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ROLL NO: 2010GL004


YEAR: 2010-12




The growth performance of the Indian economy, though not spectacular, has been decent by the standards of developing countries. But growth has failed to improve employment conditions in the country even though the rate of labour force growth has so far been quite low. It is hardly surprising that problems of unemployment and underemployment worry policy planners of today as much as they did Mahalanobis at the time of formulating the Second Five-Year Plan. The rate of labour force growth is currently accelerating and is expected to remain high for quite some time to come. If the past patterns continue, the country will soon be confronted with an employment crisis. The Indian government has come up with various schemes to tackle with the acute obstacle of unemployment in its growth. However the major problem is that there is no clear distinction between unemployment benefit schemes and the employment generating schemes. Another hitch is in the implementation and coverage of these schemes though these schemes appear to be quite comprehensive on paper. This paper looks at the problem of unemployment in the country and the various schemes that the government has initiated to combat this problem and their performance. The paper also glances at the policies in European countries and tries to draw some lessons from the East Asian countries as well.


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Social protection is defined as the set of policies and programs designed to reduce poverty and vulnerability by promoting efficient labour markets, diminishing peoples exposure to risks, and enhancing their capacity to protect themselves against hazards and interruption/loss of income. According to World Bank social protection consists of public interventions to assist individuals, households, communities in better management of income risks. The ILOs definition of social protection is the public action taken in response to levels of vulnerabilities risks and deprivation which are deemed socially acceptable within a given policy of society. Social protection deals with both, absolute deprivation and vulnerabilities of poorest and non-poor of the society. Social protection deals not only with social risks (sickness, old age, unemployment and social exclusion) but also with programmes that secure income such as food security, employment, and education etc. presence of social cohesion and can prevent irreversible losses of human capital. In the financial crisis, supply side management is not enough. There is need to increase demand. Social protection programs can increase demand. Social security is a government program designed to provide for basic economic security and welfare of individuals and their dependants. The programs classified under the term social security differ from one country to another, but all are the result of government legislation and all are designed to provide some kind of monetary payment to defray a loss of or a deficiency in income. Social security may be defined as any mandatory arrangement that provides individuals with a degree of income security when faced with the contingencies of old age, survivorship, incapacity, disability, unemployment or

rearing child. It may also offer access to curative or preventive medical care. As defined by the international social programmes, social assistance programmes, universal programmes, mutual benefit schemes, national provident funds, and other arrangements including market-oriented approaches that, in accordance with national law or practice, form part of a countrys social security system.


Social Security protects not just the subscriber but also his/her entire family by giving benefit packages in financial security and health care. Social Security schemes are designed to guarantee at least long-term sustenance to families when the earning member retires, dies or suffers a disability. Thus the main strength of the Social Security system is that it acts as a facilitator - it helps people to plan their own future through insurance and assistance. The success of Social Security schemes however requires the active support and involvement of employees and employers. As a worker/employee, you are a source of Social Security protection for yourself and your family. As an employer you are responsible for providing adequate social security coverage to all your workers.


India has always had a Joint Family system that took care of the social security needs of all the members provided it had access/ownership of material assets like land. In keeping with its cultural traditions, family members and relatives have always discharged a sense of shared responsibility towards one another. To the extent that the family has resources to draw upon, this is often the best relief for the special needs and care required by the aged and those in poor health. However with increasing migration, urbanization and demographic changes there has been a decrease in large family units. This is where the formal system of social security gains importance. However, information and awareness are the vital factors in widening the coverage of Social Security schemes.

Social Security Benefits in India are Need-based i.e. the component of social assistance is more important in the publicly-managed schemesIn the Indian context, Social Security is a comprehensive approach designed to prevent deprivation, assure the individual of a basic minimum income for himself and his dependents and to protect the individual from any uncertainties. The State bears the primary responsibility for developing appropriate system for providing protection and assistance to its workforce. Social Security is increasingly viewed as an integral part of the development process. It helps to create a more positive attitude to the challenge of globalization and the consequent structural and technological changes. Our State right from the beginning of Five year plans 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


India as a nation is faced with massive problem of unemployment. Unemployment can be defined as a state of workless-ness 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: a. The incidence of unemployment is much higher in urban areas than in rural areas. b. Unemployment rates for women are higher than those for men. c. The incidence of unemployment among the educated is much higher than the overall unemployment. d. There is greater unemployment in agricultural sector than in industrial and other major sectors.

Economists and social thinkers have classified unemployment into various types. Generally unemployment can be classified in two types: 3.1 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. 3.2 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. 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. The problem of unemployment has becoming a colossal. Various problems have caused this problem. There are individual factors like age, vocational unfitness and physical disabilities which restrict the people. External factors include technological and economic factors. There is enormous increase in the population. Every year India adds to her population afresh. More than 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. The computerization and automation has led to technological unemployment. 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 to be socially degrading or lowly. Our educational system has its own irreparable 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 vacancies which are hard to come.

For the country as a whole we have in the Population Projections for India and States 19962016o f Registrar General of India [GoI 1996], population estimates for March1 of 1999 and 2000 separately for the four segments. By interpolation, we obtain estimates of population as on January 1, 2000 - the mid-point of the Survey Year 1999-2000 - separately for rural males, rural females, urban males and urban females.3 Applying to these population estimates the segment-specific (crude) worker-population ratios (WPRs for short) as per the NSS 55th Round Survey, the estimates of workforce as on January 1, 2000 by gender and rural-urban location are obtained. The WPRs and therefore also the work-force estimates are those based on "usual activity category taking also into consideration the subsidiary economic status of persons categorised' not working" 'or the Usual Status (PS+SS) categorisation for short. Table 1 presents the estimates of population and workforce as on January1, 2000 by rural-urban location and by gender along with corresponding estimates for January 1, 1994 drawn from Visaria (1998) with WPRs drawn from the NSS 50th Round Employment-Unemployment Survey (July 1993-June 1994). Also presented in this table are the underlying (crude) workerpopulation ratios drawn from the two quinquennial surveys. A striking result is the nearstagnation in the number of female workers in the country as a whole and an absolute reduction in the number of women workers in rural India. This reduction in the number of women workers in rural India, by a little over 1.3 million, is just about offset by arise in the number of urban women workers (1.4 million).4 The above is a consequence of a sharp reduction in the WPRs between 1993-94 and 1999-2000 for both rural and urban women. This decline in WPRs is, however, not confined to women. It is in fact present in each and all the four population-segments. This has the implication that, in every segment, the rate of growth of workforce over the six-year period will be lower than the rate of growth of population over the same period. Thus, in the country as a whole, while the population is projected to have grown at a little over 1.75 per cent per annum (pcpa) between 1994 and 2000, over the same period, the total (rural plus urban and males plus females) workforce would have grown by just 0.81 pcpa. As already noted the estimates for female workers as on January 1, 2000 imply virtually no growth in the aggregate and negative growth for women workers in rural India. Even in urban

