच्छन्न बेरोजगारी) | More people engaged than needed; the marginal productivity of the extra workers is zero (or near zero). Removing them does not reduce output | Five family members working a two-acre paddy plot that two could manage |
| Seasonal (मौसमी) | Work only in some seasons | Rain-fed paddy farmers in Chhattisgarh idle after the kharif harvest |
| Structural (संरचनात्मक) | Mismatch between the skills or location of workers and the jobs available; long-term, linked to the structure of the economy | Lack of industry and capital to absorb rural labour; skill mismatch |
| Frictional | Short-term, while moving between jobs | A worker between two factory jobs |
| Cyclical (चक्रीय) | Due to a fall in aggregate demand during a downturn (Keynesian) | Job losses during a recession |
| Technological | Jobs replaced by machines or software | Combine harvesters, automation in manufacturing |
| Educated unemployment | Educated persons unable to find jobs matching their qualifications | Graduates queuing for government jobs |
| Underemployment | Working, but fewer hours or below capacity than desired | A graduate working as a part-time delivery rider |
| Voluntary | Not willing to work at the prevailing wage |
Key points:
- Disguised and seasonal unemployment are typical of agriculture and of developing economies. The concept of disguised unemployment is associated with Joan Robinson; Ragnar Nurkse saw disguised unemployment as hidden saving potential; W. Arthur Lewis’s dual-sector model assumes “surplus labour” in agriculture that industry can absorb.
- Frictional + structural unemployment together make up the natural rate of unemployment. Even a booming economy has some.
- Phillips curve: the short-run inverse relation between inflation and unemployment. Okun’s law: an inverse relation between output growth and unemployment.
How India Measures Employment Status
The NSS/PLFS classifies each person by activity status over a reference period:
| Approach | Reference period | Rule | Captures |
|---|---|---|---|
| Usual Principal Status (UPS / ps) | Last 365 days | Majority time criterion: the status in which the person spent most of the year | Chronic (long-term) unemployment |
| Usual Status (ps+ss) / UPSS | Last 365 days | UPS plus subsidiary work of at least 30 days in the year | Usual status counting subsidiary work. India’s headline annual rate |
| Current Weekly Status (CWS) | Last 7 days | Employed if worked at least one hour on any day of the week | Short-term and seasonal unemployment |
| Current Daily Status (CDS) | Each day of the last 7 days | Each day recorded in half-day units | Underemployment; gives the most detailed picture |
Rule of thumb for the ranking
Usually: CDS rate > CWS rate > usual status rate. The longer and looser the reference period, the easier it is to count someone as “employed”, so the usual status rate is the lowest. The daily status picks up every idle half-day.
The Periodic Labour Force Survey (PLFS)
| Milestone | Detail |
|---|---|
| Before 2017 | NSS quinquennial employment–unemployment surveys (the last was 2011–12); Labour Bureau annual surveys |
| PLFS launched (April 2017) by the NSO | Annual estimates (rural + urban, usual status and CWS) and quarterly estimates for urban areas (CWS) |
| First annual report: 2017–18 | Usual status UR 6.1%, then a multi-decade high |
| Agricultural-year reports | 2017–18 to 2023–24 (July–June). UR fell to 3.2% by 2023–24 |
| Revamp from January 2025 | Monthly estimates (CWS) and quarterly estimates for rural and urban areas; annual report moved to the calendar year (January–December) with a changed sample design |
Latest annual picture: PLFS Annual Report 2025 (January–December 2025, released March 2026)
| Indicator (usual status ps+ss, age 15+) | 2025 |
|---|---|
| LFPR | 59.3% (male 79.1%, female 40.0%) |
| WPR | 57.4% |
| Unemployment rate | 3.1% |
| UR among educated (secondary and above) | 6.5% (7.0% in 2024) |
| UR among urban women | 6.4% (6.7% in 2024) |
Comparing years
The 2025 report uses a new design and the calendar year, so it is not strictly comparable with the July–June series of 2017–18 to 2023–24. In an answer, write “about 3% (PLFS 2025)” and say which series you are quoting.
Other data sources you may see: the Quarterly Employment Survey (QES) of the Labour Bureau (establishments with 10+ workers), EPFO payroll data (formal jobs only), and the CMIE (a private survey, usually reporting higher unemployment).
The Real Jobs Problem: Analysis for Mains
India’s open unemployment rate is low because most people cannot afford to be unemployed. They take whatever work is available. The real problem is the quality of employment.
- Informality: by most estimates, close to nine out of ten workers are in informal work, without written contracts, paid leave or social security.
- Structure of work: agriculture still employs over 40% of workers but produces under a fifth of GVA, so output per worker on farms is low. Disguised unemployment persists.
- Self-employment dominates: much of it is low-earning own-account work or unpaid help in household enterprises.
- Women’s participation: female LFPR rose from 23.3% (2017–18) to 41.7% (2023–24) on the old series, but much of the rise is in unpaid family work and agriculture, not in salaried jobs.
- Educated youth: unemployment is highest among the young and the educated: a skill mismatch, plus a strong preference for government jobs.
