Occupational Shortage Index (OSI)

International Labour Organisation (ILO) in collaboration with OECD has established the Skill Gap Portal for several countries. Recently, India has been incorporated into this Skill Gap Portal. For having the information on demand-supply gap at State X Occupation level, the Occupation Shortage Index (OSI) for the States in India is computed and derived based on the methods and guidelines provided by the ILO.

OSI measures the level of gap between Demand and Supply of workers in a particular occupation. This Index is essential for long-term labour market planning and development of policies to facilitate employment market which promote economic growth.

Instead of direct measurement of skill characteristics, skill proxies (occupation) are used for calculation of OSI. The OSI comprise of following 4 sub-indicators:

     1) Hourly Wage Growth

     2) Employment Growth

     3) Growth in Hours Worked

     4) Share of Under-qualified Workers

These Sub-Indicators are linearly combined based on the predefined weights to compute the Occupational Shortage Index.

High OSI indicates Shortage/higher demand of workers within a particular occupation, which may result in higher wages, more job opportunities.

Low OSI indicates Surplus/less demand of workers, which may lead to lower wages, fewer job opportunities, and increased competition for available positions.

The major stakeholders of OSI are Jobseekers, Employers, Training Institutions, Government, etc. The Government can utilize the Occupation Shortage Index to pinpoint occupations facing workforce shortages or those in high demand.

Educational and training institutions can leverage this index to tailor their programs to the specific needs of the job market. By offering training in high-demand occupations, they can empower jobseekers with the skills necessary to fill these labor market gaps.

Jobseekers can benefit from the Occupation Shortage Index by directing their job search and training efforts toward occupations in short supply. This strategy enhances their prospects of securing stable employment in fields with high demand.

Employers can also use the Occupation Shortage Index to target their recruitment efforts. They can prioritize hiring in occupations with shortages and plan for the future by offering competitive compensation and benefits to attract and retain talent.

In summary, the occupation shortage index would be a valuable tool for policymakers, businesses, and educational institutions to make informed decisions about workforce planning, education, and training programs. It would serve as a foundation for informed decision-making and action in the labor market ecosystem. By identifying areas with labour shortages, stakeholders can work towards developing targeted solutions to address these gaps and ensure a well-balanced and skilled workforce. The regular updation of the index reflects changes in the labour market and economic conditions.

Data Source:

The OSI is developed by using Periodic Labour Force Survey data. The PLFS collects data on Employment and Unemployment in India and is conducted by the Ministry of Statistics & Programme Implementation (MoSPI) since 2017-18. The survey period is July to June every year. The latest available PLFS Report is for the period July 2022 to June 2023. The objective of PLFS is primarily twofold:

  • To estimate the key employment and unemployment indicators (viz. Worker Population Ratio, Labour Force Participation Rate, Unemployment Rate) in the short time interval of three months for the urban areas only in the ‘Current Weekly Status’ (CWS).
  • To estimate employment and unemployment indicators in both ‘Usual Status’ (ps+ss) and CWS in both rural and urban areas annually.

The Periodic Labour Force Survey (PLFS) gives estimates of Key employment and unemployment indicators viz., Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR), Unemployment Rate (UR), etc.

Labour Force Participation Rate (LFPR): LFPR is defined as the percentage of persons in labour force (i.e. working or seeking or available for work) in the population.

Worker Population Ratio (WPR): WPR is defined as the percentage of employed persons in the population.

Unemployment Rate (UR): UR is defined as the percentage of persons unemployed among the persons in the labour force.