Methodology
While it is easy to grasp what is meant by quantity of employment, quality of jobs includes several dimensions, ranging from the presence of collective bargaining and gender equality, to whether the job is in the informal economy, which is characterized by low-productivity.
The State-level Just Jobs Index is focused on the quantity and quality of jobs. The Index focuses on demand-side dimensions--such as employment--instead of supply-side dimensions, such as skills or education.
Dimensions and Indicators
The final Index consists of 5 dimensions: employment, benefits, formality, income equality and gender equality.
These dimensions are intended to reflect the multifaceted nature of the Indian labor market. Taken together, the dimensions in the Index reflect relative State performance on working conditions, quality and quantity of jobs, level of income and gender equality. Each dimension consists of three different indicators. To weigh all dimensions and indicators equally, there are the same number of indicators in each dimension.
A score ranging from 0-100 was developed for each dimension and each indicator used in the Index. A state’s performance (relative to other states) goes up as the score approaches 100.
This applies for dimensions and indicators with a high preferred value or low preferred value. For example, an equal score for the ratio of female to male employment indicates greater equality in employment rates between females and males--and better performance--for a given State, relative to other States. For an indicator such as unemployment rate, a higher score indicates lower unemployment, and therefore better performance, for a given State relative to other States.
Employment
As measured in labor force surveys, unemployment and youth unemployment are less accurate measures of labor market slack because of the country’s large informal sector.
But examining the quantity of employment is by itself an incomplete measure. Many are unemployed because they have to be, but these indicators do not capture pervasive underemployment and the associated poor wages. One must keep the data on the quantity of employment in perspective and also examine the quality of work to get a more accurate picture of labor market health.
Productive employment is a vehicle to lift millions out of poverty, expand the middle class and raise living standards. This spurs aggregate demand, which in-turn expands employment and increases output creating a virtuous circle.
Key indicators under employment
Labor force participation rate, ages 15+
The labor force participation rate is defined as the ratio of the labor force to the working age population (15 and above), expressed as a percentage. The labor force is the sum of the number of persons employed and the number of persons unemployed – that is, those out of a job but actively seeking work.
Unemployment rate, ages 15+
The proportion of people active in the labor force who are out of a job and actively looking, expressed as a percentage. It Includes anyone 15 years of age and above.
Youth unemployment rate, ages 15-29
The proportion of people active in the labor force who are out of a job and actively looking, expressed as a percentage but covering only those persons aged 15 to 29 years.
Benefits
The benefits dimension has been formed as a collection of collective bargaining and social protection dimension into a single dimension.
Collective bargaining refers to “all negotiations which take place between an employer, a group of employers or one or more employers' organizations, on the one hand, and one or more workers' organizations, on the other hand.”
India has estimated 16,000-20000 trade unions with a collective membership of about 10-75 million. While the sheer number of trade unions points to a vibrant trade union movement, that only 2 percent of the workforce is unionized does not speak well of the collective power of workers. When effectively implemented in law and in practice, freedom of association and collective bargaining can facilitate better wage setting, improved working conditions and greater equality, that ultimately fuel productivity and growth
Key indicators under Benefits
Share of workers with a union association, excluding the self-employed
Employees covered by collective (wage) bargaining agreements as a percentage of all earners in employment with the right to collective bargaining.
State expenditure on pensions as percentage of Gross State Domestic Product (GSDP)
Total State expenditure on old age pension, as a proportion of total State Gross Domestic Product (GSDP).
Share of workers with Provident Fund/pension, excluding the self-employed
The share of workers except self-employed having Provident Fund/pension contribution.
Formality
This dimension is highly significant in the context of India as majority of workers are in informal employment.
The overall proportion of informal workers in total employment has remained relatively stable, at around 92 per cent over the course of the last five years.
The three indicators which are used to capture the aspects of informality in Indian labor market are: share of own-account workers and contributing family workers in total employment; share of regular workers in total employment and share of workers except self-employed with written job contract.
Key indicators under Informality
Share of own-account and contributing family workers in total employment
Own-account workers are persons who operate their own economic enterprises, or engage independently in a profession or trade, and hire no employees. Contributing family workers are labor in an economic enterprise operated by a related person living in the same household, generally without pay.
Share of workers with a written job contract, excluding the self-employed
The casual and regular workers having a written job contract.
Share of regular workers in total employment
Regular workers are those who come under the purview of labor laws, as a share of the total employment.
toIncome equality
Labor income is the most important factor contributing to overall income inequality and to changes in income inequality.
Labor income will act as a good proxy measure of income inequality since majority of workers are employed in informal sectors. According to the NSS latest report, wage inequality has declined in rural areas while it has increased in urban areas (NSS, 2011-12). The real wages of regular workers rose by almost three times to casual workers in urban areas and over double in rural areas.
The income inequality dimension consists of three indicators: ratio of minimum wages to average real wages; Gini coefficient of consumption inequality and ratio of informal wages to average wages.
Key indicators under Income Inequality
Ratio of minimum wages to average wages
State-wise minimum wages as per labor bureau divided by the average wages earned by the workers.
Gini Coefficient of consumption inequality
Gini coefficient of consumption inequality is a measure of the deviation of the consumption expenditure among individuals or households within a country, from a perfectly equal distribution.
Ratio of informal wages to formal wages
State-wise informal wages divided by the formal wages.
Gender equality
The increasing participation of women in labor force and closing the wage gap between men and women will boost long-term productivity and hence will have positive impact on growth of an economy.
Female labor force participation has declined consistently since 2004, when it was 42.7 percent. This drop can be attributed to several factors ranging, for example, from girls staying in education longer and delaying their entry into the labor market, to the ‘middle income effect’. A lack of demand from female friendly industries such as apparel and footwear, and continuing social disapproval are both important factors. Other culprits include migration and the nuclearization of families, whereby there are fewer women in the household to contribute to domestic work. Female or male, low labor force participation is a loss of precious productive potential.
The gender equality dimension is comprised of three indicators: ratio of female to male employment rates, ratio of female to male labor force participation , rates and the ratio of female to male average real wages.
Key indicators under Gender Inequality
Ratio of female to male employment rates
Female employment-to-population ratio of the ages 15 and above divided by male employment-to-population ratio of the ages 15 and above.
Ratio of female to male labor force participation rate
Female labor force participation rate of the ages 15 and above divided by male labor force participation rate of the ages 15 and above.
Ratio of female to male real average wages
The real average wages received by the females divided by the average wages received by the males.