SPECIAL ARTICLES

Unemployment and Underemployment

in Rural India
Satya Paul
This paper examines spatial and temporal variations in unemployment and underemployment in rural India.
It identifies some of the important correlates of rural unemployment There is a discussion of the existing approaches
to the measurement of unemployment and presentation of a conceptual framework for the measurement of
underemployment. An examination of the unemployed by different characteristics such as occupation, education,
level of consumption expenditure, age, etc, is also undertaken.
I
I n t r o d u c t i o n
THE purpose of this paper is two fold:
firstly to examine spatial and temporal varia-
tions in unemployment and underemploy-
ment, and secondly, to identify some of the
important correlates of unemployment in
rural India. The study has been based on the
National Sample Survey data relating to the
32nd round (July 1977 - June 1978) and 38th
round (January - December 1983), The plan
of the paper is as follows. Section 2 discusses
the existing approaches of measuring
unemployment and introduces a conceptual
framework to the measurement of under-
employment. Section 3 examines regional
and temporal variations in unemployment
and underemployment in rural India. Sec-
tion 4 studies the correlates of unemploy-
ment by examining the distribution of un-
employed by their different characteristics
such as occupation, education, level of con-
sumption expenditure, age, etc. The relation-
ship between poverty and unemployment is
also examined. The conclusions are presented
in Section 5.
I I
Me a s u r i n g Un e mp l o y me n t a n d
Un d e r e mp l o y me n t
Following the recommendations of the
Dantwala Committee [Government of India,
1979), three different approaches have been
adopted in the N-.tional Sample Surveys
(NSS) for determining the activity status of
each person in the population, 'aged 5 years
and above'. These are: (a) usual status ap-
proach with a reference period of 365 days
preceding the date of survey, (b) weekly
status approach wi t h a reference period of
seven days preceding the date of survey, and
(c) daily status approach, the reference
period being each day of the seven days
preceding the date of survey. According to
the usual status approach, a person is
classified as unemployed if he/she was not
working but was either seeking or was
available for work for a relatively longer time
during the reference period of 365 days. A
person is classified as employed if he/she was
engaged for a relatively longer period during
the reference period, and all others are
classified as ' not in labour force'. Thus, this
approach identifies those who are chronically
unemployed and their proportion in the total
labour force is taken as the rate of usual
status (chronic) unemployment. It is impor-
tant to note that all the employed and
unemployed taken together constitute the
total labour force.
1
The weekly status approach classifies a
person as unemployed if he/she has not
worked for at least one hour on any one day
of the week but had been seeking work or
had been available for work at any time dur-
ing the week. Al l those who have worked at
least for one hour on any day during the
week (even if they were idle for rest of en-
tire period), are classified as employed. Thus,
this approach seeks to capture only the week-
long full (open) unemployment.
According to the daily status approach,
each person is assigned one or at the most
two activity statuses on each day of the
week. A person is considered employed for
the entire day if he/she worked for four
hours or more on the day. However, if he/she
worked for one hour or more but less than
four hours, he/she is considered employed
for the half day and unemployed or 'not in
labour force' for the other half of the day
depending on whether he/she was seeking/
available for work or not on the day. On the
other hand, if a person was not engaged in
any gainful work even for one hour on the
day but was seeking/available for work for
four hours or more, he/she was considered
unemployed for the entire day. But, if he/she
was available for work for less than four
hours, he/she was considered unemployed
for half day and 'not in labour force' for the
other half of the day. A person, who had
neither any gainful work to do nor was
available for work even for half of the day,
was considered 'not in labour force' for the
entire day. Aggregating across half-day units
over the week, total person-days unemployed
and total person-days employed are counted
in the sample. Total person-days unemployed
expressed as the proportion of total person-
days of the labour force provide person-day
rate of unemployment (PDUR). Since the
NSS data are collected in four sub-rounds
(with equal number of households in each
round)
2,
the PDUR seeks to capture the
(average) intensity of the underutilisation of
labour time.
The extent of underutilisation of labour
time is only one facet of the problem of
underemployment. What is equally impor-
tant is to know the rate (incidence) of
underemployment in the labour force. This
requires the identification of underemploy-
ment to which we now turn. Suppose a per-
son, say i, worked for m
li
days and reported
for moi days during the reference week, then
he/she may be considered unemployed or
underemployed if
In a recent paper, Visaria [1981] classifies
a person as unemployed if the under-
employed person days in the reference week
exceed the number of employed person days.
It can easily be verified that all those relating
to the category (0.50< u
i
1) from Visaria's
set of unemployed. Clearly this set does not
incorporate ai l the underemployed.