India, the rate of growth of women workers, at 1.30pcpa is much lower than the rate of growth of the population of women in urban India which is projected to have grown at 3.05 pcpa. Three points need to be noted in connection with the decline in the (crude) workerpopulation ratios noted above. First, the declines in WPR are not offset by any significant rise in the ratio of unemployed in the population on the Usual Status ( PS+SS) categorisation. For rural females this ratio is unchanged at 3 per 1,000, while for urban females there is a marginal decline from 10 per 1,000 in 1993-94 to 8 per 1,000 in 1999-2000. The increase in this ratio for rural males (from 8 per 1,000 to 9 per 1,000) and for urban males (from 22 to 24 per 1,000) are marginal. So that, crude labour force participation rates (WPRs) would also show a decline between 1993-94 and 1999-2000 in all the four population segments. Second, in each of the four segments, age-specific WPRs have declined between 1993-94 and 19992000 in each and every single age-group (five-year age-groups between 5 and 59 years and the open-ended interval '60 years and above') distinguished in the NSS Report. So the observed decline in crude worker-population ratios is not due merely to shifts in the agestructure of the population. Third, to a significant extent, the reduction in worker population ratios reflects a beneficial rise in the student-population ratios - not only in the 5-9 and the 10-14 age-groups covering the primary and middle-school system, but also in the 15-19 and the 20-24 age-groups in dictating a rising participation in secondary and higher-level education. These gains have been particularly impressive for rural girls below 20 years of age (Table 3). In relation to the last noted point, however, two caveats are in order: First, in the case of rural women in the 20-24 age group, the decline in WPR (from 456 per 1,000 in 1993-94 to 409 per 1,000 in 1999-2000) is much greater than the 10 point rise in the corresponding student population ratio from 19 to 29 per 1,000. This is also the case for rural males in the three age-groups 10-14, 15-19, and 20-24, for urban males in the 10-14 and the 15-19 age-groups, and, to a lesser extent, in the 20-24 age-group as well. Second, as noted earlier, the decline in the age-specific WPRs extends to all age groups in all the four population segments. And, in age-groups 25 years and above, there is no offsetting beneficial rise in the student-population ratios. These declines in the 25 and above age-group accounted for over 40 per cent of the decline in the crude WPR for rural women and for over 59 per cent of the decline in overall WPR for urban women. However, at least for rural women, WPRs on the Usual Principal Status in the 25 and above age group (except 50-54) are higher in 19992000. So that, at least in their case the declines in the WPRs (on the principal Plus Subsidiary Status) in these groups is due to entirely to declines in WPRs on the Subsidiary Status. But, sizeable declines in the principal status WPRs in the 50-54, 55-59 and 60+ age groups for males in both rural and urban India remain an unresolved puzzle. Our state-level review of changes in worker-population ratios between 1993- 94 and1 999-2000, not reported here, shows that, in all the four segments the decline in WPRs has been widespread across states and, even though the declines have been quite sharp in a few states, the decline in WPRs observed at the all-India is not due to a sharp but concentrated decline in a few states.


The organized sector includes primarily those establishments which are covered by the Factories Act, 1948, the Shops and Commercial Establishments Acts of State Governments, the Industrial Employment Standing Orders Act, 1946 etc. This sector already has a structure through which social security benefits are extended to workers covered under these legislations. The unorganized sector on the other hand, is characterized by the lack of labour law coverage, seasonal and temporary nature of occupations, high labour mobility, dispersed functioning of operations, casualization of labour, lack of organizational support, low

bargaining power, etc. all of which make it vulnerable to socio-economic hardships. The nature of work in the unorganized sector varies between regions and also between the rural areas and the urban areas, which may include the remote rural areas as well as sometimes the most inhospitable urban concentrations. In the rural areas it comprises of landless agricultural labourers, small and marginal farmers, share croppers, persons engaged in animal husbandry, fishing, horticulture, bee-keeping, toddy tapping, forest workers, rural artisans, etc. where as in the urban areas, it comprises mainly of manual labourers in construction, carpentry, trade, transport, communication etc. and also includes street vendors, hawkers, head load workers, cobblers, tin smiths, garment makers, etc.


At the all-India level, this widely accepted measure of open unemployment indicates a worsening of the unemployment situation over the 1990s in three out of the four population segments, with urban women as the sole exception. The increase in the daily-status unemployment rate is the steepest for rural males (29 per cent) followed by rural females (21 per cent). For urban males, at 7 per cent the increase is relatively modest. This increase in the unemployment rate for rural males has to be seen in the context of the rise in the share of casual labour (from 338 to 362 per 1,000) and a decline in the share of self-employed among rural male workers on the usual status (principal plus subsidiary). Given that the daily status unemployment rate better captures the unemployment among casual labourers than that among the self-employed (where we could be faced with the phenomenon of work spreading) the rise in the daily status unemployment rate among rural males could well be due to the change in the status-composition of the workforce [ Sundaram and Tendulkar 1988]. Before proceeding further, we may note a reduction in the unemployment rates on the usual principal status for the educated - those with 'secondary and above' level of education as also for the sub-set of those with 'graduate and above' level of education - in almost all the four population segments. The exception was rural females with 'graduate and above' level of education who experienced an increase in usual status unemployment rate from 323 to 351 per 1,000. One of the indicators of underemployment among those classified as workers on the Usual (principal plus subsidiary) status available from the NSS EmploymentUnemployment Surveys is the proportion of such workers (adults above 15 years of age) who had sought or were available for additional work - either on most days or on some days of the year. Those who reported themselves as seeking or available for additional work are further classified by reasons for seeking or being available for additional work, with 'to supplement income'; 'not enough work'; and 'not enough work and to supplement income' as the principal rubrics of 'reasons'. In this tabulation, the proportion of usual status workers reporting that they had not sought (nor were available for) additional work may be treated as those who perceive themselves to be fully employed during the 365-day reference period.

