Every government wants to know how many of its people are out of work. But counting the unemployed is far harder than it sounds. Who exactly counts as “unemployed”? Someone who works two hours a week – are they employed? What about a farmer who toils during harvest season but sits idle for months? The answer changes drastically depending on how you define and measure unemployment. This post breaks down the core methodologies used globally and in India to quantify unemployment – and why getting those numbers right matters profoundly for public policy.
Table of Contents
- What does it mean to be “unemployed”?
- Why the ILO definition matters – and where it falls short
- India’s approach: The NSSO’s three-status framework
- Usual status approach
- Current weekly status approach
- Current daily status approach
- How much do the numbers differ?
- The challenge of the informal sector
- Underemployment: The hidden dimension
- Why measurement methodology matters for policy
What does it mean to be “unemployed”?
Before any counting can begin, there needs to be a shared definition. The International Labour Organization (ILO), the United Nations agency responsible for global labour standards, provides that universal benchmark. According to the ILO, a person must simultaneously meet three criteria to be classified as unemployed.
Not employed: The person must not be in paid employment or self-employment during the reference period.
Currently available for work: The person must have been available for paid employment or self-employment during the reference period.
Seeking work: The person must have taken specific steps in a specified recent period to obtain work. A general declaration of being in search of work is not sufficient – this formulation is meant to provide an element of objectivity for measurement.
All three conditions must be met at once. Miss even one, and the person is not counted as unemployed under the formal definition. This precision is deliberate – it helps ensure that unemployment rates are comparable across countries, since the ILO methodology is adopted globally as a standard.
Why the ILO definition matters – and where it falls short
The ILO standard is powerful for international comparisons. The unemployment rate is calculated by expressing the number of unemployed persons as a percentage of the total number of persons in the labour force – the sum of the employed and the unemployed. This clean ratio makes cross-country analysis possible.
However, the ILO definition was primarily designed with formal, wage-based economies in mind. Even when the international standard definitions are strictly applied, there may still be differences in the operational criteria used to translate these definitions into practical terms – and the reference periods for job search and availability can have a considerable impact on employment and unemployment statistics. For countries like India, where hundreds of millions work in informal, seasonal, or self-employed capacities, a single rigid definition cannot capture the full picture. This is why India developed its own multi-layered framework.
India’s approach: The NSSO’s three-status framework
India’s labour statistics were historically collected by the National Sample Survey Organisation (NSSO) – now merged into the National Statistical Office (NSO) since 2019. The NSSO recognised that no single time reference could capture India’s complex labour landscape, which includes subsistence farming, seasonal agricultural work, household enterprises, and daily casual labour. It therefore developed three distinct approaches to measure unemployment, each using a different reference period.
The three approaches are: the usual status approach, with a reference period of 365 days preceding the date of survey; the current weekly status approach, with a reference period of seven days preceding the date of survey; and the current daily status approach, with each day of the seven days preceding the date of survey as the reference period.
Usual status approach
The usual status approach looks at an individual’s economic activity over the entire past year – 365 days. The usually employed are an indicator of the persons who have a stable attachment with some economic activity, though they may not be pursuing the same at any specific point of time. The persons reporting unemployment in the usual status would be those who are chronically unemployed.
This approach is further divided into two sub-categories: usual principal status (UPS), which identifies the activity a person spent the most time on during the year, and usual subsidiary status (USS). The subsidiary economic activity status applies when a person, in addition to their usual principal status, performs some economic activity for 30 days or more during the reference year. Together, these two are combined into the Usual Principal and Subsidiary Status (UPSS). This combined measure tends to report the lowest unemployment rates because even limited engagement in work over the year counts as employment.
Current weekly status approach
The current weekly status (CWS) uses the past seven days as its reference window. A person is considered employed under CWS if they worked for at least one hour on any day during the reference week. This approach produces unemployment estimates that fall between the lower usual status and the higher current daily status rates, making it a balanced and internationally comparable indicator.
The NSSO’s Periodic Labour Force Survey (PLFS), launched in April 2017, uses the current weekly status to estimate key employment and unemployment indicators at three-month intervals for urban areas, making it suitable for tracking short-term labour market changes. Because the reference window is shorter than a year, this method naturally surfaces more people who were out of work during that particular week – resulting in higher unemployment figures than the usual status method.
Current daily status approach
The current daily status (CDS) is the most granular of the three. Instead of a single status for the week or year, it records each person’s employment situation for every individual day of the past seven days. The current daily status provides the most inclusive picture of the employment-unemployment situation during the week. It takes into account the day-to-day changes in the week, as against the current weekly status where only one status is recorded for the whole week.
