Unemployment in India

Submitted by
Mithelesh DK
B.A.L.L.B (Hons) Batch 2013-18 (Reg no: BA0130038)
Under the supervision and guidance of
Mr.Balachandran Sathyan
Faculty, Economics 2
THE TAMILNADU NATIONAL LAW SCHOOL
Navalurkuttapattu, Trichy.

INDEX
1

Sr. No.

TOPICS

Page
No.

1.

Definition & Introduction.

2.

Concept of unemployment.

3.

Types Of Unemployment.

5-7

4.

Causes of Unemployment.

8-10

5.

Effects of Unemployment & Natural Rate.

11-13

6.

Labor Force Statistics from the Current Population Survey

14

7.

Remedies for Solving Problems of Unemployment.

15

8.

Government Policy for Removing Unemployment.

16-18

9.

Solution.

19

10.

Conclusion.

20

11.

Weblography.

21

Unemployment in India
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 DEFINATION:
Unemployment is the state in which a person is without work, available to
work, and is currently seeking work.
It is a situation where there is non-availability of job for the persons.
Its an situation in which a person who is physically capable, mentally willing to
work at existing wage rate does not find any job and is forced to remain
unemployed.

INTRODUCTION:
It involves a waste of human resource and results in many social evils like theft, pickpocketing, robbery, murder etc. Its a serious economic, social and political problem
of the country. Its a
cause as well as effect
of
poverty.
The
unemployment rate is
used in economic
studies.
Rate
is
determined as the
percentage of those in
the labor force without
jobs.
There are a variety
of different causes of
unemployment,
and
disagreement
on
which causes are most important. Different schools of economic thought suggest
different policies to address unemployment. Monetarists for example, believe that
controlling inflation to facilitate growth and investment is more important, and will
lead to increased employment in the long run. Keynesians on the other hand
emphasize the smoothing out of business cycles by manipulating aggregate demand.
There is also disagreement on how exactly to measure unemployment.

CONCEPTS OF UNEMPLOYMENT

1. Usual Status Unemployment

2. Current Weekly Status Unemployment
3. Current Daily Status Unemployment
1) Usual Stauts Unemployment: It is meant to determine the Usual Activity Statusemployed, unemployed or outside the labour force. The activity status is determined
with referance to a longer period, say a year preceding to the time of survey. It is a
person rate and indicates constant unemployment.
2) Current Weekly Status: This concept determines activity status of a person with
reference to a period of preceding seven days. In this period, if a person seeking job
fails to get work for even one hour on any day, he is deemed to be unemployed.
3) Current Daily Status: This concept considers the activity status of a person for
each person for each day of the preceding seven days .If he works for one day but less
than four hours, then he is considered as employed for half a day.
Out of these concepts of unemployment, Current Daily Status concept
provides most appropriate measure of unemployment.

UNEMPLOYMENT IN INDIA:
India as a nation is faced with massive problem of unemployment. Unemployment
can be defined as a state of worklessness for a man fit and willing to work. It is a
condition of involuntary and not voluntary idleness. Some features of unemployment
have been identified as follows:
1. The incidence of unemployment is much higher in urban areas than in rural
areas.
2. Unemployment rates for women are higher than those for men.
3. The incidence of unemployment among the educated is much higher than the
overall unemployment.
4. There is greater unemployment in agricultural sector than in industrial and
other major sectors.

