Haryana's stormy labour markets

by Mahesh Vyas

The state of Haryana is often in the news for its high unemployment rate reported by CMIE’s Consumer Pyramids Household Survey. The most recent unemployment rate of Haryana is an exceptionally high 37.3 per cent in August 2022. In comparison, India’s unemployment in the same month was 8.3 per cent.

Haryana is one of India’s most prosperous states. According to its Economic Survey, in 2021-22, Haryana’s per capita net state domestic product at Rs.274,635 was nearly twice the national average of Rs.150,326. The Economic Survey does not talk about labour markets in the state but we know from CPHS that Haryana can easily boast of a labour participation rate (LPR) that is much higher than the national average.

In August 2022, for example, it had a LPR of 47.7 per cent which is way above the national average of 39.2 per cent. This is the highest LPR witnessed by Haryana. It is also much higher than the usual 42.6 per cent LPR that the state reports. Haryana always reports a higher LPR than the national average, but the August record is exceptional.

It is this high LPR of August 2022 that is responsible for the exceptionally high unemployment rate in the state in the month. India’s labour market challenge is in its very low LPR. A low LPR indicates low willingness of people to be employed in work that provides wages or profits. A higher-than-average LPR indicates that the people of Haryana are more willing to work in the labour markets than the rest of the nation. The exceptional rise of the LPR in August 2022 in Haryana implies that the people of the state were motivated more than the usual to seek employment.

It is noteworthy that Haryana’s share in India’s labour force has been rising. In 2016, Haryana had a share of about 2 per cent in India’s labour force. By 2022, this had risen to 2.34 per cent . Haryana’s LPR was lower than India’s till 2018. Since then, it has risen above it. Haryana’s LPR was less impacted by the Covid-19 induced lockdowns.

During 2022, male LPR in Haryana has been significantly higher than the male LPR at the all-India level. And, the gap between Haryana and all-India for female LPR has narrowed substantially. We use the CPHS Wave level data to study this because the sample is more representative and it permits more dis-aggregations. A CPHS Wave is a four-month period over which the entire sample is surveyed.

During September-December 2021, the LPR for males was 67.4 per cent in both Haryana and India. In January-April 2022, the LPR for males in Haryana went up to 67.6 per cent but that for India fell to 66.4 per cent. During May-August 2022, the gap widened as the male LPR for India dropped significantly to 65.7 per cent but that for Haryana fell very marginally to 67.5 per cent.

The narrowing of the gap between Indian and Haryana female LPR can be illustrated by two points May-August 2019 and May-August 2022. During the former period, the Indian female LPR was 11 per cent and the value for Haryana was 7.8 per cent a difference of 3.2 percentage points. In the latter period, the difference narrowed to 0.9 per cent. The Indian female LPR dropped to 8.4 per cent but that for Haryana was relatively stable at 7.6 per cent.

Implicitly, Haryana is a preferred destination for Indian labour to find employment.

The challenge is that the state is unable to match the rising demand for employment with a corresponding rise in employment opportunities. The challenge is disproportionately high for females.

Haryana’s problem seems to have begun towards the end of 2017. The state’s unemployment rate shot up from less than 4 per cent during May-August 2017 to 14.5 per cent during September-December 2017 and then to over-20 per cent in 2018 and then to even higher levels.

Male unemployment rate in Haryana shot up from 2.9 per cent during May-August 2017 to a peak of 28.1 per cent during the Covid-19 affected May-August 2020 period. Since then, the rate has moderated to around 22 per cent except for a spike to 25 per cent in the second wave of Covid-19 during May-August 2021. These unemployment rates are obviously high but they reflect the rise in the labour participation rate.

Possibly, in recognition of the challenges the state government faced with respect to employment, it passed legislation in March 2021 to reserve 75 per cent of some jobs in the private sector for locals. The law has faced its own challenges in the courts.

Meanwhile the unemployment rate for women in the state worsened dramatically. Women faced an unemployment rate of 12.3 per cent during May-August 2017 when the national average was 9.1 per cent. But, from late 2020, the female unemployment rate in Haryana has been almost consistently above 70 per cent when the national average was between 13 and 15 per cent.

In spite of the high unemployment rate, Haryana continues to attract labour. This is evident in its rising labour force participation rate. It is particularly noteworthy that Haryana’s women have a higher than national average LPR in spite of some exceptionally high unemployment rate. Labour in Haryana is therefore not as disheartened as it is in other parts of the country. They await employment opportunities to open up as they keep storming the labour markets with increasing strength.