When we look at the data for 1993-94 and 1999-2000 the per 1,000 distribution of adult usually working persons as between those who had not sought (nor were available for) additional work, those who had sought or were available for additional work on most days, and, those who did so on some days. To focus on the self-perceived underutilisation of labour time, we also present the proportion of those who had sought additional work - separately for those who did so on most days and those who did so on some days - who reported either 'not enough work' or 'not enough work and to supplement income' as the reason. This is presented separately by gender and rural-urban location and within each population segment this information is presented separately for the self-employed workers and casual labourers in addition to all workers. A striking result to emerge from Table 7 is the reduction over the 1990s in the proportion of usual status workers who had not sought additional work in every segment and category of workers distinguished. This points to an unambiguous increase in self-perceived underemployment among those classified as workers on the Usual Status (principal and subsidiary). The decline in the proportion of workers who had not sought additional work or, equivalently, the rise in the proportion who had sought additional work is the highest for casual labourers in each of the four segments. And, among casual labourers it is the highest for rural males, followed by rural females, urban males and urban females, in that order. Significantly, except for rural female self-employed workers, a major portion of the reduction in the proportion who had not sought additional work is accounted for by an increase in the proportion of those who had sought additional work on 'some days'. This is overwhelmingly the case among all the categories of urban workers - males and females alike. In fact among urban casual labourers there is a reduction, albeit marginal, in the proportion that had sought or was available for additional work 'on most days'. Also noteworthy is the fact that, even in rural areas where there is some rise in the proportion of those who had sought additional work 'on most days', among them, those citing either 'not enough work' or 'not enough work and to supplement income', accounted for only about a third of such cases. Those citing either of these reasons, however, accounted for 50 per cent or more of the rise in the proportion of those who had sought additional work 'on some days' in almost all cases - with the category 'all urban female workers' as the exception. In sum, while there is clear evidence of increase in self-perceived underemployment, much of this is reflected in an in-crease in the proportion of usual status workers who sought additional work on 'some days' rather than 'on most days'. Also, even among those adding to the proportion of workers who had sought additional work 'on most days, the principal reason was the need to supplement income rather than lack of work per se. This leads us to consider next the changes in the average number of days worked and the changes in the average daily wage earnings of casual labourers in the four population segments. The NSS Employment Report provides estimates of average daily wage earnings received by casual labourers by gender and rural-urban location. For rural India, these estimates are separately available in respect of employment in public works, employment in agriculture and employment in non-agriculture. Within agriculture estimates are separately available by operations. For urban India, these estimates are separately available by industry divisions at 1-digit detail. The data available from the NSS for rural and urban India the estimates of average daily wage earnings of adult (15-59) casual labourers for 1993-94 and 1999-2000.For

rural India, the 1999-2000 estimates have been adjusted for inflation between 1993-94 and 1999-2000 by reference to the Consumer Price Index for Agricultural Labourers (CPIAL with base 1986-87= 100) while for urban India this adjustment has been made by reference to the Consumer Price Index for Industrial Workers (CPIIW with base 1982=100). It is readily seen that, in rural India, the average daily wage earnings of adult male casual labourers finding employment in public works have grown, in real terms, by over 3.8 per cent per annum and that the rate of growth of real average daily wage earnings of rural male casual labourers employed in non-agricultural activities is only marginally lower, at 3.70 per-cent per annum. The growth in real average daily wage earnings of male casual labourers in agriculture, though lower than that for those employed in non-agricultural activities by nearly 1 percentage point, is still quite significant at 2.8 per-cent per annum. For rural female casual labourers, the rate of growth of real daily wage earnings of those employed in public works and in non-agricultural activities is substantially higher than that for males at a little over 5 per cent per annum. For rural female casual labourers employed in agricultural activities, the rate of growth of their average daily wage earnings in real terms was over 2.9 per cent per annum. Overall, for both males and females, real average daily wage earnings of casual labourers in rural India have grown at close to or above 3 per cent per annum over the period 1993-94 to 1999-2000. For casual wage labourers in urban India, with the exception of urban female workers employed in Industry Divisions 8 (Financial and Business Services) and 9 (Social, Community and Personal Services) who have suffered a decline in real average daily wage earnings,8 real average daily wage earnings have grown for both males and females in all industrial activity categories at close to or above 3 per cent per annum in most cases. The rate of growth in real average daily wage earnings of urban male casual labourers employed in construction and in transport, storage and communication has been somewhat slower, but still significant at 2 per-cents per annum. With the two exceptions noted above, urban female casual labourers have experienced a faster rate of growth of real average daily wage earnings relative to the male counterparts in all other cases. Taking all industries together, real average daily wage earnings of urban female casual labourers have grown at close to 4 per cent per annum, while for urban male casual wage labourers this growth rate is close to 3 per-cent per annum. Thus, in all the four population segments, average daily wage earnings of casual labourers have grown at a rate close to or above 3 per cent per annum over the period covered by the two surveys. This widespread and significant growth in average daily wage earnings is fully consistent with the strong and generalised growth in labour productivity witnessed over the same period. Next, we examine the issue of average number of days worked during the year of usually employed (Principal plus Subsidiary Status) workers. This is possible since the surveys simultaneously canvass the activity status of the individual on the usual and the current daily (as well as the current weekly) statuses. In principle, this can be done for each category of usual status workers such as the self-employed (further distinguished by broad industry), the regular wage/salaried workers and the casual labourers.9 However, published tables reporting such a cross-tabulation (Usual (PS+SS) x Daily Status) restricts the scope of such analysis to the broad categories of workers, the unemployed and those outside the labour force. The computation of average number of days worked, average days in unemployment and days outside the labour force, of those classified as workers on the Usual (Principal plus Subsidiary) Status per year in 1993-94 and 1999-2000 at the all-India level for the four