It follows from the above that no single
approach would capture the different aspects
of unemployment and underemployment,
Al l the alternative rates of unemployment,
namely, usual status unemployment rate
(USUR), PDUR, full (week long) unemploy-
ment rate and the rates of underemployment
of different degrees, need to be computed
to have a comprehensive view of unemploy-
ment. This is what we attempt in this paper.
Economic and Political Weekly July 16, 1988
1475
where wi l l denote full (open)
unemployment, u
i
- 0 full employment
and all other values of u
;
lying between zero
and unity wi l l denote underemployment of
different intensities. For practical ease, we
can define three broad degrees of under-
employment, namely,
I l l
Re g i o n a l a n d T e mp o r a l Va r i a t i o n s
i n R u r a l Un e mp l o y me n t a n d
Un d e r e mp l o y me n t
Table 1 gives the rates of usual status
unemployment, person-day unemployment
and the rates of underemployment for rural
India for the years 1977-78 and 1983. The
rates for 1977-78 are based on NSS 32nd
round data and those for 1983 on NSS 38th
round data. The rates of underemployed in
the labour force are computed using weekly
time disposal data published in the form of
the distribution of labour force and the
number of unemployed days by the number
of days worked (specified wi t h the interval
of
X
A day unit) in the week.
For 1977-78, the rate of usual status
(chronic) unemployment is the lowest,
followed by the rate of f ul l unemployment.
The person-day rate of unemployment is
7,70. The rates of underemployment are,
however, quite high: about I / 5t h of labour
force is found in the state of underemploy-
ment. The incidence of severe underemploy-
ment is negligible whereas marginal
underemployment is relatively high.
The rates of unemployment and under-
employment for females are higher than
those for males (Table I). This shows that
employment opportunities for females are
fewer than those for males in rural areas.
Over the period 1977-78 to 1983, the rate
of usual status unemployment has declined
significantly. The changes i n the rates of full
unemployment and person-day unemploy-
ment are negligible. The rates of 'moderate'
and 'severe' underemployment have increased
whereas the rate of marginal underemploy-
ment declined considerably. This is an i m-
portant change in the structure of under-
employment which led the rate of overall
underemployment to decline by about two
percentage points over the period of five
years.
There are large variations in the rates of
unemployment and underemployment
across the states (Table 2). These rates show
that the extent of unemployment and under-
1476
Economic and Political Weekly July 16, 1988
employment is the highest in Kerala and the
second highest in Tamil Nadu. Assam,
Himachal Pradesh and Rajasthan show very
low rates of unemployment and under-
employment. In eight states (Andhra
Pradesh, Bihar, Karnataka, Kerala, Madhya
Pradesh, Maharashtra, Tamil Nadu and
West Bengal), the rates of unemployment
and underemployment among females are
higher than the males; the picture is however
the reverse in Punjab, Himachal Pradesh and
Jammu and Kashmir (Table 3).
While several 'factors like natural assets
base, agricultural productivity, wages, oc-
cupational structure, level of education, etc,
might be responsible for differences in the
rates of unemployment and underemploy-
ment across the states,
4
our research is
restricted to the examining the association
between rates of unemployment and agri-
cultural productivity. A priori one would ex-
pect a negative association between the two.
The existing evidence, however, does not sup-
port this hypothesis. In a study based on
NSS 27th round (1971-72) data for 56 regions
of rural India, Lakdawala [1977] observed
a positive and statistically significant cor-
relation of 0.30 between PDUR and agri-
cultural output per hectare (in rupees
1970-71 to 1972-73). A recent study by
Sundaram and Tendulkar [1988] which is
also based on the same data, however,
showed no significant relationship between
Economic and Political Weekly July 16, 1988 1477
PDUR and agricultural output per hectare
(AGHA). The study reports that coefficient
of AGHA for PDUR in a multiple linear
regression model is negative (- 0.001663) but
statistically insignificant.
We regress USUR, PDUR and the rate of
' ful l unemployment and underemployment'
(FAUR) separately on AGHA
5
using the
32nd round data for 17 major states. The
coefficient of AGKA in equations (2) and
(3) is insignificant which implies that there
is no statistically significant association bet-
ween PDUR and AGHA and between FAUR
and AGHA. The coefficient of AGHA for
USUR is positive and statistically significant
(Eq 1). This supports the hypothesis that in
the absence of any unemployment dole,
people in low agricultural. productivity
regions cannot afford to remain idle for a
long time; they either migrate to a neigh-
bouring high productivity region or engage
themselves in low-paid activities. The
outflow of labourers from agriculturally less
developed regions to developed regions is
well known in India.