This method effectively measures employment in terms of person-days, not just persons. Someone who worked three days and was idle for four in a given week would show up as partially employed rather than fully employed. As a result, CDS consistently reports the highest unemployment and underemployment figures of the three approaches – and captures disguised and seasonal unemployment that the other two methods can miss.
How much do the numbers differ?
The gap between the three methods is not trivial. In 2022-23, India’s unemployment numbers varied from 2.1 percent under the usual status to 5.5 percent under the current daily status. That is nearly a threefold difference – and both figures technically describe the same economy in the same year. In the Indian situation, the longer the reference period, the smaller the rate of unemployment, and the shorter the reference period, the larger the unemployment rate. This is not a contradiction – it reflects the reality that many Indian workers oscillate between work and idleness throughout the year, especially in agriculture and informal trade.
The PLFS 2023-24 reported CWS unemployment at around 3.2 percent for rural areas and 6.1 percent for urban areas, with an overall national rate near 4.3 percent – highlighting the continuing urban-rural divide.
The challenge of the informal sector
Even with three measurement approaches, accurately capturing unemployment in India – and in developing economies generally – remains deeply challenging. The central problem is the size and complexity of the informal economy.
In countries like India, where the informal economy accounts for over 90% of the workforce, traditional unemployment measurements become problematic. Informal workers often lack formal contracts or any documentation, which makes them difficult to track in official statistics. Many workers also move fluidly between formal employment, informal jobs, self-employment, and periods of complete idleness – sometimes within the same week.
A related issue is disguised unemployment – where people appear to be employed but are producing little to no output. This is common in subsistence agriculture, where an entire family might work a small plot of land that could realistically be managed by one or two people. Standard unemployment metrics do not register these individuals as unemployed, even though their labour is significantly underutilised.
In employment surveys, workers are only classified as involuntarily unemployed if they are not engaged in any work activity. Since a rationed worker who cannot find wage work can turn to self-employment or a gig economy job to make some extra money, focusing on these standard questions can lead to drastic underestimation of labour rationing in the economy. This is a systemic blind spot that affects unemployment data across many developing nations.
There are also practical operational challenges. Traditional urban-centric unemployment metrics fail to capture the nuances of rural unemployment, leading to skewed national statistics. Seasonal variations in agricultural employment can distort annual unemployment rates, making it necessary to employ more frequent and localised surveys to capture these fluctuations accurately.
Underemployment: The hidden dimension
Beyond unemployment, labour economists increasingly focus on underemployment – the condition of people who are technically employed but not as much as they want or need to be. The current daily status method is particularly well-suited to detecting this, since it can identify workers who were available and willing to work more days in a week than they actually worked.
The ILO itself acknowledges that the unemployment rate alone does not provide a comprehensive measure of labour underutilisation. The unemployment rate is a key labour market indicator, but it has many shortcomings that must be taken into account when interpreting it. To address this, the ILO has developed broader measures of labour underutilisation – including time-related underemployment and the concept of the “potential labour force” (people who are not actively searching for work but would accept it if available) – to give a more complete picture of how labour resources are being used.
Why measurement methodology matters for policy
The choice of measurement method is not merely a statistical technicality – it has real consequences for public policy. A government relying solely on the usual status figure of 2.1% might conclude that unemployment is largely under control. The current daily status figure of 5.5% for the same year tells a very different story – one that demands action on seasonal work, informal labour protections, and rural employment programmes.
This is precisely why India’s Periodic Labour Force Survey uses all three approaches rather than just one. These different measurement approaches explain why unemployment statistics can vary significantly depending on which measure is used – each reveals a different dimension of the complex employment landscape. Policymakers need all three lenses to design responses that address chronic long-term unemployment, short-term seasonal slack, and daily underutilisation simultaneously.
As India and other developing nations continue to evolve their statistical frameworks, the integration of new data sources – including mobile surveys and digital employment records – holds promise for closing the measurement gaps that have long obscured the true scale of joblessness. Until then, understanding how unemployment is measured remains just as important as understanding the numbers themselves.
What do you think? If the usual status and current daily status methods can produce unemployment figures that differ by more than 3 percentage points for the same country in the same year, which measure should governments rely on most for designing employment policy? And given that disguised unemployment and informal work are so hard to count, is any official unemployment figure truly telling the full story?
Leave a Reply