JAIPURIA INSTITUTE OF MANAGEMENT

LUCKNOW

“UNEMPLOYEMENT IN INDIA”

SUBMITTED BY: -
SUBMITTED TO:-

SHOBHIT SRIVASTAVA

(JIML-1—138)
PROF. MAHIMA SHARMA

Section: D
 ACKNOWLEDGEMENT

In preparing this report a considerable amount of thinking and informational inputs from various sources
were involved. I express my sincere gratitude to everyone who contributed towards making this Project report
possible.

My sincere gratitude goes to our faculty guide Prof. MAHIMA SHARMA for her inspiration, cooperation
to complete the project report. Under her brilliant untiring guidance I was able to complete the project
successfully in time. In spite of having a very busy schedule, she made sure in every way that I acquire the best
possible exposure and knowledge during the project.

I am greatly thankful and obliged to our institution JAIPURIA INSTITUTE OF MANAGEMENT,

LUCKNOW for guiding me throughout the project.

I am also thankful to my friends, many others who have helped me a lot, without their encouragement and
cooperation I would never have been able to complete the project.

SHOBHIT SRIVASTAVA

PGDM
 UNEMPLOYMENT

“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 is 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.”

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.

Criteria of unemployment:-

• TIME: If a person works less than optimal hours (or days) during the year.
• INCOME: If a person earns an income less than desirable minimum during the year.
• Productivity: If a persons contribution to output is less than normal and his removal
will not reduce the output

The population of an economy is usually divided into two categories, the economically active and the
economically inactive.

The economically active population (labor force) or working population refers to the population that is
willing and able to work, including those actively engaged in the production of goods and services (employed)
and those who are unemployed. Whereas, unemployed refers to people who are willing and a capable of work but
are unable to find suitable paid employment.

The next category, the economically inactive population refers to people who are neither working nor looking
for jobs. Examples include housewives, full time students, invalids, those below the legal age for work, old and
retired persons.

CONCEPTS OF UNEMPLOYMENT

1) Usual Status Unemployment: It is meant to determine the Usual Activity Status - employed,
unemployed or outside the labour force. The activity status is determined with reference to a longer period, say a
year preceding to the time of survey .It is a person rate and indicates chronic 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.

LABOR FORCE
India’s labor force was approximately 375 million in 2002 and increase by 7 to 8.5 million per year in the first
decade of this century and will increase by a total of about 160-170 million by 2020, i.e., 2.0 percent per annum.
In 2010, it was total labor force in India was around 467 million.

Labor force: 467 million (2009 est.)

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of November 3, 2010

Date of
Year Labor force Rank Percent Change
Information Labor force - by occupation:
2003 406,000,000 2 1999
2004 472,000,000 2 16.26 % 2003 agriculture 52%
industry 14%
2005 482,200,000 2 2.16 % 2004 est.
services 34%
2006 496,400,000 2 2.94 % 2005 est.
This entry lists the percentage distribution of the labor
2007 509,300,000 2 2.60 % 2006 est. force by occupation. The distribution will total less than
100 percent if the data are incomplete.
2008 516,400,000 2 1.39 % 2007 est.
2009 523,500,000 2 1.37 % 2008 est. Source: CIA World Factbook - Unless otherwise noted,
information in this page is accurate as of November 3, 2010
2010 467,000,000 2 -10.79 % 2009 est.

We can see a decline in labor force in 2010. In 2009, it was around 523 million which dropped to 467
million in 2010. However, it has fallen short of target. India’s labor force is growing at a rate of 2.5 % a
year but employment just grows at a rate of 2.3%. In consequence, India has the test of not only
absorbing workers to the market, but also clearing the buildup. Around 60% of India’s labor force is
self-employed which many of them are very poor, 30% are casual workers earning very low wages and
just 10% are regular workers. Also around 90% of the workers work in unorganized sectors meaning
they do have the privilege of social security or other benefits.
UNEMPLOYMENT RATE: The unemployment rate is expressed as a percentage of the total number
of persons available for employment at any time. The rate of unemployment may be calculated:

Unemployment rate = (Unemployed persons / Labour force) x 100

Year Unemployment rate Rank Percent Change Date of Information

2003 8.80 % 110 2002
2004 9.50 % 105 7.95 % 2003
2005 9.20 % 83 -3.16 % 2004 est.
2006 8.90 % 91 -3.26 % 2005 est.
2007 7.80 % 92 -12.36 % 2006 est.
2008 7.20 % 89 -7.69 % 2007 est.
2009 6.80 % 85 -5.56 % 2008 est.
2010 10.70 % 121 57.35 % 2009 est.