( 1) USUR=: -2.65 + 0.00357 AGHA
(-1.12) (2.92) R
2
= 0.36
(2) PDUR = 1.35+0.00351 AGHA
(3.77) (1.80) R
2
= 0.18
(3) FAUR = 9.76+0.00570 AGHA
(1.13) (1.28) R
2
= 0.09
(Values within parentheses are the t-values)
Table 4 reveals the changes in three rates
of unemployment (namely, PDUR, USUR
and weekly status) in 1983 over 1977-78 for
each state. However, the state-wise rates of
underemployment for 1983 could not be
worked out due to the non-availability of
NSS 38th round detailed data. The observed
1478 Economic and Political Weekly July 16, 1988
changes in the three rates of unemployment
in 1983 over 1977-78 are not uniform across
the states. In eight states, namely, Andhra
Pradesh, Gujarat, Haryana, Karnataka,
Madhya Pradesh, Maharashtra, Rajasthan
and Uttar Pradesh, all the three rates of
unemployment have declined. In all these
states, the magnitude of decline in
unemployment rates for females is much
larger than for males. In three states, namely,
Assam, Himachal Pradesh and Punjab, all
the' three rates show an increase in un-
employment over the period. In all other
states, the usual status unemployment rate
have declined but the two other rates have
increased, thus, indicating a change in the
nature of rural unemptoyrnem ower its
period 1977-78 to 1983.
I V
Correlates of Unempl oyment
We now proceed to discuss the correlates
of unemployment by examining the distribu-
Economic and Political Weekly July 16, 1988
1479
tion of unemployed by their different
characteristics such as occupation, educa-
tion, level of consumption expenditure, age,
etc. However the distribution of under-
employed could not be examined due to non-
availability of data.
PER CAPI TA CONSUMPTI ON EXPENDI TURE,
POVERTY A N D UNEMP LOYMENT
The estimates of the three rates of
unemployment by levels of per capita con-
sumption expenditure (PCE) presented in
Table 5 reveal several things, (i) There are
wide differences in the three rates of
unemployment at the lower level of PCE, the
difference between them tends to converge
as we move on to higher PCE classes. This
indicates that rates of unemployment among
the poor households are relatively more sen-
sitive to the concept of unemployment,
(ii) In the case of rural all-India, Kerala and
Madhya Pradesh, the three rates of un-
employment decline consistently as we move
from the lower PCE class to the higher PCE
classes implying that levels of living and
unemployment are inversely related, (iii) For
six states (Assam, Himachal Pradesh,
Jammu and Kashmir, Rajasthan, Tamil
Nadu and Uttar Pradesh) no systematic rela-
tionship between PCE and unemployment
rate is observed, (iv) In some states, (Andhra
Pradesh, Gujarat and Punjab), the rates of
unemployment first increase up to the
second or third PCE class and then show a
declining trend. The low rate of unemploy-
ment in the lowest PCE class is understan-
dable in that these people are perhaps too
poor to remain idle, (v) In all other states,
the unemployment rates decline consistently
up to the eighth expenditure class and then
move upwards. The upward trend in un-
employment towards the end of the upper
tail of PCE distribution suggest that peo-
ple in well-off families prefer to remain idle
for relatively longer periods, in order to
search for better jobs. Nevertheless, the
unemployment rates among the poor
6
are
higher than the average level in a majority
of states (compare Table 6 wi t h Table 2).
In each state, poverty is much widely
spread than unemployment/underemploy-
ment (Tables 6 and 2). This phenomenon has
also been observed in some earlier Indian
studies [see, for example, Visaria (1981) and
Sundaram and Tendulkar (1988)]. Based on
the aggregate data for 56 agricultural regions
of India relating to the NSS 27th round
(1972-73), Sundaram and Tendulkar found
a positive and significant association
between poverty ratio (PR) and person-day
unemployment rate. As will be shown below,
this hypothesis is not supported by the NSS
32nd round (1977-78) aggregate data for 17
major states. The values of the coefficient
of correlation (r) between poverty ratio and
person-day unemployment rate and between
PR and 'full unemployment and under-
employment rate' are positive, r is negative
between PR and usual status employment
rate. But in none of the cases the value of
r is statistically significant. Even the values
of r between PR and unemployment rates
among the poor are low and statistically
quite insignificant (Table 7). Thus, the
hypothesis of positive and significant
association between poverty and unemploy-
ment supported by the NSS 27th round
(1972-73) data is rejected by the NSS 32nd
round (1977-78) data.
UNEMPL OYMENT BY OCCUPATI ON
GROUNDS
Table 8 gives the person-days unemploy-
ment rates by occupation groups of
households. The occupation groups are;
(1) self-employed households, (2) self-
employed non-agricultural households,
(3) agricultural labour households, (4) other
labour households, and (5) other house-
holds.