population segments. For rural males, there is a reduction of days at work of 4 days in the year, on the average, in 1999-2000 compared to 1993-94 and an off-setting increase in the number of days in unemployment with no change in the number of days not in the labour force. In the case of urban males the reduction in the number of days worked by 2 days is offset by an increase in the number of days outside the labour force, with no change in the number of days in unemployment. So that, at least for the urban male workers on the usual status, the rise in the average rate of daily-status unemployment would follow not from an increase in the number of days in unemployment but from a reduction in the number of days spent in the labour force. In the case of female usual status workers, both among rural women and among urban women, there is a reduction in the number of days in the year that is spent outside the labour force on the average. In the case of rural females, a reduction of 9-days in the number of days outside the labour force is offset by an increase in the number of days worked (of 5 days from 241 to 246 days) and an increase in the number of days in unemployment. This would suggest that, at least among the usual status workers among rural females, the increased number of days in unemployment is not due to any fall in the average number of days worked - which in fact, shows an increase - but is due to a shift in daily status from the category 'outside the labour force' to both components - the employed and the unemployed - of labour force. In the case of usual status workers among urban women, there was an increase of 9 days in employment on the average during the year - largely reflecting a shift out of days not in the labour force (a reduction of 8 days) and a small (1-day) reduction in the number of days in unemployment. Thus between 1993-94 and 1999-2000 there has been a significant decline in the crude worker-population ratios in all the 4 population segments resulting in a slower growth of workforce relative to the growth in population and an absolute reduction in the number of women workers in rural India which is just about offset by a rise in the number of urban women workers. To a significant extent, the reduction in worker-population ratios reflects a beneficial rise in the student-population ratios. In terms of industrial distribution, the share of the agriculture sector records a significant decline to just below 60 per cent to reduce marginally the absolute number of workers in agriculture for the first time since independence. Also, a decline has been recorded in share and in the number of workers in the community, social and personal services sector with trade, hotels and restaurants; construction; and, transport, communications and storage sectors recording sizeable growth in both share and number of workers. In terms of labour productivity, except for the construction sector, the gross value added per worker has grown significantly in all the sectors with a 6 per cent per annum growth in the economy as a whole and in two of the three largest employing sectors outside of agriculture. This significant growth in labour productivity has translated into an equally significant and widespread growth in daily average wage earnings of casual wage labourers both for males and females and in both rural and urban India. In turn, this growth in real wage earnings, and a rise in the number of days worked by females, has been sufficient to more than offset both a reduction in the crude worker-population ratios and a marginal reduction in the average number of days worked for male workers, to raise average wage earnings per capita at over 2.5 per cent per annum in


both rural and urban India over the period 1993-94 and 1999-2000. This result is consistent with a decline, over the same period, in poverty ratios in both rural and urban India.


According to the 32nd NSS survey, the level of unemployment varies from occupation to occupation. In the urban sector, the level of unemployment among self-employed is lower than others. In the rural sector, the level of unemployment is the lowest among selfemployed households and the highest among agricultural labour households. The nonagricultural labour households have the second highest level of unemployment. All the agricultural and non-agricultural labour households taken together contribute about 70 per cent towards total unemployment in the rural sector. These findings are of great relevance to the policy-makers in devising appropriate employment strategy. If the government believes in eradicating unemployment from all the occupations simultaneously then about 70 per cent of the additional person days of employment generated during a particular period must go to the agricultural and non-agricultural labour households. The level of unemployment varies from state to state. Kerala shows the highest level of unemployment followed by Tamil Nadu and West Bengal. The level of unemployment is the lowest in Madhya Pradesh followed by Himachal Pradesh, Rajasthan and Uttar Pradesh. The traditional measures of unemployment do not provide the same ranking to the states. The interstate variations in the level of unemployment in the rural sector are much higher than those in the urban sector. The agricultural productivity and the percentage share of wagebased households in labour force are found to explain interstate variations in the level of rural unemployment. In the urban sec-tor, the percentage share of self-employed households in labour force has turned out to be the single-most important determinant of interstate variations in the level of unemployment. By and large the empirical results of this study are quite comprehensive and useful. However, there are a number of problems that are ignored completely: duration of unemployment and search unemployment (that often is thought to be a major factor in the unemployment of relatively highly educated youths from middle and upper class families in most Asian countries.



To tackle with the acute unemployment problem the government came up with various unemployment alleviation programmes and yojnas were introduced. The primary objective was to provide gainful employment to every able bodied person. It is rightly demanded that the right to work should be enshrined as a fundamental right to all the citizens of the country. To have work is a basic necessity, an imperative condition for human beings. The economic policy and planning in India with their triune objectives of growth, stability and justice have not recognized this as a matter of direct and explicit importance and attention. The philosophy of development in India has remained one of increasing employment indirectly through the maximization of growth, and of not allowing the maximization of growth to be adversely affected by targeting maximization of employment creation. The consequent choice of development strategy, structure of growth (of output), and technology resulted in a colossal and alarming backlog of unemployment by the end of 1960s itself. Incidentally, a considerable part of employment which has been created in government and other services, public sector, army, police, numerous Para-military and security forces etc. itself can be regarded as disguised unemployment from the view point of materiality of production. In other words, the development process has partly resulted only in shifting the disguised unemployment from rural/unorganized sector to urban/organized sector. Alarmed by the growing backlog of unemployment, the government of India appointed Bhagwati committee which submitted its report in 1973 in which it recommended, interalia, undertaking specific schemes to alleviate unemployment problem in the country. Thus the UAPs can be said to have originated with the submission of the Bhagwati committee report. They have been subsequently conceived, designed, introduced and implemented as a direct means of employment creation policy under the planned development. They reflect the admission that the eradication of poverty and unemployment through percolation or trickledown effect is not possible within the desirable time frame, and, therefore, a direct attack on these problems is essential. Thus, finding that five year plans, which had not directly focused on employment angle, had not been able to make an appreciable impact on employment creation, particularly in backward areas and groups, special programmes/schemes were devised from the fourth five

year plan onwards to provide the poor with adequate purchasing power through giving them employment at rates above the poverty level. Many of these schemes are anti-poverty programmes but are also aimed at ensuring increased in employment opportunities. Over the years, the number of these programmes has grown to be bewilderingly large. After looking at the sheer number, one would be afraid to say that the employment objective has not received enough attention from the policy makers in India.


Rural Works Program (RWP)(1970.71) It is an employment-oriented program to create permanent civil works (soil conservation, road construction, afforestation, and so on); to mitigate scarcity conditions; and to promote integrated development in drought-affected areas.

Crash Scheme for Rural Employment (CSRE)(1971) This scheme takes up projects of durable nature such as minor irrigation, soil conservation, afforestation, and land reclamation, anti-water-logging to alleviate unemployment and underemployment in rural areas.

Small Farmers Development Agency (SFDA)(1971) and Marginal Farmers and Agricultural Labourers Scheme (MFALS)(1971) To make credit available to farmers of various capacity and agricultural laborers to enable them to use the latest technology, practice intensive agriculture, multiple cropping, and to take up subsidiary activities such as dairying, poultry, fishing, and horticulture. MFALS emphasized employment generation and improvement of examining capacity of landless agricultural labourers. In 1974 the two were merged into an expanded SFDA, which in turn was merged with IRDP in 1980.