Definition: This entry contains the percent of the labor force that is without jobs. Substantial underemployment might be noted

We can see a rapid increase in employment rate in 2010. The basic weakness in our employment
performance is the failure of the Indian economy to create a sufficient volume of additional high quality
employment to absorb the new entrants into the labour force while also facilitating the absorption of surplus
labour that currently exists in the agricultural sector, into higher wage, non-agricultural employment. A successful
 transition to inclusive growth requires migration of such surplus workers to other areas for productive and gainful
employment in the organized or unorganized sector. Women agricultural workers in families where the male head
has migrated, also require special attention given the need for credit and other inputs if they are self-employed in
agriculture or for wage employment if they do not have land.

Past and Present Scenario on Employment and Unemployment (1983-

2005)

(current daily status basis)

(Million) Growth per

annum (%)

1983 1993-94 1999-2000 2004- 1993–94 to 1999–2000 1983 to 1993–94 to

2005 1999–2000 to 2004–05 1993–94 2004–05

ALL INDIA

Population 718101 893676 1005046 1092830 1.98 1.69 2.11 1.85

Labor Force 263824 334197 364878 419647 1.47 2.84 2.2 2.09
8
Workforce 239489 313931 338194 384909 1.25 2.62 1.87
2.6
9.22 6.06 7.31 8.28 1
Unemployment Rate
(%) 20266
24335 26684 34738 4.69 5.42 5.02
No. of unemployed
–1.73

RURAL

Population 546642 658771 728069 779821 1.68 1.38 1.79 1.55

Labor Force 206152 252955 270606 303172 1.13 2.3 1.97 1.66

Workforce 187899 238752 251222 278076 0.85 2.05 2.31 1.40

Unemployment Rate 8.85 5.61 7.16 8.28

(%) 18253 14203 19383 25097 5.31

5.32 5.30 –2.36

No. of unemployed

URBAN

Population 171459 234905 276977 313009 2.78 2.48 3.02 2.64

Labor Force 57672 81242 94272 116474 2.51 4.32 3.32 3.33

Workforce 51590 75179 86972 106833 2.46 4.2 3.65 3.25

Unemployment Rate 10.55 7.46 7.74 8.28

(%)
6082 6063 7300 9641 3.41 5.72 -0.03 4.31
No. of unemployed
 This table shows a comparison of the trends in employment and labour force
over a longer period. It is evident that population growth decelerated in Period II as compared
with Period I and this led to a deceleration in labour force growth also. However, the growth of
the workforce, that is, total employment, also decelerated in Period II. Employment grew more
slowly than the labour force in Period II which raised the unemployment rate from 6.1% in
1993–94 to 8.3% in 2004–05. Measured in absolute terms, the average annual increase in
employment opportunities during Period II was 6.45 million, which is lower than the annual
increase of 7.09 million in Period I.

The inadequate increase in aggregate employment in Period II is

associated with a sharp drop in the pace of creation of work opportunities in agriculture.
Agriculture should not be expected to create additional employment but, rather, to reduce the
extent of underemployment and thereby increase incomes and wages of those employed in
agriculture while surplus labour shifts to the non-agriculture sector. However, the increase in
employment in the non agricultural sectors was disappointing.

UNEMPLOYMENT SITUATION

Unemployment in India is not a straightforward issue that can be either estimated directly with a single
measuring rod or addressed with a single policy initiative. Even if a person is not reported to be unemployed on a
particular point of time, he/she may be actually unemployed/under employed. Poor and weaker sections of
society, particularly those who are engaged in subsistence agriculture and low income earning self-employment
activities frequently face this situation as they do not get employment round the year. Hence, various approaches
are used to measure different dimensions of unemployment in the country. The estimates for 2004-05 varied from
10.8 million (as per usual status – widely referred to as „open unemployment‟) to 35 million (as per daily status
which includes both open unemployment and underemployment). Hence, addressing underemployment along
with open unemployment is important for policy initiatives, particularly, from the point of view of „inclusive
growth‟.

As far as the question of open unemployment is concerned, it has to be tackled by creating new employment
opportunities in the labour market. The issue of underemployment, however, may require a variety of policy
measures ranging from creation of new job opportunities to measures related to social security for workers,
introducing innovative technology etc. Promoting rural non-farm employment is considered as an important
policy measure to address under- employment in the rural areas.