7
For rural India as a whole, the
person-days unemployment rate is found to
be lowest among the self-employed house-
holds and the highest among agricultural
labour households. Person-days unemploy-
ment rate among females is higher than
among males in all the occupation categories
except self-employed agricultural house-
holds. Agricultural labour households alone
contribute about 61 per cent towards total
person-days unemployment in the rural area.
The occupational distribution of person-
days unemployment is not uniform across
states. While in about half of the states, the
person-days unemployment rates among
females are higher than among males in
most of the occupations, the picture in the
other half is reverse. In Assam, Himachal
Pradesh and Jammu and Kashmir, the
agricultural labour households show
relatively very low rates of unemployment
and their contribution towards total person-
days unemployment is also very low: 12 per
1480 Economic and Political Weekly July 16, 1988
cent in Assam, 7 per cent in Himachal
Pradesh and 3 per cent in Jammu and
Kashmir. But in all other states, agricultural
labour households contribute 31 to 74 per
cent towards total person-days unemploy-
ment. It can thus be inferred that any
economic programme which ensures full
employment to all the unemployed in
agricultural labour households would con-
siderably ease the situation of unemploy-
ment in the rural sector.
UNEMP LOYMENT RATES BY LEVELS OF
EDUCATI ON
Table 9 shows the rates of usual status
(chronic) unemployment by levels of educa-
tion. In rural India as a whole, the rate of
chronic unemployment is the highest (21.68)
among the 'graduates and above' and second
highest among those who have passed the
secondary schooling. The unemployment
rate is the lowest (2.06) among illiterates.
This is understandable in view of the fact
that illiterates are not professionals and
therefore accept whatever jobs they get.
While the unemployment rates among the
educated are higher than the illiterates in
each state, their magnitude differs across the
states. For instance, the unemployment rates
among the 'graduates and above' range from
8.50 to 45.95 per centthe lowest being in
Madhya Pradesh and the highest in Tamil
Nadu. In six states (Andhra Pradesh,
Haryana, Karnataka, Kerala, Tamil Nadu
and West Bengal), the unemployment rates
among the 'graduates and above' are higher
than the .corresponding figures at the all-
India level.
Thus, educated unemployment in the
rural sector is quite a serious problem and
needs to be tackled on a priority basis.
A G E DI STRI BUTI ON OF UNEMPLOYED
Table 10 gives the usual status (chronic)
and person-days unemployment rates by age-
group. It is seen that unemployment rates
in the age-group (15-29) are the highest for
both males and females. The contribution
of this group towards total chronic un-
employment is also very high: 91 per cent
in the case of males and 57 per cent in the
case of females. As expected, the chronic
unemployment rates among children and the
aged are very low. The rates of person-day
unemployment also show a similar picture.
In an earlier study, Paul [1988] has found
that the pattern of age-distribution of
unemployed does no! vary significantly
across the states.
Concl usi ons
This study has analysed inter-regional and
inter-temporal variations in unemployment
and underemployment based on alternative
approaches using the NSS 32nd (1977-78)
and 38th (1983) rounds survey data for rural
India. On the methodological side, it is
Economic and Political Weekly July 16, 1988 1481
V
households contribute about 16 per cent
towards total person-days unemployment
in the rural areas. In three states (namely,
Assam, Himachal Pradesh and Jammu
and Kashmir), the contribution of agri-
cultural labour households towards total
person-day unemployment is low, whereas
in all other states their contribution
towards total person-days unemployment
varies from 31 per cent to 74 per cent.
From this it can be inferred that any
economic programme which ensures full
employment to all the unemployed in
agricultural labour households would
considerably ease the situation of un-
employment in rural sector.
5 The unemployment rates vary with the
levels of education. In the rural sector as
a whole, the usual status unemployment
rate (USUR) is the lowest (2 per cent)
among illiterates and the highest (22 per
cent) among the 'graduates and above*. In
some states, the USUR among the
'graduates and above' is very high: for
instance, in Tamil Nadu it is 46 per cent,
in Haryana 32 per cent and in Kerala 30
per Lent. This suggests that educated
unemployment is really a serious problem
and should be tackled on a priority basis.