Maharashtra Employment Guarantee Scheme (MEGS)(1972.73) To provide gainful, productive, unskilled, manual, adult employment at a minimum living wage in rural areas through labour-intensive and durable-assets producing activities. A unique state-level scheme that tried to offer work to everyone and give practical expression to the .right to work..


Agro-Service Centres (ASS)(early 1970s)

It provides assistance for self-employment to the unemployed graduates and diploma holders by enabling them to set up workshops, and repairing and hiring facilities.

Drought-Prone Area Program (DPAP) (1973), Command Area Development Program(CADP)(1974.75), Hill Areas Development Program (HADP)(1974). Desert Development Program (DDP) (1977.78) All of these are Area Development Programs (ADPs); DPAP was a redesigned RWP. Their aims: to deploy adequate infrastructure, to bring about integrated area development, to increase productivity and employment opportunities, to control the process of desertification, to mitigate the effects of drought, to restore ecological balance to raise productivity of land, water, livestock, and human resources in respective types of areas, to diversify agriculture, and to promote afforestation and pasture development.

Food for Work Program (FFWP) (1977) To generate additional gainful employment in rural areas to create durable community assets, to strengthen social and rural infrastructure, and to raise living standards. The wages were paid not in cash but in the form of food grains from Government surplus stocks.

Training for Rural Youth in Self-Employment (TRYSEM)(1979) To provide technical skills and to upgrade traditional skills of rural youth (18 to 35 years old and from families living below the poverty line), and to enable them to take up self-employment in agriculture, industry, and services in rural areas.

National Rural Employment Program (NREP) (1980) This is a restructured and renamed RWP. To provide gainful wage employment during periods of seasonal and sporadic unemployment, to assist liberated bonded labour, to secure minimum wages to agricultural workers, to play a supportive role in IRDP and ADPs, to create community assets, and to strengthen rural infrastructure.

Integrated Rural Development Program (IRDP)(1976.80) To promote self-employment and to raise the level of living of the poorest families in rural areas above the poverty line on a lasting basis by giving them income generation assets and access to credit as well as other inputs. Toward this end, the program aimed at achieving integration of sectoral programs, spatial dimensions, social and economic process and policies.


Development of Women and Children in Rural Areas (DWCRA)(1982.83)

It is a supportive program for IRDP, to increase the income of rural women and to provide them with child care facilities and other support services and financial assistance so that they could take up self-employment in viable economic activities, individually or in homogeneously organized groups.

Rural Landless Employment Guarantee Program (RLEGP)(1983) A program to supplement NREP, It aimed at guaranteeing employment to at least one member of landless households up to 100 days in a year, with a focus on women. Wage employment program in which a part of the wages was paid in the form of subsidized food grains.

Self-Employment Scheme for Educated Unemployed Youth (SEEUY) (1983.84) To provide self-employment to the educated unemployed youth in the age group of 18.35 years with a minimum qualification up to matriculation in industry, services and business.

Self-Employment Program for Urban Poor (SEPUP) (1986.87) To encourage families living below the poverty line in metropolitan, urban, semi urban areas to undertake self-employment by providing subsidy and credit. The share of Scheduled Castes/Scheduled Tribes (SC/ST) beneficiaries was to be 30 per-cent in terms of number and amount.

Jawahar Rozgar Yojana By merging the two erstwhile wage employment programme National Rural Employment programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) the Jawahar Rozgar Yojana (JRY) was started with effect from April, 1, 1989 on 80:20 cost sharing basis between the centre and the States. The main objective of the yojana was additional gainful employment for the unemployed and under-employed persons in rural areas. The other objective was the creation of sustained employment by strengthening rural economic infrastructure and assets in favour of rural poor for their direct and continuing benefits. Though the people below the poverty line were the target group for employment, the preference was to be given to the Scheduled Castes, Scheduled Tribes and freed bonded labourers. Thirty percent of the employment opportunities were reserved for women in rural areas. Gram Panchayats were involved in the planning and implementation of the programme.

Nehru Rozgar Yojna T h e Nehru Rozgar Yojana has been designed to provide employment to the urban unemployed and under-employed poor. The employment contemplated is of two types-setting up of self-employment ventures and provision of wage employment


through the creation of socially and economically useful assets shelter upgradation programmes in urban areas. The programme has three schemes: 1. Setting up micro enterprises and providing training and infrastructure support for urban poor beneficiaries. This scheme is operative in all urban settlements. 2. Scheme of wage employment for creation of socially and economically useful public assets In the jurisdiction of urban local bodies! This scheme is applicable in : (i) towns with less than 20,000 population, and (ii) towns with population from 20,000

3. Scheme of employment through Housing and Shelter Upgradation in low income neighbourhoods mainly for the urban poor and economically weaker sections and training and infrastructure support for promotion of construction skills among beneficiaries. This scheme is applicable in settlements with population between 1 lakh and 20 lakh. While the target group of the yojana is urban poor, women beneficiaries and beneficiaries belonging to Scheduled Castes and Scheduled Tribes constitute special target groups. The Urban Micro Enterprises Scheme is design t o encourage unemployed and underemployed urban youth to take up self-employment ventures. Under Urban Micro Enterprises Scheme, there are two elements. The first is loan-cum-subsidy assistance for setting up selfemployment ventures. This is similar to the Integrated Rural Development Programme (IRDP) and the expenditure on the subsidy portion IS to be shared between the Centre and the State Urban Local Bodies on a 50: 50 basis. Element relates to training. The second where beneficiaries are would be provided for technological upgradation, designs, marketing etc. The average per-capita training expenditure is expected to be Rs. 1200 per trainee. This element is funded entirely by the Central Government. Under the Scheme of Wage Employment, it is proposed to provide wage employment to urban poor beneficiaries by utilising the labour for construction of socially and economically jurisdiction of urban local useful public assets, in the bodies such as low cost water supply, pour-flush community latrines, drainage related earthworks community facilities etc. Under the scheme of employment through Housing and Shelter Upgradation, households belonging to economically weaker sections would be assisted to construct simple dwellings or to upgrade their dwellings with improvement of roof, walls; floorings, additional room etc. at a cost of Rs. 4,000, 25 per-cent subsidies with a ceiling of KS. 1,000 would be available for this purpose and a loan of Rs. 3,000 from HUDCO at 7 per cent rate of interest. In case Of additional financial requirements, loans could be taken from HUDCO under the scheme for E W S Built Houses of from Scheduled Banks. Training will be provident to urban poor beneficiaries under- the scheme of housing and shelter upgradation. On an average, percapita expenditure of Rs. 1 ,500 will be incurred on trainees. Fifteen per cent of the funds earmarked, for training and infrastructure support will be available for support to training institutions. The scheme progressed well despite initial difficulties the main achievements of the scheme for the period ending December, 1991 are:--