Another crucial issue relates to the youth unemployment. Analysis of unemployment data for the year 2004-05
reveals that unemployment rates are very high in urban areas, particularly, in the age group of 15-24 years.
Further, female unemployment rate in the age group of 20-24 years is the highest at approximately 27%. Among
males, the highest unemployment rate is reported in the 15-19 years age group both in rural as well as urban areas.
However, in the 20-24 years age group, male unemployment rates are 12% and 16% in rural and urban areas
respectively. Overall, in rural areas unemployment among youth (age 15-24 years) is approximately 12 to 15%.
 Types of Unemployment

The main types of employment are structural, frictional, seasonal, cyclical, residual, technological and disguised
unemployment.

Structural Unemployment

Structural unemployment occurs when there is a change in the structure of an industry or the economic activities
of the country. As an economy develops over time the type of industries may well change. This may be because
people's tastes have changed or it may be because technology has moved on and the product or service is no
longer in demand.

This type of unemployment is also known as the chronic unemployment or the Marxian or long-
term unemployment. It is mostly to be found in the underdeveloped countries of Asia and Africa. This type of
unemployment is due to the deficiency of capital resources in relation to their demand. The problem in the
underdeveloped countries is to get rid of this age-old chronic unemployment by accelerating the process of
economic growth.

In other words, structural unemployment results from a mismatch between the demand for labour
and the ability of the workers. It does not affect the particular industry that can have adverse repercussion on
related industries as well.

Frictional Unemployment

This type of unemployment is caused by industrial friction, such as, immobility of labor, ignorance of job
opportunities, shortage of raw materials and breakdown of machinery, etc. Jobs may exist, yet the workers may be
unable to fill them either because they do not possess the necessary skill, or because they are not aware of the
existence of such jobs. They may remain unemployed on account of the shortage of raw materials, or mechanical
defects in the working of plants.

The more efficiently the job market is matching people to jobs, the lower this form of unemployment
will be. However, if there is imperfect information and people don't get to hear of jobs available that may suit
them, then frictional unemployment will be higher. Therefore, the better the economy is doing, the lower this type
of unemployment is likely to occur. This is because people will usually be able to find a job that suits them more
quickly when the economy is doing well.
Seasonal Unemployment

This is due to seasonal variations in the activities of particular industries caused by climatic changes,
changes in fashions or by the inherent nature of such industries. The ice factories are closed down in
winter throwing the workers out of their jobs because there is no demand for ice during winter.
Likewise, the sugar industry is seasonal in the sense that the crushing of sugar-cane is done only in a
particular season. Such seasonal industries are bound to give rise to seasonal unemployment.

Cyclical Unemployment

This type of unemployment (also known as Keynesian unemployment or the demand deficient
unemployment) is due to the operation of the business cycle. This arises at a time when the aggregate
effective demand of the community becomes deficient in relation to the productive capacity of the
country. In other words, when the aggregate demand falls below the full employment level, it is not
sufficient to purchase the full employment level of output. Less production needs to be carried out which
ultimately leads to retrenchment of workers. Cyclical or Keynesian unemployment is characterized by
an economy wide shortage of jobs and last as long as the cyclical depression lasts.

Residual Unemployment

This type of unemployment is caused by personal factors such as old age, physical or mental disability,
poor work attitudes and inadequate training.

Technological Unemployment

This type of unemployment is caused by changes in the techniques of production. Technological changes are
taking place constantly, leading to the discovery of new production methods involving a good deal of
mechanization. This naturally results in the displacement of labour and finally, unemployment.

Disguised Unemployment

This type of unemployment is to be found in the backward and the underdeveloped countries of Asia and Africa.
The term ‘disguised unemployment’ refers to the mass unemployment and underemployment which prevail in the
agricultural sector of an underdeveloped and overpopulated country. The people in underdeveloped countries are
outwardly employed but actually they are unemployed, the reason being that agricultural production would suffer
no reduction if a certain number of them are actually withdrawn from agriculture.

CAUSES OF UNEMPOYMENT

The main causes of unemployment in India are:-

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:

Industrialisation is not rapid in India and industrial labour 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 labour 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.

INAPPROPRIATE TECHNOLOGY : In India, while capital is a scarce factor, labour is available in

abundant quantity. However, not only in industries, but also in agriculture producers are increasingly
substituting capital for labour.

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.

