Transforming India’s Labour Force | 03 May 2025

Source:TH 

Why in News? 

On May 1^st, the world commemorates International Labour Day to honour the dignity of work and workers’ rights. In India, while the day honours workers' contributions, it also underscores the need for stronger implementation of labour laws to eliminate bonded and exploitative labour. 

What are the Current Issues Related to India's Labour Ecosystem? 

• Widespread Informality: According to the National Sample Survey Organization, around about 39 crore of India’s 47 crore workforce is in the unorganised sector, lacking job security, contracts, and social protection.  
  • Additionally, 9.8% of workers in the organised sector are informal, highlighting widespread outsourcing and worker vulnerability.\ 
  • While Gross Domestic Product (GDP) formalisation has reached 56% and labour market formalisation lags at 15% (Citi Research 2024). 
    • Post-Covid, 54 million new jobs were created, mostly self-employment, not formal wage employment. 
• Dominance of Low-Quality Jobs and Skill Gap: The International Labour Organisation’s India Employment Report 2024, highlights that low-quality jobs in the informal sector dominate, with migrants and informal workers often facing conditions similar to bonded labour. 
  • Even where high quality jobs are available, The Economic Survey 2023-24, reveals that only 51.25% of India's graduates are deemed employable, highlighting a significant skills gap. 
• Delayed Implementation of Labour Laws: The implementation of the Labour Codes in India is delayed due to objections from trade unions over reduced rights and weakened worker protections. Additionally, the readiness of states to draft and implement the necessary rules has also been a significant factor. 
  • Additionally, Gig workers (7.7 million gig workers as of 2020-21) are excluded from minimum wage laws, occupational safety regulations, and the Industrial Relations Code 2020, leaving them vulnerable to health risks and lacking dispute resolution mechanisms. 
• Gender Disparities in Labour Force: The female labour force participation rate (LFPR) dropped from 41.3% in 2023 to 40.3% in 2024, while men's rose from 78.3% to 79.2%.  
  • Urban female unemployment stands at 8.2% and only 3% of employed women over 25 hold advanced degrees, highlighting underutilization of educated women and a skills-job mismatch. 
• Low Labour Productivity:  India ranks 13th globally for the longest working hours, with an average of 46.7 hours per week, and over 51% of employees working 49 hours or more.  
  • Despite this, India’s labour productivity is relatively low, with a GDP per working hour of USD 8, placing it 133rd globally.  
  • High-pressure work environments, especially in corporate sectors, are contributing to mental health issues among employees. 
    • Labour productivity, a key indicator of economic growth and competitiveness, is crucial for improving living standards. 
  • By 2030, climate change is expected to cause the loss of over 2% of total working hours globally each year, further exacerbating the productivity issue. 

How can India Enhance the Productivity and Inclusivity of its Labour Force? 

• Enhancing Formalisation: India should prioritize transitioning workers from informal to formal employment by effectively implementing the Labour Codes, 2020 and expanding coverage under EPFO (Employees' Provident Fund Organisation)  and ESIC (Employees' State Insurance Corporation). 
  • Additionally, strengthening schemes like Pradhan Mantri MUDRA Yojana, MSME Udyam and Employment Linked Incentive (ELI), and linking them to infrastructure development in Tier 2 and Tier 3 cities, will promote job creation and economic growth. 
  • Formalisation will provide access to worker benefits like healthcare, pensions, and job security, improving overall productivity and reducing inequality. 
• Boosting Skill Development: Improve the quality and relevance of vocational training under schemes like Skill India and Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and strengthen industry-academia linkages focusing on digital, green, and soft skills for future jobs. 
  • Indian can learn from Ireland model in this regard by focusing on fostering a strong connection between education and industry 
• Revisiting the Labour Codes through Dialogue: India should institutionalize social dialogue mechanisms by reconvening the Indian Labour Conference (ILC).  
  • Ratifying ILO Convention No. 87 on freedom of association and ILO Convention No. 98 on the right to organize and collective bargaining would promote unionization, particularly for workers in informal sectors.  
  • This would address the challenges faced by these workers, including lack of job security, limited bargaining power, and poor working conditions, while ensuring fair wages and better working conditions. 
• Promoting Gender Equality: Increase female labour force participation through policies like Beti Bachao Beti Padhao and the Maternity Benefit Act (2017).  
  • Provide safe workspaces, flexible hours, work-from-home options, childcare support, and gender-sensitive policies to boost female labour force participation. 
• Enhancing Worker Health and Safety Standards: Improve occupational health and safety standards, particularly in high-risk sectors such as mining, construction, and textiles.  
  • Ensure strict enforcement of the Occupational Safety, Health, and Working Conditions Code, 2020. 

What are the Key Conventions of the International Labour Organization?  

Conclusion 

India must prioritize the creation of formal, secure, and meaningful employment opportunities. By investing in human capital, fostering gender equality, formalizing the workforce, and aligning skills with emerging industry demands, India can capitalize on its demographic dividend. Immediate and decisive action is essential to shaping a future-ready workforce.