1. Scheme of Urban Micro Enterprises: Subsidy to the tune of Rs. 42.35 Crore a n d institutional finance (in the form of bank loans) to the tune of Rs. 127 crore (approx.) i.e. three times of the subsidy were sanctioned to the beneficiaries. With this, about 2, 40,500 beneficiaries were assisted. Under the Training & Infrastructure support component, 42,042 beneficiaries were either trained or are undergoing training for skill upgradation. 2. Scheme of Urban Wage Employment: Under this scheme, the States UTs have reported expenditure of Rs. 95.30 crore with the result that 167.72 lakh man-days of wage employment has been generated Scheme of Housing & Shelter Upgradation . HUDCO has sanctioned scheme from various States UTS worth Rs. 232.02 crore (subsidy of Rs .47.39 crore and loans up to Rs. 184.68 crore) involving upgradation of 5.92 lakh dwelling units. A central plan provision of Rs. 71.00 crore has been made for the programme during the year 1992- 93. According to Seventh Plan Estimates the urban poor account for 50.5 million people of approximately 10 million families. During 1992-93 it is- expected that about 1.00 lakh urban poor beneficiaries will be assisted to set up self-employment ventures under the scheme of urban micro enterprises. Further, more than 142 lakh man-days of wage employment will be generated under the schemes of Urban Wage employment and Urban & Housing Shelter Upgradation during the same period.

Sampoorna Grameen Rozgar Yojna:

There were two major Programmes of this Ministry for Wage-Employment Generation in the rural areas, one dedicated to wage employment itself namely the Employment Assurance Scheme (EAS) and the other for Infrastructure creation at the village level known as the Jawahar Gram Samridhi Yojana (JGSY). The EAS was basically meant for creation of additional employment opportunities during the period of acute shortage of wage employment through manual work for the rural poor living below the poverty line and the JGSY aimed at creation of need based rural infrastructure at the village level. These programmes contributed to a great extent in alleviating rural poverty and in improving quality of rural life. To meet an unusual high demand for wage-employment and food security due to occurrence of calamities, the Food for Work Programme was introduced in January 2001 and was also continued in the year 2001-2002. The need was felt that the different programmes for wage-employment in the rural areas be merged and one ambitious programme be introduced which would take care of food security, additional wage-employment and village infrastructure at the same time. With this noble idea, a new Wage-Employment Programme namely the Sampoorna Grameen Rozgar Yojana (SGRY) was announced by the Honble Prime Minister from the ramparts of the Red Fort on 15th August 2001. The new programme was launched on 25th September 2001 with an annual outlay of Rs.10,000 crore. Under the Scheme, 50 lakh tonnes of food grains amounting to Rs.5,000 crore (at economic cost ) will be provided every year free of cost to the State Governments and Union Territory Administrations. The remaining funds will be utilized to meet the cash component of wages and the material cost. The expenditure of the scheme will be shared by Central and States in the ratio of 87.5 : 12.5. Under the Scheme, about 100 crore man-days of wage-employment is envisaged to be generated every year. Even though the EAS and the JGSY have been merged with this new Scheme, in order to avoid confusion, these two Schemes will be implemented as a part of the SGRY during the remaining part of the year 2001-2002.


Salient Features of Sampoorna Grameen Rozgar Yojana (SGRY). The Sampoorna Grameen Rozgar Yojana (SGRY) has been launched w.e.f. September 25, 2001 to provide Wage Employment in the rural areas. Under the Scheme, 50 lakh tonnes of food grains amounting to Rs. 5,000 crore (at economic cost) will be provided every year, free of cost, to the State Governments and Union Territory Administrations. The remaining funds (Rs. 5,000 crore), will be utilized, to meet the cash component of wages and material cost. The expenditure of the scheme will be shared by the Centre and State in the ratio of 87.5:12.5. However the Cash Component is shared between centre and state in the ratio of 75.25. The payment of food grains will be made by the Ministry of Rural Development to the Food Corporation of India (FCI) directly. About 100 crore man-days of employment are envisaged to be generated every year in the rural areas through the SGRY. The SGRY will be implemented in two streams. First Stream will be implemented at the District and Intermediate Panchayat levels and the Second Stream will be implemented at the Village Panchayat Level. The basic objective of the first stream would be to provide additional WageEmployment while the second stream would primarily aim at creation of need based rural infrastructure.

Though, the EAS and the JGSY have been merged with the Sampoorna Grameen Rozgar Yojana (SGRY), but for the convenience of implementation and accounting, the funds are being released under the EAS and the JGSY separately as earlier during the current year i.e. 2001-02.The programme will be implemented as a single unit from 2002-03. However, the component of food security has been added in the EAS and the JGSY during the current year itself as envisaged under the SGRY.

Employment Assurance Scheme (EAS)

The Employment Assurance Scheme (EAS) was introduced w.e.f. 2nd October, 1993 in the rural areas of 1778 blocks of the country situated in drought prone areas, desert, tribal and hill areas. Over the years the Scheme was extended to all the Rural Blocks of the country. Prior to 1.4.99 the Scheme was a demand driven scheme. With effect from 1.4.99 it became an allocation-based Scheme. The primary objective of the EAS is creation of additional employment opportunities during the period of acute shortage of wage employment through manual work for the rural poor living below the poverty line. The secondary objective is the creation of durable community, social and economic assets for sustained employment and development. The Scheme is open to all rural poor who are in need of wage employment. Since the programme is self-targeting

in nature and only the minimum wages are paid, it is expected that only persons below the poverty line would come for the unskilled workers.

Main Features of the Employment Assurance Scheme (EAS) 1. Resources under the Scheme are shared between the Centre and States in the proportion of 75:25. 2. The Central Assistance under the Scheme is released directly to the District Rural Development Agency (DRDA).

