Labor Market In India

The Indian labor market can be categorized into three sectors:

 Rural workers , who constitute about 60% of the workforce
 Organized of the formal sector, that constitutes about 8% of the workforce; and
 Urban unorganized or informal structure which represents the 32% of the workforce.
The chart below describes the estimated increase in the number of labors from 1977-78 to 2004-
05. The labor force has grown from 276.3 million to 385.5 million between 1977-78 and1993-94
showing an annual growth rate of 2.1%. During the year 1999-2000, the workforce was
estimated to be 407
million. In 2004-05 the labor market consisted of 430 million workers and has grown up to 500
million in 2006.
Two-third of India’s workforce is employed in agriculture and rural industries. One-third of rural
households are agricultural labor households, subsisting on wage employment. Only about 9
percent of the total workforce is in the organized sector; the remaining 91 percent are in the
unorganized sector, self-employed, or employed as casual wage laborers. The labor force in year
2006 has grown up to 509.3 million out of which 60% are in agriculture, 12% are employed in
industries and the residual 28% are in services.

Labor force can be divided into four categories:

self employed workers, wage and salary earners, casual workers and unemployed. Of these, self-
employed are most loosely connected to labor market because of the possibilities of work-
sharing and work spreading in a self-employed enterprise. Non-contractual casual laborers have
the closest connection to labor market on almost day-to day basis. Same is the case with those
unemployed who are actively seeking work. Contractual and hence stable hired employment
(with the same employer and/or in the same job) on a regular basis is covered in the description
wage and salary workers. Persons who are engaged in their own farm or non- farm enterprises
 are defined as self employed. The employees in an enterprise can be either regular salaried/ wage
employees or casual wage employees who are normally engaged on a day today

basis.  The casual wage workers both in public work and

other types of work don’t have any job security or social security. These workers, either in
formal or informal sector or in private households, are informal workers. The regular
salaried/wage employees are those working in others farm or non- farm enterprises and getting in
return salary or wages on a regular basis and not on the basis of daily or periodic renewal of
work contract. This category includes those getting time wage as well as those receiving piece
wage or salary and paid apprentices, both full time and part time. This category of persons may,
therefore, include persons engaged regularly on an hourly basis, temporary workers, out-
workers, etc.
The table given below classifies labor force across male-female and rural-urban dimensions. It is
clear that
o Self-employment and casual labor statuses are more prevalent among rural than
urban labor force and among female than male workers.
o The Incidence of unemployment is higher in the urban than in the rural labor force
with nearly 48 per cent of the total unemployed persons coming from aggregate urban labor
force whose share in total (rural plus urban) work force is 22 per cent.
o Those reporting wage and salary earning dominate in the urban labor force, their
share being around 62 per cent (lines 10 to 12 of Table).
8 Major Problems Faced by Labour Market in India

Problem # 1. Surplus Labour Force:

Labour market in India is suffering from surplus labour force. A huge number of labourers are
rendered surplus due to lack of adequate demand arising out of both primary, secondary and
tertiary sector. Due to high rate of growth of population, a huge number of labour forces is
continuously being added with the existing labour force leading to a huge surplus in the labour
market.

Problem #  2. Unskilled Labour:

Another major problem of labour market in India is that there is a growing number of unskilled
labourers in the country. In the absence of adequate vocational institutes, skill formation among
the labour force in the country is very slow. This huge number of unskilled labourers fined it
difficult to become self employed and thus create a huge army of unemployed in the country.

Problem #  3. Lack of Absorption of Skilled Labour:

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In India the absorption rate of skilled labour force is also very poor. A huge number of
technically educated youths after completing their technical education like engineering,
vocational courses etc. are finding it difficult to get themselves absorbed in the secondary sector,
leading to a huge problem educated unemployment in India.
Problem #  4. Imperfections:
Labour market in India is also suffering from some imperfections such as lack of adequate
information regarding jobs, lack of suitable agency for the proper utilisation of labour force,
child labour practices, lack of proper manpower planning etc. Such imperfections have been
resulting in various hurdles in the path of absorption of labour force smoothly.

Problem #  5. Work Culture:

Work culture among the Indian labour force is not at all good. Whatever work force is absorbed
in various productive sectors it is not adhered to healthy work culture. This has been resulting in
lesser economic surplus in the production system which restricts indirectly its absorption
capacity in future.

Problem #  6. Militant Unionism:

Labour market in India is also facing the problem of militant unionism. In some productive
sectors and that too in some particular states, trade unions are not adhering to healthy practices.
This has led to militancy in the union structure and its activities, which is detrimental for the
greater interest of the nation.

Problem #  7. Unemployment:
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Labour market is also facing a serious problem of unemployment. A huge number of work forces
of our country remain partially or wholly unemployed throughout the year or some part of the
season. This has led to the problems like disguised unemployment, seasonal unemployment,
general unemployment and educated unemployment.

In the absence of adequate growth of employment avenues, unemployment problem in the

country is gradually becoming much more alarming day by day.

Moreover, due to the policy of downsizing followed both in public and private sector and also in
government administration and services sector, the problem of unemployment is becoming much
more acute. This has also been putting much pressure on the labour market of the country.

Problem #  8. Lack of Labour Reforms:

Labour market in India is also suffering from lack of adequate labour reforms provision.
Economic reforms introduced in the country during the 1990s have changed economic scenario
of the country. But the country is lagging behind in adopting necessary labour reforms which are
rational and important under the present context.

We have seen that the labour market in India has been suffering from the aforesaid serious
problems. Thus the Government should chalk out proper policy for bringing necessary reforms in
the labour market for the greater interest of the country as well as for the interest of labour force
(both working and non-working) in general.