Why we must look beyond the labour force participation rate

The Indian workforce is divided into two distinct categories. On the one hand, we have white-collar workers who make up only 4% of the Indian workforce. On the other hand, we also have frontline workers who make up the remaining 96%. The former get the majority of the benefits while the latter are left out, and forced to live a volatile life.

White-collar workers have access to health and life insurance and, provident funds, and have credit histories that help them get affordable loans, most of which are accrued to them directly from the employer. Frontline workers, however, do not have access to these basic benefits, only 1% (as per BetterPlace NHRD whitepaper) of them have access to credit and less than 3% are formally skilled, limiting the opportunities they have in the job market. This has created a conundrum where a small portion of the workforce is getting more benefits by the day while the larger cohort remains underserved.

This has created a series of problems for the Indian economy, in general, especially for the workforce. For one, Indian labour productivity is one of the lowest in the world at $8 per person per hour, compared with $26 in Malaysia and $14 in Indonesia. India is also suffering from slow growth in the Labour Force Participation Rate (LFPR). Between April-June 2021 and October-December 2023, India’s LFPR has grown from 46.8% to 49.9%. Coupled with all of this, enterprises are facing high levels of attrition with the average monthly attrition rate being close to 15% in FY23 (as per BetterPlace Frontline Index Report), especially at a time when they are facing an average labour shortage of 20%, as per the whitepaper.

However, the solution to this problem exists in the data collected by the government. What needs to be done is to ‘platformise’ it. As of August 2023, more than 28.99 crore people have registered in the government’s E-Shram portal, which was created to formalise the unorganised workforce.

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While this is a robust database, it can be built on to make it actionable and the Periodic Labor Force Survey (PLFS) can be a starting point. The PLFS survey captures the unemployment rate, and labour force participation rate across categories of waged, casual, and self-employed. This data needs to be integrated with the E-Shram portal and parameters like access to insurance, credit, upskilling courses etc can be added to this database. The next step would be to make a digital platform which has the E-Shram data set and make it accessible to the private sector. This can be the starting point of every enterprise’s hiring journey to get the initial pool of workers who can be included in the formal sector.

This can then be followed by leveraging the available data trails to hire effectively and affordably. Smartphones which have penetrated the hinterlands of India can be a powerful medium. Over 69% of frontline workers use a smartphone; enterprises can leverage this to hire through digital means, screening candidates virtually for the first few stages of the recruitment process, as per the BetterPlace report. This will not only make the process seamless but also transparent for the frontline workers.

The final step would be to create pathways for sustainable livelihood for these workers. One of the major reasons for attrition is the stagnation of a person’s career. The incomes of frontline workers have been decreasing. Between FY22 and FY23, their average salary decreased by 4.5%, the report found. Hence, these employees are moving horizontally across different companies for marginal hikes in their salaries.

However, what is needed is for us to think of their professional journeys from a growth trajectory perspective. We need to equip them with skills that can exponentially increase their earning and professional potential. Although a majority of these workers have access to smartphones, the report highlighted that 38% still face barriers to upskilling in the form of high fees, odd class timings, and language barriers. There is a critical need to democratise skilling. Enterprises can invest in creating skilling modules which can be accessed by all. Another sustainable way to build the skills would be to leverage digital public infrastructure like ONEST to help these workers access a large set of courses that suit their needs.

This three-step approach can unlock the true potential of our workforce, but we need to act fast. India has the population advantage of the decade which will start fizzling out in the next thirty years or so. The sooner we can help our population grow professionally, the sooner we will be able to reap the benefits of it for our economy, to become the third-largest economy in the world.

(Anish Philip is Chief People Officer at Movate and Hon. President of National Human Resource Development organisation's Bengaluru chapter. Pravin Agarwala is the Co-founder and Group CEO of BetterPlace.)