3. DRDAs release 70% of funds to the Panchayat Samitis, 30% of the funds are reserved at the Zilla Parishad level and utilized in areas affected by endemic labour exodus/ areas of distress. 4. Diversion of funds from one district to another and, similarly, from one Panchayat Samiti to another is not permitted. 5. The Zilla Parishad is the Implementation Authority for the funds released to both Zilla Parishad & Panchayat Samitis. 6. The Zilla Parishad has to prepare an Annual Action Plan every year. 7. All works under the EAS are executed departmentally only by the respective Implementing Agencies and in no case any contractor is engaged for the execution of these works. 8. All works started under the EAS have to be labour intensive and have a wage material ratio of 60:40. 9. Priority is to be accorded to the works of soil and moisture conservation, minor irrigation, rejuvenation of drinking water sources and augmentation of ground water, traditional water harvesting structures, works related to watershed schemes (not watershed development), formation of Rural Roads (linking villages with other villages/block headquarters) and roads linking the villages with agricultural fields, drainage works, forestry etc. 10. Zilla Parishads/Panchayat Samitis are permitted to spend up to a maximum of 15% on maintenance of the assets created under the Scheme. 11. The Zilla Parishad has to maintain the Employment Register for the entire District. 12. Minimum equal wages fixed by the State authorities are paid in cash under the EAS, both for unskilled and skilled labour. Jawahar Gram Samridhi Yojana (JGSY)


Jawahar Gram Samridhi Yojana (JGSY) was launched w.e.f. 1.4.99 to ensure development of rural infrastructure at the village level by restructuring the erstwhile Jawahar Rozgar Yojana (JRY). The Jawahar Rozgar Yojana was one of the major wage employment programmes launched in the year 1989 by merging the two wage employment programmes namely National Rural Employment Programme (NREP) & Rural Landless Employment Guarantee Programme (RLEGP). It was the single largest wage employment programme implemented in all the villages of the country through the Panchayati Raj Institutions. It also, to a great extent, contributed in creating durable rural infrastructure, which is of critical importance in the development of the village economy thereby improving the standard of living of the rural poor. Both Jawahar Rozgar Yojana and Employment Assurance Scheme resulted in the creation of durable assets in the form of school buildings, roads and other infrastructure. Under these programmes, the generation of wage employment was getting overriding priority and the effort was to see that in the process of creating employment, durable assets were created. It was, however, felt that a stage had come when the development of village infrastructure had to be taken up in a planned manner. This could best be done by the Village Panchayats who are closest to the ground realities and can effectively determine their local needs. Accordingly, JRY was restructured and renamed as the Jawahar Gram Samridhi Yojana. The new programme is entirely dedicated to the development of rural infrastructure at the village level and is being implemented by the Village Panchayats. This programme came into effect from 1st April 1999. The primary objective of JGSY is creation of demand driven community village infrastructure including durable assets at the village level and assets to enable the rural poor to increase the opportunities for sustained employment. The secondary objective is generation of wage employment for the unemployed poor in the rural areas. Main Features of JGSY 1. The main emphasis of the Jawahar Gram Samridhi Yojana (JGSY) is to create rural infrastructure at the village level. 2. Implementation of the JGSY is done entirely by the Village Panchayats. 3. 100% of funds (both Central & State shares) are released directly to the Village Panchayats through the District Rural Development Agencies (DRDAs)/ Zilla Parishads (ZPs). 4. Village Panchayats are the sole authority for preparation of Annual Action Plan and its implementation with the approval of the Gram Sabha. 5. The Gram Sabha has been empowered to approve the schemes/works. 6. Village Panchayats can execute individual works/schemes costing up to Rs. 50,000/without technical or administrative approval. However, the Gram Sabhas approval is a must. 7. 22.5% of JGSY funds have been earmarked for individual beneficiary schemes for SCs/STs.


8. 3% of annual allocation would be utilized for creation of barrier free infrastructure for the disabled. 9. Wage employment under the programme shall be given to Below Poverty Line families. 10. 30% of the employment opportunities are reserved for women. 11. Wages under the JGSY will either be the minimum wages notified by the States or higher wages fixed by States through the prescribed procedure. 12. Panchayats can suitably relax 60:40 wage material ratio for building demand driven rural infrastructure. 13. 15 per cent of funds can be spent on maintenance of assets. Social Audit by is to be undertaken the Gram Sabha. 14. Village level Monitoring & Vigilance Committee are to oversee and supervise the works/schemes undertaken. 15. DRDA/ZP is responsible for overall guidance, coordination, supervision, monitoring and periodical reporting. 16. Central assistance is provided for training of personnel including elected representatives involved in the implementation of JGSY. Swarnjayanti Gram Swarozgar Yojana (SGSY) Programme for self-employment of the poor has been an important component of the antipoverty programmes implemented through government initiatives in the rural areas in India. The Swarnjayanti Gram Swarozgar Yojana (SGSY) is the major on-going programme for the self-employment of rural poor at present. The programme was started with effect from 01.04.1999 after review and restructuring of erstwhile Integrated Rural Development Programme (IRDP) and allied programmes namely Training of Rural Youth for Self Employment (TRYSEM), Development of Women and Children in Rural Areas (DWCRA), Supply of Toolkits in Rural Areas (SITRA) and Ganga Kalyan Yojana (GKY), besides Million Wells Scheme (MWS). The earlier programmes are no more in operation with the launching of the SGSY. The basic objective of the SGSY is to bring the assisted poor families (Swarozgaris) above the Poverty Line by providing them incomegenerating assets through a mix of bank credit and governmental subsidy. The programme aims at establishing a large number of micro enterprises in rural areas based on the ability of the poor and potential of each area. The SGSY is different from earlier Programmes, in terms of the strategy envisaged for its implementation. It has been conceived as a holistic Programme of self-employment. It covers all aspects of self-employment of the rural poor viz. organisation of the poor in to Self Help Groups (SHGs) and their capacity building, training, selection of key activities, planning of activity clusters, infrastructure build up, technology and marketing support. An all a major shift of the SGSY from the erstwhile programmes is in terms of its emphasis on social mobilization of the poor. The programme focuses on organisation of the poor at


grassroots level through a process of social mobilisation for poverty eradication. Social mobilisation enables the poor to build their own organisations Self-Help Groups (SHGs), in which they participate fully and directly and take decisions on all issues that will enable them to cross the poverty line. An SHG may consist of 10-20 persons belonging to families below the Poverty Line and a person should not be a member of more than one group. In the case of minor irrigation schemes, disabled persons, and in difficult areas i.e. hills, deserts and sparsely populated areas, the number of persons in a group may range from 5-20. However, if necessary 20% and in exceptional cases up to 30% of the members in a group may be from APL; (marginally above the poverty line and residing continuously with BPL families) if agreed to by BPL members of the group. Efforts have to be made to involve women members in each SHG. 50% of Self-Help Groups in each block should be exclusively for women. Group activities are to be given preference and progressively, majority of the funding should be for Self-Help Groups.


