Unemployment

Introduction - Meaning And Types Of Unemployment - Measurement Of Unemployment - Causes Of Unemployment In India

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People search for jobs in many ways –

  • some people look for jobs in newspapers;
  • some look for a job through friends and relatives;
  • in many cities, people stand in some select areas looking for people to employ them for that day’s work;
  • some go to factories and offices and give their bio-data and ask whether there is any vacancy in their factory or office;
  • many in the rural areas do not go out and ask for a job but stay home when there is no work;
  • some go to employment exchanges and register themselves for vacancies notified through employment exchanges; etc.

There are a variety of ways by which an unemployed person is identified –

  • NSSO defines unemployment as a situation in which all those who, owing to lack of work, are not working but either seek work through employment exchanges, intermediaries, friends or relatives or by making applications to prospective employers or express their willingness or availability for work under the prevailing condition of work and remuneration.
  • Economists define unemployed person as one who is not able to get employment of even one hour in half a day.

There are three sources of data on unemployment –

  • Reports of Census of India;
  • National Sample Survey Organisation’s Reports of Employment and Unemployment Situation;
  • Directorate General of Employment and Training Data of Registration with Employment Exchanges.

Though they provide different estimates of unemployment, they do provide us with the attributes of the unemployed and the variety of unemployment prevailing in our country.

Do we have different types of unemployment in our economy?

  • The situation described in the first part of this article is called open unemployment.
  • Economists call unemployment prevailing in Indian farms as disguised unemployment.
    What is disguised unemployment? Suppose a farmer has four acres of land and he actually needs only two workers and himself to carry out various operations on his farm in a year, but if he employs five workers and his family members such as his wife and children, this situation is known as disguised unemployment. One study conducted in the late 1950s showed about one-third of agriculture workers in India as disguisedly unemployed.
  • People migrate to an urban area, pick up a job and stay there for some time, but come back to their home villages as soon as the rainy season begins.
    Why do they do so? This is because work in agriculture is seasonal; there are no employment opportunities in the village for all months in the year. When there is no work to do on farms, men go to urban areas and look for jobs. This kind of unemployment is known as seasonal unemployment. This is also a common form of unemployment prevailing in India.

Though India has witnessed slow growth of employment; have you seen people being unemployed over a very long time?

  • Scholars says that in India, people cannot remain completely unemployed for very long because their desperate economic condition would not allow them to be so.
  • You will rather find them being forced to accept jobs that nobody else would do, unpleasant or even dangerous jobs in unclean, unhealthy surroundings.
    • The government has taken many initiatives to generate acceptable employment, ensuring at least minimal safety and job satisfaction, through various measures.

The population of any country consists of two components –

  • (i) Labour Force
  • (ii) Non-Labour Force.

Labour force means all persons who are working (i.e. being engaged in the economic activity) as well as those who are not working but are seeking or available for work at the current wage rate. It means the labour force consists of both employed and unemployed people.

The component of population which is not a part of the labour force is Non-Labour Force. It includes all those who are not working and are neither seeking nor available for work.

Unemployment can be defined as a state of work-less-ness for a person who is fit and willing to work at the current wage rate. It is a condition of involuntary and not voluntary idleness. Simply stated an unemployed person is the one who is an active member of the labour force and is seeking work, but is unable to find the same.

In case of voluntary unemployment a person is out of job on his own accord or choice, doesn’t work on the prevalent or prescribed wages. Either he wants higher wages or doesn’t want to work at all. The involuntary unemployment on the other hand is the situation when a person is separated from remunerative work and devoid of wages although he is capable of earning his wages and is also anxious to earn them. It is the involuntary idleness that constitutes unemployment.

Involuntary unemployment can be further divided into –

  • cyclical unemployment,
  • seasonal unemployment,
  • structural unemployment,
  • frictional unemployment,
  • natural rate of unemployment,
  • disguised unemployment and
  • under employment.

Cyclical Unemployment

Cyclical or demand deficient unemployment occurs when the economy is in need of low workforce. When there is an economy-wide decline in aggregate demand for goods and services, employment declines and unemployment correspondingly increases.

Cyclical unemployment mainly occurs during recession or depression.

This form of unemployment is most commonly known as cyclical unemployment since unemployment moves with the trade cycle. For instance, during the recent global slowdown in late 2008, many workers around the globe lost their jobs.

Seasonal Unemployment

This type of unemployment occurs in a particular time of the year or season and thus is known as seasonal unemployment. Seasonal unemployment is most common in industries like agriculture, tourism, hotel, catering etc.

Structural Unemployment

Structural unemployment arises when the qualification of a person is not sufficient to meet his job responsibilities.

It arises due to long-term change in the pattern of demand that changes the basic structure of the economy. The person is not able to learn new technologies used in the new expanding economic sectors and they thus may be rendered permanently unemployed.

For instance, when computers were introduced, many workers were dislodged because of a mismatch between the existing skills of the workers and the requirement of the job. Although jobs were available, there was a demand for a new kind of skill and qualification. So, persons with old skills did not get employment in the changed economic regime, and remain unemployed.

Frictional Unemployment

Frictional unemployment occurs when a person is out of one job and is searching for another for different reasons such as seeking a better job, being fired from a current job, or having voluntarily quit a current job. It generally requires some time before a person can get the next job.

Natural rate of unemployment

The sum total of frictional and structural unemployment is referred as the natural rate of unemployment.

Disguised Unemployment

The unemployment which is not visible is said to be disguised unemployment. It occurs when a person doesn’t contribute anything to the output even when visibly working. This happens amongst family labour especially in agriculture who are engaged on land but are not contributing to the given level of output. Thus their marginal productivity is zero.