TYPES OF UNEMPLOYMENT

Economists and social thinkers have classified unemployment into various types.
Generally unemployment can be classified in two types:
VOLUNTARY UNEMPLOYMENT:
In this type of unemployment a person is out of job of his own desire doesn't work on
the prevalent or prescribed wages. Either he wants higher wages or doesn't want to
work at all. It is in fact social problem leading to social disorganization. Social
problems and forces such as a revolution, a social upheaval, a class struggle, a
financial or economic crisis a war between nations, mental illness, political corruption
mounting unemployment and crime etc. threaten the smooth working of society.
Social values are often regarded as the sustaining forces of society. They contribute to
the strength and stability of social order. But due to rapid social change new values
come up and some of the old values decline. At the same time, people are not is a
position to reject the old completely and accept the new altogether. Here, conflict
between the old and the new is the inevitable result which leads to the social
disorganization in imposed situation. In economic terminology this situation is
voluntary unemployment.
INVOLUNTARY UNEMPLOYMENT:
In this type of situation the person who is unemployed has no say in the matter. It
means that 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. Forms
and types of unemployment according to Hock are.
a. Cyclical unemployment - This is the result of the trade cycle which is a part
of the capitalist system. In such a system, there is greater unemployment and
when there is depression a large number of people are rendered unemployed.
Since such an economic crisis is the result of trade cycle, the unemployment is
a part of it.
b. Sudden unemployment - When at the place where workers have been
employed there is some change, a large number of persons are unemployed. It
all happens in the industries, trades and business where people are employed
for a job and suddenly when the job has ended they are asked to go.
c. Unemployment caused by failure of Industries - In many cases, a business
a factory or an industry has to close down. There may be various factors
responsible for it there may be dispute amongst the partners, the business may
give huge loss or the business may not turn out to be useful and so on.
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d. Unemployment caused by deterioration in Industry and business - In

various industries, trades or business, sometimes, there is deterioration. This
deterioration may be due to various factors. In efficiency of the employers,
keen competitions less profit etc. are some of the factors responsible for
deterioration in the industry and the business.
e. Seasonal unemployment - Certain industries and traders engage workers for
a particular season. When the season has ended the workers are rendered
unemployed. Sugar industry is an example of this type of seasonal
unemployment.

Voluntary and Unvoluntary Unemployment (Graphically)

 RURAL UNEMPLOYMENT:
This kind of employment prevails is on rural areas. The nature of problem is also
complicated. There are only two types of unemployment commonly found in
agricultural economy e.g. India
a) Seasonal Unemployment:
In an agrarian economy like India, seasonal unemployment is the most significant
type of unemployment in rural sector. Agriculture labour in India is mostly dependent
on monsoon.
b) Disguised Unemployment:
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In the rural subsistence agrarian sector of the Indian economy, the problem of
disguised unemployment is also typical. Disguised unemployment refers to that type
of unemployment in which laborers appear to be working and employed but in
reality, they are not employed as they do not add to the total output. In other words
they are removed from their jobs, output would not decrease.
URBAN UNEMPLOYMENT:
This type of unemployment is found in urban areas i.e. towns and cities.
1) Industrial Unemployment:
This refers to unemployment amongst workers in industries and factories in urban
areas. Industrial workers may be skilled or unskilled. Industrial is open
unemployment.
2) Educated Unemployment:
It is the problem of educated middle class people of urban society. It means
joblessness amongst the graduates, post graduates, doctors, engineers etc. However
this type of unemployment does not exist in countries worldwide. These are specific
type of unemployment that exist only in few countries especially those in involved in
agricultural activities like India.

CAUSES OF UNEMPLOYMENT

Unemployment levels are increasing dramatically in many parts of the world. There is
considerable debate among economists as to the causes of unemployment. Keynesian
economics emphasizes unemployment resulting from insufficient effective demand
for goods and service in the economy. Others point to structural problems,
inefficiencies, inherent in labour markets. Classical economics tends to reject these
explanations, and focuses more on rigidities imposed on the labor market from the
outside, such as minimum wage laws, taxes, and other regulations that may
discourage the hiring of workers.
8

In the set up of a modern market economy, there are many factors, which contribute
to unemployment.
Causes of unemployment are varied and it may be due to the following factors:
HIGH POPUALTION GROWTH:
The rapid increase in population of
our country during the last decade
has further worse the unemployment
problem in the country. Due to
rapidly increasing population of the
country, a dangerous situation has
arisen in which the magnitude of
unemployment goes on increasing
during each plan period.