1482
Economic and Political Weekly July 16, 1988
argued that the problem of underemploy-
ment has, two aspects: one, the overall
under utilisation of labour time and the
other, the incidence of underemployed in
labour force. While the first aspect is well
captured by the person-day rate of un-
employment, the second aspect is taken care
of by introducing a conceptual framework
for measuring the incidence of under-
employed. Three degrees of underemploy-
ment are defined and their incidence
examined. The main findings that emerge
from our analysis may be stated as follows:
1 The problem of underemployment is more
serious than chronic or full unemploy-
ment in rural India. About l / 5t h of the
rural labour force was underemployed
during 1977-78, 'Severe underemploy-
ment ' was least, prevalent and 'marginal
underemployment' was most prevalent.
2 The rates of unemployment and under-
employment vary from state to state.
These rates are highest for Kerala, second
highest for Tamil Nadu and relatively very
low for states like Assam, Himachal
Pradesh and Raiasthan. The NSS 32nd
round data for 17 major states shows no
significant relationship between person-
days unemployment rates and agricultural
productivity and also between ' ful l
unemployment and underemployment
rates
1
and agricultural productivity.
The relationship between usual status
(chronic) unemployment and agricultural
productivity is positive and significant.
This only supports the hypothesis that in
the absence of unemployment doles peo-
ple in agriculturally less developed regions
cannot be expected to stay idle for long;
they either migrate to the neighbouring
developed regions or accept very low paid
jobs.
3 The rates of unemployment and under-
employment for females are higher than
that for males. This shows that the j ob
opportunities for females are limited in
the rural area.
4 The person-day rate of unemployment is
highest among agricultural labour house-
holds and lowest among self-employed
households. The agricultural labour
Not es
[The author is grateful to M L Dantwala,
V M Dundekar, A Vaidyanathan, T S Papola
and S R Hashim for useful comments and sug-
gestions on an earlier draft of this paper. The
responsibility for the remaining errors lies with
the author only.]
1 The old and disabled, rentiers, pensioners,
remittance recipients, beggars, prostitutes,
students and all those engaged in domestic
duties fall in the category of 'not in labour
force'. See Sarvekshana, Vol V, Nos 1 and 2,
July-October 1981.
2 Since the details of sampling design of the
NSS are given in Sarvekshana, Vol V, Nos 1
and 2, July-October 1981, a discussion
thereon is avoided here.
3 These degrees of underemployment were first
outlined in Krishna [1976] but no empirical
estimates were reported perhaps due to the
non-availability of data.
4 Some of these factors have been considered
in Sundaram and Tendulkar [1988], The
question of wage-rate differentials has been
discussed in Hashim and Paul [1987].
5 The state-wise figures of agricultural output
per hectare are taken from Central Statistical
Organisation [1985].
6 'Poor' are defined as those whose PCE (per
month) is less than the poverty cut-off line
of Rs 55.77 per month specified by Planning
Commission [Government of India, 1984].
7 It may be noted that alt these occupation
categories of households taken together cover
the entire rural population. Definitions of
these occupational categories are given in
Sarvekshana, Vol V, Nos 1 and 2, July-
October, 1981.
Ref er ences
Government of India, Planning Commission
(1970), Report of the Committee of Experts
on Unemployment Estimates, (Chairman:
M L Dantwala), New Delhi,
, (1984), Reports of the Study Group on the
Concepts and Estimation of Poverty Line,
New Delhi.
Central Statistical Organisation (1985), State-
wise and Group-wise Estimates of Output
from Agriculture, December 1985 (Ministry
of Planning).
Hashim, S R and Satya Paul (1987), Aspects
of Employment and Unemployment in
Rural India', Presented at the 'International
Workshop on Rural Unemployment' (June
29-July 3, 1987), held at NIRD, Hyderabad
(India). Appeared in Rural Unemployment
edited by Afro-Asian Rural Reconstruction
Organisation, New Delhi, 1988.
Krishna, Raj (1976), Rural Unemployment
A Survey of Concepts and Estimates for
India, World Bank Staff Working Paper No
234, Apri l , Washington.
Lakdawala, D T (1977), 'Growth, Unemploy-
ment and Poverty', Presidential Address to
the Al l India Labour Economic Conference,
Tirupati, December 31, 1977.
Paul, Satya (1988), 'Unemployment and
Underemployment in Rural India
1
presented
at the Silver Jubilee Conference of the
Indian Econometric Society held in
Bangalore, January 4-6, 1988.
Sundaram, K and Suresh D Tendulkar (1988),
'Towards an Explanation of Inter-Regional
Variations in Poverty and Unemployment
in Rural India' in T N Srinivasan and
P K Bardhan (eds); Rural Poverty in South
Asia, Delhi, Oxford University Press, 1988.
Visaria, Pravin (1981), 'Poverty and Unemploy-
ment in India: An Analysis of Recent
Evidence
1
, World Development, Vol 9, No 3.
Economic and Political Weekly July 16, 1988 1483