Underemployment

When a person is engaged in the economic activity but that fail to provide him fully in accordance to his qualification and efforts. Thus it is a situation in which a person is employed but not in the desired capacity whether in terms of compensation, hours, or level of skill and experience. While not technically unemployed the underemployed often compete for available jobs.

Unemployment rate is the percent of the labour force that is without work. It is calculated as below –

Unemployment rate = (Unemployed Workers / Total labour force) × 100

Measurement of unemployment is a difficult task. In India, the most comprehensive and reliable data on employment and unemployment are compiled by the National Sample Survey Organization (NSSO). Based on different reference period (a year, a week, and each day of a week), NSSO provides four different measures of employment and unemployment.

The following are some methods of measuring unemployment –

  • Usual Principal Status Unemployment (UPS)
  • Usual Principal and Subsidiary Status Unemployment (UPSS)
  • Current Weekly Status Unemployment (CWS)
  • Current Daily Status Unemployment (CDS)

Usual Principal Status Unemployment (UPS)

This is measured as the number of persons who remained unemployed for a major part of the year. The persons covered by the survey may be classified into those working and/or available for work in their principle activity, and those working and/or available for work in a subsidiary activity, that is, a sector other than their principal activity. Hence, within the usual status concept, the estimates are now derived on the usual principal status as well as the usual principal and subsidiary status basis. The usual status unemployment rate is a person rate and indicates chronic unemployment, because all those who are found usually unemployed in the reference year are counted as unemployed. This measure is more appropriate to those in search of regular employment, e.g., educated and skilled persons who may not accept casual work. This is also referred to as ‘open unemployment’.

Usual Principal and Subsidiary Status Unemployment (UPSS)

Here person is considered unemployed, if besides UPS, those available but unable to find work on a subsidiary basis during a year.

Current Weekly Status Unemployment (CWS)

This refers to the number of persons who did not find even an hour of work during the survey week.

Current Daily Status Unemployment (CDS)

This refers to the number of persons who did not find work on a day, or on some days, during the survey week.

Rates of unemployment differ based on different concepts –

  • The UPS and UPSS measure reflect only long-term unemployment spells.
  • The CWS measure captures shorter unemployment spells, but ignores unemployment for less than a week.
  • The CDS measure is the most inclusive, capturing both open as well as partial unemployment.

The unemployment rate based on different measures is given under the below table –

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It is clear from the above table that there is decline in the unemployment rate since 2004-05.

  • UPSS has remained more or less same between 2004-05 to 2010-11 at marginally above 2 per cent.
  • CWS declined from 4.4 per cent in 2004-05 to 3.6 in 2009-10 and almost remained same at 3.7 in 2010-11.
  • CDS decreased continuously from 8.2 per cent in 2004-05 to 6.6 per cent in 2009-10 and 5.6 per cent in 2010-11

  1. Slow Economic Growth
  2. Increase in Labour force
  3. Rural-Urban Migration
  4. Inappropriate Technology
  5. Defective Educational System
  6. Lack of Infrastructure Development
  7. Lack of employability

 

Slow Economic Growth

During the planning period the trend rate of growth was considerably lower than the targeted rate. Therefore, jobs in adequate number were not created. Further, economic growth by itself does not solve the problem of unemployment. In the recent past there has been deceleration in the growth of employment in spite of the accelerated economic growth. This can be explained in terms of steady decline in the degree of response of employment to change in output in all the major sectors of economic activity except in construction.

According to T.S. Papola, over a period of time, the output growth in agriculture and manufacturing sector has become more input and technology-intensive and less labour-intensive. Besides, the sectoral composition of growth is also an important determinant of unemployment. Excessive dependence on agriculture and slow growth of non-farm activities limit employment generation.

Increase in Labour force

There are two important factors that have caused an increase in the labour force which are as follows –

  • (i) Rapid Population Growth : Rising population has led to the growth in the labour supply and without corresponding increase in the employment opportunities for the increasing labour force has aggravated the unemployment problem.
  • (ii) Social Factors : Since Independence, education among women has changed their attitude toward employment. Many of them now compete with men for jobs in the labour market. The economy has however failed to respond to these challenges and the net result is a continuous increase in unemployment backlogs.

Rural-Urban Migration

The unemployment in urban area is mainly the result of substantial rural migration to urban areas. Rural areas have failed to provide subsistence living in agriculture and allied activities and so large-scale migration is taking place to cities. However, economic development in cities has failed to create enough additional jobs for the new urban entrants to the labour market. Thus only some of the migrants are absorbed in productive activities and the rest join the reserve army of unemployed workers.

Inappropriate Technology

In India, though capital is a scarce factor, labour is available in abundant quantity; yet producers are increasingly substituting capital for labour. This policy results in larger unemployment.

Despite the abundance of labour, capital-intensive technology is adopted in India mainly because of rigid labour laws. It is quite difficult to follow easy hire and fire policy and so right sizing of manpower is difficult for the enterprises. It is difficult to reduce the number of labour force.

Further, the factors like labour-unrest and lack of work-culture leads to the increased inefficiency of labour and thus provide incentives to follow labour-saving technology by organizations.

Defective Educational System

The present educational system has theoretical bias and has limited utility for productive purposes. It lacks the emphasis on the development of aptitude and technical qualifications required for various types of work among job seekers. This has created a mismatch between the need and availability of relevant skills and training, which results in unemployment, especially of youth and educated while shortage of technical and specialized personnel continues.

Lack of Infrastructure Development

Lack of investment and infrastructure development limits the growth and productive capacity of different sectors which leads to inadequate generation of employment opportunities in the economy.

Lack of employability

India faces poor health and nutrition situation among masses which reduces the capacity of person to be employable and it causes unemployment.

 
 
June 30, 2018

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