Tamil Nadu fares better than most States on employment metrics, but more must be done to tackle underemployment and gaps between skills and education, as the State produces the highest number of graduates in India.

While there is no accurate data to measure India’s employment scenario, the periodic labour force survey (PLFS) conducted by the Union Ministry of Statistics and Programme Implementation offers some insights.

The annual PLFS from July 2022-June 2023 measured different aspects of employment across States and nationwide. Among the sample population, it considered the activity in which a person spent relatively long time during 365 days preceding the date of survey as the principal activity status, while the economic activity performed for 30 days or more, adding to the principal status was considered the subsidiary economic status.

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Put together the principal and subsidiary economic status, that is, Tamil Nadu’s (T.N.) labour force participation rate (LFPR), which is the percentage of persons in the labour force – those working, or seeking, or available to work – was 46%, compared with 42.4% nationally. 

More women workers

Under the principal plus subsidiary status, the percentage of employed persons, or Worker Population Ratio (WPR) in T.N. was 44%, compared with 41.1% nationally. The female WPR was 31.6%, higher than the 27% nationally.

In T.N. 31.6% earned a regular wage, compared with 20.9% nationally. T.N.’s overall unemployment rate was 4.4%, compared with 3.2% nationally.

The unemployment rate among the educated, that is, those who have attained secondary level education, was 9.4% in T.N., compared with 7.3% nationally. The unemployment rate among graduates was 16.3% in the State, higher than 13.4% at the all India level, and the youth unemployment rate (15-29 y/o) was 17.5% for T.N., significantly more than the nationwide 10%.

PLFS also measures the workforce according to the current weekly status (CWS) approach, which considers those who worked for at least one hour, or was seeking/available for work for at least an hour on any day in the past week preceding the survey date. As per this metric, T.N.’s LFPR was 44.5%, compared with 40% as the national average, while WPR was 41% against the national level of 38%.

T.N.’s unemployment rate going by the CWS approach, was 7.9%, against 5.1% nationally.

The PLFS considers proprietary and partnership enterprises as the informal sector. On that basis, informal workers were 65.7% in T.N., against 74.3% nationally.

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One of the ways to assess employment in the formal sector is to consider net Employees’ Provident Fund Organisation subscriber additions. Maharashtra, Karnataka, Tamil Nadu, Gujarat and Haryana combined constituted around 58.24% of net addition in the month of May 2024, the Union government said.

T.N. has the highest number of factories in India. More than 40% of factory employment was in Tamil Nadu, Gujarat, and Maharashtra combined, according to the Economic Survey 2023-24. But the highest employment growth between FY18 and FY22 was seen in states with a higher share of young population, which included Chhattisgarh, Haryana and Uttar Pradesh, according to the Survey.

The DMK government has said it has attracted investments of more than ₹10 lakh crore and created about 31 lakh jobs in the past three years. In June, Chief Minister M.K. Stalin told the Assembly that his government would fill more than 75,000 vacancies across government departments within 18 months.

He also said 65,483 youths have been hired hired across departments in the past three years, while overall the state government has ensured jobs for 5,08,055 people.

A. Kalaiyarasan, an economist with the Madras Institute of Development Studies said T.N. has more unemployed graduates due to the higher gross enrolment ratio (GER).

More graduate numbers

T.N.’s GER in higher education is almost double the national average, according toa 2024-25 State Higher Education Department policy note, which quoted the All India Survey on Higher Education (AISHE).

“Our youth enrolment in education is not keeping pace with the employment opportunities. So some youth end up working in the gig economy like Swiggy and other e-commerce sites, hoping to land a better job in future,” Mr. Kalaiyarasan said.

Despite T.N. having the highest women workforce participation, Mr. Kalaiarasan said wage discrimination must be addressed. He pointed to the monthly earnings gap between men and women, with women in regular jobs earning ₹12,969 against ₹17,476 for men in 2020-21.

Mr. Kalaiyarasan also said T.N. must incentivise employment generation over capital investments.

‘Incentivise labour’

Srivats Ram, Chairman, Confederation of Indian Industry (CII), T.N. State Council said historically, industrial promotion schemes incentivised based on the amount of capital or investment being deployed. But now this is shifting toward attracting labour intensive sectors like electronics, non-leather footwear, etc, he said.

Mr. Ram also warned of the skill gap among recent graduates, making them hard to be placed at jobs immediately pointing to the need for more training programmes. “Sometimes it is easy to train for necessary skills with one or two programs. But it becomes challenging in segments where technology is changing rapidly,” he added.

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During the IT boom, it was easy to get hired after graduation. But the industry has matured and net job additions have been coming down, amid a slowdown in the industry lately. While the number of global capability centres had grown, their requirement for specific skills made skilling initiatives essential, Mr. Ram observed.

He said CII is working with Anna University to update their curriculum.

He said T.N. government’s Naan Mudhalvan scheme is a good initiative for entry level job creation, but said its scope could be expanded with involvement of more firms and internships could be part of the program.

Extremely high underemployment

As on March 31, a whopping 54,25,114 people had registered across the State’s District Employment and Career Guidance Centres through the employment portal (www.tnvelaivaaippu.gov.in). Of these, 25,00,134 registrants were men, while 29,24,395 were women and another 285 were transgenders, according to a Labour Welfare and Skill Development Department (LWSD) policy note for 2024-25. But K. Veera Raghava Rao, Secretary, LWSD Department said this number “may not necessarily reflect a shortage of job opportunities as a majority of these people are working elsewhere,” pointing to the extremely high level of underemployment in T.N..

Mr. Rao, added that through the Naan Mudhalvan initiative, the government is engaging colleges, industrial training institutes (ITIs), and polytechnics across the state to provide training and assist students in securing jobs.

The government has established industry 4.0 technology centres in ITIs state-wide for the students to keep pace with latest industry trends. And many MSMEs are using these centres, Mr. Rao said, adding the curriculum at polytechnics is being updated to align with industry needs. Additionally, industries are expanding their internship programs”, he said.

The state’s employment landscape is, however, expected to witness significant demand in sectors like electronics, automobile, and auto component, including electric vehicles and solar cell manufacturing, as investments in these industries rise. Tamil Nadu is expected to generate more than one lakh jobs in the next few years, especially in smaller cities and towns like Krishnagiri, Hosur, Coimbatore, reckoned P. Subburathinam, Chief Strategy Officer, TeamLease Services Limited, a staffing firm.

There are significant disparities in job opportunities between urban and rural areas. Rural areas often lack the infrastructure and investment needed to create jobs, leading to migration to urban centres and associated socio-economic issues, Mr. Subburathinam added.

Another concern has been the probable labour displacement due to rising automation, he warned.

K. E. Raghunathan, National Chairman, Association of Indian Entrepreneurs said unemployment is the key issue across India. Industry and educational institutions must align in addressing the skills gap concern. An option of adding another semester to undergo practical training like in the case of medical courses must be considered, Mr. Raghunathan said.