JOBLESS GROWTH: Although

India is a developing country, the rate of growth is inadequate to absorb the entire
labour force in the country. The opportunities of employment are not sufficient to
absorb the additions in the labour force of the country, which are taking place as
result of the rapidly increasing unemployment in India.
INEFFICIENT
AGRICULTURAL
AND
INDUSTRIAL
SECTORS:
Industrialization is not rapid in our country and industrial labor finds few job
opportunities. As enough other employment opportunities are not available,
agriculture is the principal area of employment in our country. Thus, pressure on land
is high, as about 2/3 of the labor force is engaged in agriculture. Land is thus
overcrowded and a large part of the work force is underemployed and suffer from
disguised unemployment.
INAPROPRIATE EDUCATION SYSYTEM: After remaining at schools and
colleges for a number of years men and women come out in large numbers, having
gained neither occupational nor vocational training nor functional literacy from which
all future skilled, educated professional, and managerial manpower is drawn.
WEAKNESSES IN PLANNING TECHNIQUES: The growth strategy underlying
our plans has been found to be faulty. Lack in infrastructure development and poor
labour-intensive techniques planning has made unemployment a severe issue in our
Indian economy.

RECESSION:

INFLATION:

10

DISABILITY:

EFFECTS OF UNEMPLOYMENT
11

Unemployment has obvious and well-documented links to economic disadvantage

and has also been connected in some discussion to higher crime rates especially
among the young suicide,
and homicide Garry Ottosen
and Douglas Thompson
(1996)
broaden
the
consequences
of
unemployment, relating it to
increases in the incidences of
alcoholism, child abuse,
family
breakdown,
psychiatric hospitalization,
and a variety of physical
complaints and illnesses.
Some
researchers
have
emphasized the importance of preventing youth from falling into unemployment
traps. Robert Gitter and Markus Scheuer (1997) suggest that unemployment among
youth not only causes current hardship, but may also hinder future economic
success. This is because unemployed youths are not able to gain experience and onthe-job training and because a history of joblessness signals that the individual may
not have the qualities that are valued in the labour market.
Attempts have, however, been made to estimate the economic cost associated
with unemployment. Ottosen and Thompson (1996, p.5) noted that "the United
States loses a little less than one percentage point of potential gross domestic
product (GDP) or output for each one percentage point of unemployment. This
implies that an unemployment rate of 7 percent costs the United States at least $400
billion annually in foregone output. This is more than $2,000 for every man,
woman, and child over 16 years of age." Similarly, in Australia, Peter Kenyon
(1998) calculated that the loss of GDP associated with an unemployment rate above
the full-employment rate is the equivalent of one year's worth of GDP over the past
two decades.
In addition to the loss of GDP, high unemployment increases the burden on
social welfare programs. These include unemployment insurance programs and
other types of welfare, such as food stamps, Medicaid, Medicare, and Supplemental
Security Income (Ottosen and Thompson 1996). There are also intergenerational
effects, as unemployment of parents will limit their capacity to finance the
schooling of their children. As education is the primary means of social mobility,
this intergenerational effect will give rise to an inheritance of inequality.
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 NATURAL RATE:
The natural rate of unemployment is the rate of unemployment where the labour
market is in a position of equilibrium. This means that the labour supply = labour
demand at a given real wage rate. All those people willing and able to take paid
employment at the going wage rate do so.
The diagram below shows the labour supply (those willing and able to take work
at a going wage rate) and the labour force - the number of active participants in the
labour market. The labour force expands as the real wage rises because there is a
greater incentive to search for paid work and sacrifice leisure.
Employment on the x-axis measures the total labour hours supplied by workers
in the economy in a given time period. As the real wage increases, the total number
of hours supplied by the labour force will expand.