- “Jobless growth” debate: periods of fast GDP growth with slow growth in formal jobs, especially in capital-intensive manufacturing.
- Demographic dividend at risk: a young population becomes a dividend only if it is healthy, skilled and employed.
Policy responses (detail on the next page)
- Wage employment: MGNREGA (2005), replaced by the VB-G RAM G Act, 2025 from 1 July 2026.
- Self-employment and credit: DAY-NRLM, PMEGP, MUDRA, Stand-Up India, PM SVANidhi, PM Vishwakarma.
- Skilling: Skill India Mission and PMKVY (2015), DDU-GKY (2014).
- Formal job creation: the Pradhan Mantri Viksit Bharat Rozgar Yojana (PM-VBRY), an employment-linked incentive scheme (outlay ₹99,446 crore, jobs created from 1 August 2025 to 31 July 2027).
- Labour law reform: four labour codes (wages, industrial relations, social security, occupational safety) replacing 29 central laws.
Chhattisgarh’s Labour Market
Chhattisgarh angle
- Low open unemployment: Chhattisgarh’s usual status unemployment rate is consistently below the all-India rate (SBI Research’s reading of PLFS 2025 puts it at about 2.3%).
- But high underemployment: most workers depend on rain-fed, single-crop paddy farming and on minor forest produce (tendu leaves, mahua, sal seeds). Work is seasonal.
- Distress migration (पलायन): seasonal migration from the plains districts (Janjgir-Champa, Bilaspur and neighbours are often reported) to brick kilns and construction sites in other states, sometimes in bonded conditions.
- Output vs employment gap: industry (steel, power, cement, mining) produces the largest share of GSDP but employs relatively few people, because it is capital-intensive.
- Responses: wage employment under MGNREGA and now VB-G RAM G; women’s SHGs under Bihan (बिहान), the state rural livelihoods mission; skilling through the Chhattisgarh State Skill Development Authority; and procurement-linked support for paddy and minor forest produce. See Economy, Budget and State Schemes and Minerals, Energy and Industries.
Memory Tricks
Reference periods: '365, 7, 1'
Usual = 365 days, Weekly = 7 days, Daily = 1 day at a time (in half-days). Shorter period → more unemployment detected → CDS > CWS > US.
'Zero MP = Disguised'
If taking a worker away changes nothing in output (marginal productivity zero), the unemployment was disguised. If the worker is idle only after harvest, it is seasonal.
Don’t Confuse
| This | vs | That |
|---|---|---|
| LFPR: (employed + unemployed) ÷ population | vs | WPR: employed ÷ population |
| UR denominator: labour force | vs | WPR denominator: population |
| Disguised: appears employed, adds nothing to output | vs | Seasonal: openly idle in some months |
| Structural: long-term mismatch | vs | Frictional: short-term, between jobs |
| UPS: majority of 365 days | vs | UPSS (ps+ss): adds subsidiary work of 30+ days |
| PLFS quarterly (before 2025): urban only | vs | PLFS from 2025: monthly, and quarterly for rural + urban |
Common Mistakes
MCQ traps
- “Disguised unemployment means people are openly without work.” No. They appear employed; their marginal productivity is zero.
- “The unemployment rate is calculated on the total population.” No. It is calculated on the labour force.
- “Current weekly status counts a person as unemployed if they did not work for one full day.” No. Under CWS, a person who worked even one hour on any day of the week is employed.
- “PLFS is conducted by the Labour Bureau.” No. It is conducted by the NSO (MoSPI). The Labour Bureau runs the QES.
- “Natural rate of unemployment = cyclical + frictional.” No. It is frictional + structural; cyclical unemployment is what the business cycle adds on top.
Practice
All questions below are original practice questions written in CGPSC style. They are not previous-year questions.
Level 1: Foundation
- The unemployment rate is the number of unemployed persons as a percentage of the ______.
- Under Current Weekly Status, a person is counted as employed if they worked for at least ______ on any day of the reference week.
- Unemployment in which the marginal productivity of labour is zero is called ______ unemployment.
Answers
- Labour force (not the population).
- One hour.
- Disguised unemployment.
Level 2: Prelims MCQs
Q1. Consider the following statements about the Periodic Labour Force Survey (PLFS):
- It is conducted by the National Statistics Office.
- Before 2025, its quarterly estimates covered only urban areas.
- From 2025, its annual report covers the calendar year instead of the agricultural year.
Which of the statements given above is/are correct?
- (a) 1 and 2 only
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Answer and explanation
(d) 1, 2 and 3. PLFS (launched 2017) is run by the NSO under MoSPI. Its quarterly bulletins were urban-only (CWS) until the January 2025 revamp, which added monthly estimates and rural + urban quarterly estimates and moved the annual report to January–December.