RURAL URBAN MIGRATION- There has been a large-scale migration of people from rural areas to
urban areas due to inadequate employment opportunities in rural areas and higher wages in urban areas.
However, jobs are not available for all of them in urban areas. This has increased urban unemployment
in India.
LABOUR LAWS- The government has been protecting the existing workers and their exploitation with
the help of Minimum Wage Act, Workers Compensation Act and the other laws. High wages have kept
the demand for labour at a low level.

Effects of high rates of unemployment

High and persistent unemployment has presented a major challenge for the economy in two major areas.
One such area, it has eroded the funding base and secondly, it has increased the demands on government
through the use of welfare programs because of the consequences for poverty and inequality resulting
from high unemployment.

One such effect is the social costs, these include increasing poverty, personal hardships,
depression, decay of unused skills, increase in crime (mostly among the young) as well as family
disputes and broken marriages. Unemployed individuals become more and more dissatisfied and resort
to riots and demonstrations.

Secondly, the economic costs that are produced from unemployment. Due to
unemployment, the economy’s GNP will be less than the potential GNP, that is to say; what is possible
of full employment. This difference is known as the GNP gap. The gap is positive but can be slightly
negative if the actual GNP exceeds potential GNP and this can be possible only when the employed
labour works overtime or firms run their plants beyond their efficient level of capacity.

Unemployment is an economic problem involving loss of output and income. To measure the economic
costs of unemployment, we can consider either:

1. Low output to the economy- which is measured by taking the average worker’s productivity,
then multiply it by the number of unemployed individuals
2. Loss of income to factors of production – which is measured by taking the average annual wage
and then multiply it by the number of individuals
3. Wastage of productive resources.
4. Loss of resource efficiency.
5. Adverse effect on saving and capital formation.
6. Source of exploitation.
7. Leads to inequalities of income.
8. Burden on the Government.
9. Change in work attitude.
 10. Adverse effect on individual’s personality.
11. Moral degeneration.
12. Adverse social and political effects.

GOVERNMENT POLICY FOR REMOVING UNEMPLOYMENT

MAJOR EMPLOYMENT PROGRAMS

 Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched from April 1,

1999. It is the only self employment programme for the rural poor.

 Sampoorna Grameen Rozgar Yojana (SGRY) was launched on September 23,

2001. It aims at providing additional wage employment in rural areas.

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

 Prime Minister’s Rozgar Yojana (PMRY) was designed to provide self employment to more
than a million educated unemployed youth by setting up 7 lakh micro-enterprises under the
Eighth Five Year Plan.

SOME OTHER EMPLOYMENT PROGRAM

 The Rural Landless Employment Guarantee Programme (RLEGP)

 The Integrated Rural Development Programme (IRDP
 The Scheme of Training Rural Youth for Self-Employment (TRYSEM)
 Jawahar Rozgar Yojana (JRY) was announced in February 1989
 The National Rural Employed Programme (NREP)
 The Employment Assurance Scheme (EAS)

SOME OTHERS REMEDIES

 High rate of economic growth.

 Increasing investment.
 Development of agricultural sector.
 Rural industrialization.
 Creation of self employment opportunities.
 Employment for the educated unemployed.
 Control of population growth.
 Educational reforms
 Conclusion

The problem of unemployment has become a big issue in India. Various individual factors like age,
vocational unfitness and physical disabilities, which restrict the people had contributed to this problem. External
factors include technological and economic factors. At the same time there is enormous increase in the population.
Apart from this every year about 5 million people become eligible for securing jobs. Business field is subject to
ups and downs of trade cycle and globalization. Economic depression or sick industries are often close down
compelling their employees to become unemployed. Technological advancement contributes to economic
development. But unplanned and uncontrolled growth of technology is causing havoc on job opportunities. Strikes
and lockouts have become inseparable aspect of the industrial world today. Due to these industries often face
economic loses and production comes down. Since workers do not get any salary or wages during the strike
period, they suffer from economic hardships. They become permanently or temporarily unemployed.

Today young people are not ready to take jobs, which are considered socially degrading or lowly.
Our educational system has its own defects and its contribution to the unemployment is an open truth. Our
education does not prepare the minds of young generation to become self-employed on the contrary it makes them
dependent on government jobs, that are just dreams in present scenario. Government has introduced several
employment generating schemes and programmes over the years but in the absence of proper implementation and
monitoring have failed to achieve the required targets. The remedial measures for reducing unemployment may
lay greater emphasis on creation of opportunities for self -employment, augmentation of productivity and income
levels of the working poor, shift in emphasis from creation of relief type of employment to the building up of
durable productive assets in the rural areas and instead of attempting to revert somewhat to protectionist policies
the pace of privatization may be accelerated.