The natural rate of unemployment is not zero - at the equilibrium wage W1 in

the diagram above, there is unemployment measured by AB. This is made up of
frictional plus structural unemployment. At a wage rate W2 (above the equilibrium

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"market-clearing wage") employment contracts along the labour demand curve and
total unemployment rises (see the diagram below)

Dis-equilibrium unemployment rises to the level shown by the distance CD. This
is because labour demand has fallen and the labour force has expanded. There is an
excess supply of labour - some people who are willing and able to find employment
cannot get paid work.

14

 LABOUR FORCE STATISTICS FROM

THE CURRENT POPULATION SURVEY
Series Id:
Seasonally Adjusted
Series title:
Labor force status:
Type of data:
Age:

LNS14000000
(Seas) Unemployment Rate
Unemployment rate
Percent or rate
16 years and over

Graphical Presentation of Data:

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 REMEDIES FOR SOLVING PROBLEMS

OF UNEMPLOYMENT
Reducing unemployment is a key target for all Governments. High unemployment
has enormous costs for individuals, businesses, the Government and the economy.The
way of solving unemployment will depend upon its cause
METHODS:

Government support to struggling industries in order to try to save jobs e.g.

airline industry
Provide more training and education to the unemployed. This could help
improve computer skills and communication. These people will become more
confident and employable.
Make more information available in job centres.
Reduce unemployment benefits or cut benefits all together

Try to bring the country out of a recession. The Government needs to try to
create demand in the economy. It could;

Give grants to businesses to produce goods

Have projects such as road building

Cut interest rates to encourage spending

Cut income tax to encourage spending

NEW DEAL: Labours New Deal programme for young unemployed people was
introduced across the UK in April 1998. In June 1998 the Government launched a
separate New Deal for Long-Term Unemployed People aged over 25+.
The main options are:

A subsidised job with an employer

Remaining in full-time education and training
Work within the accredited voluntary sector and
Work experience with an environmental task force.

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The programme is designed to provide pathways back into work for the long term
unemployed many of whom have become outsiders in the labour market despite the
continuing strength of the British economy. Higher levels of employment and
economic activity add to total national output and should help to improve the overall
performance of the labour market in sustaining long run economic growth.

GOVERNMENT POLICY FOR

REMOVING UNEMPLOYMENT

Employment Policy up to the 1980s: Direct measures to eliminate unemployment

were not preferred as the apprehension was that they could slow down the growth
process by raising consumption expenditure on the other hand, and cutting down the
economic surplus on the other. This policy was obviously inadequate to tackle the
unemployment problem and as a result, the number of unemployment rose. Hence
government decided to concentrate on self employment ventures in various fields
farm and non-farm operations.
Such as:

Rural development programme

National rural employment programme
National scheme of training youth for self employment
The operation food II dairy project
Integrated rural development programme
Rural landless employment guarantee programme

Employment Strategies during the 1990s: Defining its employment perspective the
Eighth Plan clearly stated, The employment potential of growth can be raised by
readjusting the sectoral composition of output in favour of sector and sub-sector
having higher employment elasticity. In certain sectors where technologies are to be
upgraded to a higher level of efficiency and international competitiveness, there is
little scope for generating additional employment. However, in respect of certain
other sectors some flexibility may be available in the choice of technologies and thus
it may not be difficult to generate considerable employment.
According to the present estimates, the employment strategy as stated above
will enable attainment of the goal of full employment in any case not before 2012
A.D. Therefore, special employment programmes as in the past should be continued
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to provide short-term employment to unemployed and underemployment among the

Poor and the Vulnerable.

18

1. MAJOR EMPLOYMENT PROGRAMS

Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched from April 1, 1999 after
restructuring the IRDP and allied schemes. It is the only self-employment programme for the
rural poor.

Sampoorna Grameen Rozgar Yojana (SGRY) was launched on September 23, 2001 and
the scheme of JGSY and Employment Assurance Scheme was fully integrated with SGRY. It
aims at providing additional wage employment in rural areas.