Q2. Match List I (Type of unemployment) with List II (Example):
| List I | List II |
|---|---|
| A. Disguised | 1. A software tester replaced by automated testing tools |
| B. Seasonal | 2. Six family members on a plot that needs three |
| C. Technological | 3. A worker idle for two weeks between two jobs |
| D. Frictional | 4. A rain-fed paddy farmer without work in summer |
- (a) A-2, B-4, C-3, D-1
- (b) A-2, B-4, C-1, D-3
- (c) A-4, B-2, C-1, D-3
- (d) A-1, B-4, C-2, D-3
Answer and explanation
(b) A-2, B-4, C-1, D-3. Extra family workers who add nothing to output show disguised unemployment; idleness after the kharif season is seasonal; replacement by machines is technological; a short gap between jobs is frictional.
Q3. If in a region the population (15+) is 1,000, the employed are 540 and the unemployed are 60, what are the LFPR and the unemployment rate?
- (a) 60% and 6%
- (b) 54% and 10%
- (c) 60% and 10%
- (d) 54% and 6%
Answer and explanation
(c) 60% and 10%. Labour force = 540 + 60 = 600, so LFPR = 600/1,000 = 60%. UR = 60/600 = 10%. Option (a) wrongly divides the unemployed by the population. (WPR here is 54%.)
Q4. Which approach to measuring unemployment is best suited to capture underemployment within a week?
- (a) Usual Principal Status
- (b) Usual Principal and Subsidiary Status
- (c) Current Weekly Status
- (d) Current Daily Status
Answer and explanation
(d) Current Daily Status. CDS records activity for each day of the reference week in half-day units, so it captures partial idleness. Usual status approaches look at the whole year, and CWS counts a person as employed if they worked even one hour in the week.
Level 3: Mains Answer Writing
Q1. (150–200 words) India’s unemployment rate is low, yet unemployment is considered one of its biggest economic challenges. Explain this paradox and suggest measures, with reference to Chhattisgarh.
Model answer outline
- Intro: PLFS 2025 puts usual status unemployment at about 3.1%, but this masks the quality problem.
- Explaining the paradox:
- The poor cannot afford to stay unemployed, so they take low-quality work.
- Disguised and seasonal unemployment in agriculture; underemployment is not captured by usual status.
- Informality: most workers lack contracts and social security.
- Low female paid work; much of it unpaid family labour.
- High educated youth unemployment and skill mismatch.
- Chhattisgarh angle: low open unemployment, but single-crop paddy, forest-based livelihoods and seasonal palayan to brick kilns; capital-intensive industry employs few.
- Measures: labour-intensive manufacturing (food processing, minor forest produce value chains, textiles); second-crop irrigation; skilling linked to local industry; MSME credit; enforcing labour codes and social security for gig and migrant workers; better data (monthly PLFS, district estimates).
- Conclusion: the goal is not just more jobs but more productive, secure jobs.
Q2. (60 words) Distinguish between disguised unemployment and seasonal unemployment.
Model answer outline
- Disguised: workers appear employed, but their marginal productivity is zero; removing them does not reduce output. Chronic, typical of family farms.
- Seasonal: workers are openly idle in certain months because the activity is seasonal (rain-fed farming, sugar mills).
- Conclusion: disguised needs non-farm jobs; seasonal needs irrigation, multiple cropping and off-season public works.
Quick Revision Table
| Fact | Detail |
|---|---|
| Labour force | Employed + unemployed (seeking/available) |
| LFPR / WPR / UR | Labour force ÷ population / employed ÷ population / unemployed ÷ labour force |
| UPS | 365 days, majority time |
| UPSS (ps+ss) | UPS + subsidiary work of 30+ days |
| CWS | 7 days; employed if 1 hour of work on any day |
| CDS | Each day, half-day units; captures underemployment |
| PLFS | NSO, from April 2017; first report 2017–18 (UR 6.1%) |
| PLFS revamp | From January 2025: monthly (CWS) and rural + urban quarterly; calendar-year annual |
| PLFS 2025 | LFPR 59.3%, WPR 57.4%, UR 3.1% (ps+ss, 15+) |
| Natural rate | Frictional + structural |
| Disguised unemployment | Marginal productivity zero; Joan Robinson; Lewis surplus labour |
| PM-VBRY | Employment-linked incentive; ₹99,446 crore; jobs from 1 Aug 2025 to 31 Jul 2027 |
| Chhattisgarh | UR below national average; seasonal migration; capital-intensive industry |
Key Takeaways
Key Takeaways
- UR is a share of the labour force; LFPR and WPR are shares of the population.
- India’s problem is less open unemployment and more disguised, seasonal, informal and under-employment.
- The usual status rate is lowest; daily status captures underemployment best.
- PLFS (NSO, 2017) was revamped in 2025: monthly and rural quarterly estimates, calendar-year annual report.
- Chhattisgarh combines a low open unemployment rate with seasonal farm work, forest dependence and distress migration.
What’s Next
- Poverty Alleviation and Employment Programmes — MGNREGA, VB-G RAM G, NRLM and skilling
- Inclusive Growth and Social Security — financial inclusion and safety nets
- Agricultural Economy — where most of the disguised unemployment lies
- Social Legislation and Human Rights — bonded labour and labour laws
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