Middle-income households account for largest chunk of India’s unemployed

Middle-income households account for largest chunk of India’s unemployed

Bulk of India’s unemployed population is in the middle-income households that earn between Rs 2 lakh and Rs 5 lakh a year despite the fact that they have the highest labor participation rate among non-rich household groups, the Center for Monitoring Indian Economy said.
Citing its Consumer Pyramids Household Survey (CPHS) data, CMIE said the middle class households accounted for half of the total households and also half of the unemployed and the largest number of unemployed people while the average labor participation rate (LPR) of this group was 43% compared to the overall average LPR was 40.8%. Also, it experiences an elevated unemployment rate of over 9%.

“India’s biggest challenge on the employment front is to provide jobs that yield about Rs 2,00,000 a year to about 16 million unemployed in the middle class households,” CMIE said in its weekly labor market analysis.

CMIE has divided households into five income classes. At the bottom of the income pyramid are households that earn less than Rs 100,000 a year. The next group earns between Rs 100,000 and Rs.200,000 a year and is called the lower middle class. The third group of households earns between Rs 200,000 and Rs 500,000 a year and belong to the middle income class. The fourth earns between Rs 500,000 and Rs 1 million a year and could be classified as the upper middle class and the richest group of households earn more than Rs 1 million in a year.
Further, a little over a third of the unemployed households reside in the lower middle income households that earn between Rs 1 lakh and Rs 2 lakh. These households accounted for about 45 per cent of all households and the share of this class in the total unemployed increased from 33% during September-December 2019 to 39.5% during May-August 2021 as a significant portion of this income group migrated to lower income groups during 2021-22.

According to CMIE, the poorest households accounted for 9.8% of all the households and only 3.2% of all the unemployed before the pandemic in 2019-20. However, in 2020-21 and the first half of 2021-22 they accounted for 16.6% of all households but still accounted for only 3.5% of all the unemployed.

The richer households, however, suffer the least pain of unemployment. They account for about 0.5% of all households and contain a similar proportion of all unemployed. Their average LPR at 46.3% is the highest among all income groups.

As per CMIE, their unemployment rate had shot up the most among all income groups but has since declined. It was over 15% during the first wave of the pandemic. But, in 2021, the rate averaged at 5.2%. The employment rate has been mostly over 40% but shot up to 45% during September-December 2021.

“However, even India’s best case employment rate at 45% is much worse than the world average of 54%,” it concluded.

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