Rural Unemployment: Incidence and Evidence

Abstract

The effect of population growth and demographic transition on economic growth, poverty, inequality and on rural livelihoods has been widely discussed and debated (Birdsall and Sinding 2001). Within this debate, the focus has also been on how the age structure of a country’s population could affect its future rate of growth. A productive work force coupled with a larger working age population could offer the opportunity for a country to grow faster. This phenomenon is referred to as the demographic dividend. In the context of East Asia, it has been argued that one of the factors contributing to the annual increase in per capita income of over 6 percent over the period 1960-1995 was the favorable age structure of the population. These countries had a bulge in the working age population and created opportunities for the workforce. This enabled them to reap the demographic dividend (Bloom and Williamson 1998). Against the backdrop of these discussions, in this paper we examine the employment and unemployment scenario over the period 1993-2004 in the context of India. This is also the period when the Indian government undertook a slew of economy wide reforms. India is a relatively young country and it is often conjectured that it might be ideally poised to reap the demographic dividend. Over 37 percent of its population is in the age group 0-14 years, 17.7 percent is in the age group 15-24 years and 14.8 percent is in the age group 25-34 years. It is projected that the proportion of population in the working age group of 15-64 years would increase from 62.9 per cent in 2006 to 68.4 percent by 2026 (Economic Survey 2006-2007, p. 215). There has been feminization of the workforce over the years. Except for the low poverty regions, in all other regions the workforce participation rate for women have increased and that of men have declined in 2004-2005 compared to 1993-1994. Over the period employment situation worsened in the low poverty region. Though there was some tendency of diversification of workforce away from agricultural sector, the unemployment rate almost doubled for both men and women. Thus even though people are moving out of agricultural sector all of them are not getting absorbed in the non agricultural sector.