The Swarana Jayanti Shahari Rozgar Yojana (SJSRY) came into operation from
December 1, 1997, subsuming the earlier urban poverty alleviation programmes. It aims to
provide gainful employment to the urban unemployed and underemployed poor by
encouraging the setting up of self-employment ventures or provision of wage employment.

Prime Ministers Rozgar Yojana (PMRY) was designed to provide self-employment to

more than a million educated unemployed youth by setting up seven lakh micro-enterprises
under the Eighth Five Year Plan.

The National Rural Employed Programme (NREP) was started as a part of the Sixth plan
and was continued under the Seventh Plan. It was meant to help that segment of rural
population which largely depends on wage employment and has virtually no source of
income during the lean agricultural period.

The Rural Landless Employment Guarantee Programme (RLEGP) was started on 15th
August, 1983, with the objective of expanding employment opportunities for the rural
landless, i.e., to provide guarantee to at least one member of the landless household for about
100 days in a year.

The Integrated Rural Development Programme (IRDP) was launched in 1978-79 and
extended all over the country in 1980-81.It was to provide self-employment in a variety of
activities like sericulture, animal husbandry etc. in primary sector, handicrafts etc. in
secondary sector , and service and business activities in the tertiary sector.

The Scheme of Training Rural Youth for Self-Employment (TRYSEM) was initiated in
1979. It aimed at training about 2 lakh rural youth every year to enable them to become selfemployed.

19

Jawahar Rozgar Yojana (JRY) was announced in February 1989, it was supposed to
provide intensive employment creation in the 120 backward districts. It was later renamed
Jawahar Gram Samridhi Yojana (JGSY) whose objective was creation of infrastructure
and durable assets at the village level so as to increase opportunities for sustained
employment to the rural poor.

The Employment Assurance Scheme (EAS) aimed at providing 100 days of unskilled
manual work on demand to two members of a rural family in the age group 18 to 60 years in
the agricultural lean season within the blocks covered under the scheme.

2. IMPLIMENTATION OF EMPLOYMENT PROGRAMS

Till now these programmes have not been launched on a sufficiently large scale and thus
their contribution from the point of view of the reduction in the incidence of unemployment
seems to be only marginally.
The three major problems which prevent pursuit of these programmes on a considerable
scale are the choice of appropriate works are to be done; finding the resources to finance the
programmes; and the lack of clarity with regard to the organisation of the rural work programmes
meant to generate employment.

20

SOLUTION

Faster economic growth is viewed as a means of generating more jobs.

Unemployment agencies could tighten their job search and job acceptance requirements.

Improvements to the education and training provided to young people, with a greater
focus on vocational skills.

Countries need to ensure that their welfare systems do not provide discouragement to
work.

Government support to struggling industries in order to try to save jobs.

Provide more training and education to the unemployed. This could help improve
computer skills and communication. These people will become more confident and
employable.

The Government needs to try to create demand in the economy.

21

CONCLUSION

The whole length of discussion concludes that to solve the unemployment problem of India the
development plans and the family planning programmed, both, should be reformed on the lines
suggested herein above whereby the extra employment opportunities will be generated fast, on
one hand, and population growth will be checked, on the other, in such a way that growth of
employment opportunities would considerably exceed to the population growth.
To solve these massive problem efforts should be made to rectify the mistakes in the
development move on one hand, & to mitigate the high population growth, on the other reselect
its programmers & reconstruct its plans so as to make the development move rural oriented.
This will bring about fast agricultural development, uplift of village life & revival of village
industries, artisanship & handicraft to check the massive rural- urban migration. As regards to the
check on high population growth the prevailing family planning programmed has been proved
insufficient & incomplete.
.

22

WEBLOGRAPHY

1. www.economywatch.com
2. www.scribedoc.com
3. www.isid.ac.in
4. ideas.repec.org
5. www.legco.gov.hk/
6. www.jstor.org/stable/1818137
7. www.informaworld.com
8. www.cdedse.org/pdf/work174.pdf
9. www.icai.org/resource_file/16789ppui.pdf

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