Unemployment compensation has been subject to many discussions on efficiency and incentive grounds. It is claimed that generous benefits lead to lack of work its financial burden exceeds its benefits. Also, it is argued that increasing internationalization would compel greater flexibility, which conflicts with regulation in the labour markets and social insurance against unemployment. Here we will look at the unemployment compensation benefits in Sweden, Germany and England to have a comparison with the Indian context. In the early 1990s, all three countries experienced sluggish economic growth with falling, and sometimes even negative, annual growth rates. Related to this, the budget deficits of these countries got larger and reached a peak in Sweden in 1993 with a deficit more than 12% of GDP. The recessions of the 1990s had their effects on employment growth as well. Between 1990 and 1995, in all three countries, the number of people in unemployment increased. However, it began to fall in Sweden and UK after 1995 and even hit lower levels than 1990 in the UK. Germany continued to show a rise in unemployment rates after a slight decrease. Among the countries under consideration, the spending on activation measures is remarkably higher in Sweden, especially in mid-1990s while unemployment spending remained lower than Germany. In the UK, spending on active labour market programs stayed stable. The data of the year 2002 revealed that the unemployment compensation is most generous in Sweden (initial payment of 80% of the gross earnings for a maximum duration of 14 months) by roughly every indicator we take account of, Germany ranks the second and UK last. All countries seem to be quite stable in terms of qualification weeks, duration and coverage while the replacement rates declined slightly in Germany and Sweden. In UK, the replacement rates and qualification weeks, which were already lower than the other countries under study, have dramatically decreased after Thatcher government. A substantial cut was adopted in Sweden, where as well, however the levels are still higher than the other two nations and were increased after 1997. Germany reduced unemployment benefits by 3 per-cent from 1990 to 2002. These cuts were justified on the basis of financial concerns. Since unemployment compensation has an effect on labour supply and cost of labour, which are important elements in determining a countries international performance, with globalization it is deemed necessary to be curtailed. One overall theme in the reform of unemployment

compensation systems has been the reduction in the level, and sometimes the duration of benefits, which can be seen as a response to incentive problems, but also simply to financial concerns. In Germany, during the 1990s, unemployment benefit rates were cut less severely for claimants with children and unemployment assistance became available only to claimants with prior receipt of unemployment insurance. Other legal changes in 1990s were the inclusion of so-called minor jobs (few hours, low monthly earnings) into the contributory net, a slight increase in the income ceiling for social insurance contributions, and the restoration of sickness benefit rates. Contributory benefits have remained important for also for the unemployed. Beneficiary rates for persons entering unemployment have declined considerably between 1980s and late 1990s (from about 68% to 52%), but for the stock of the unemployed rates have not declined. This is because people with longer spells of unemployment tend to be better protected than those with short spells (who are generally younger), and this has become more pronounced since the 1980s.Unemployment assistance has become more important over time. For unemployed people with stable work histories, there has been relatively little change, except for slightly lower benefit rates in Sweden. Nevertheless, Sweden moved from an almost fully accessible unemployment insurance system to a fairly accessible one. From 1990 to 1995, the work requirement was raised from 4 to 6 months of work within a year. The Swedish work concept, however, is still broad and includes de facto participation in labour market programs and leave schemes. In contrast, access conditions remained stable in Germany and UK. Germany retained a more or less not accessible unemployment insurance mainly because that, on the one hand, self-employed are excluded from coverage and there are relatively strict working requirements, and on the other, compulsory coverage. Because of comparatively lax working requirements in the form of paid or credited National Insurance contributions within two years, the UK kept unemployment insurance scheme was more or less accessible throughout the 1990s. In the UK, frequent benefit changes in the 1980s contributed to the continual decline of the proportion of claimants receiving contributory unemployment benefits). The introduction of Job Seekers Allowance (JSA) in 1996 replaced unemployment benefit with a scheme which combines contributory and means-tested benefits within one program. It halved the entitlement period for contributory benefits to 6 months and introduced reduced benefit rates for claimants under the age of 25. Income-based (i.e. means-tested) JSA can be claimed by those unemployed who do not meet the qualifying conditions for contributory JSA or have exhausted entitlement to the latter. The unemployment benefit system in Sweden has recently been subject to many reforms; however, from the beginning the unemployment compensation system has strong activation orientations. To receive full unemployment benefits participation in active labour market programs is compulsory. Also according to recent reforms, participation in active measures does in principle not suffice for a renewed right to earnings-related benefit; nevertheless, this is still possible for some cases. The work force administrators may also renew the eligibility for earnings-related compensation if prospects for employment look bad enough (Hytti 2002, p. 336). Throughout the 1990s Sweden continued to count active labour market policy participation as ordinary work towards new unemployment benefit. The authorities aimed to prevent large number of unemployment insurance claimants being excluded from the system. The existence of fairly weak obligations from 1990 to 1996 and to accept job and ALMP


offers should be judged on this background. (Kvist 2000). The rules were made stricter in 1996 by increasing the sanction period threefold or more. Swedish labour market policy has always emphasized active labour market programs including educational programs, training and other competence-building activities. These have been main strategies for adapting the labour force to structural changes within the labour market (Kildal 2001). Sweden offers support for education and training of unemployed relying mostly on workfare without any major cutbacks in social benefits. In that sense, the degree of marketization or workfare tendencies has been at a lower stage in Sweden compared to other countries, which will be analysed below. The changes in unemployment compensation system in Germany have been gradual. However, on the whole, these slow but steady disentitlements made unemployed workers more dependent on tax-financed, means-tested benefits instead of on contribution-based

benefits designed to guarantee the previously achieved living standards (Seeleib-Kaiser 2004). German activation policies called Help towards Work create two forms of work requirements: one is work under an employment contract which carries standard wages and is fit into the social insurance system. The other is more casual work in which there is no employment contract. There are also reduced-waged community jobs for the ones having more barriers to employment (Handler 2002: 24). Since 1993, labour market policies have been subject to several major changes which include cutbacks as well as tightening of work requirements. The unemployment insurance benefit recipients were expected to enhance their employability or perform community-related work. Moreover, the jobs created by means of active labour market policy were no longer paid in line with the regular public sector pay scale. Then in 1997, the Employment Promotion Reform Act introduced a reorganization of active and passive benefits with the aim to increase incentives for the unemployed (Boenker & Wollman 2003). With this reform, acceptability criteria were redefined bringing conditions of not declining jobs that dont correspond to formal qualification and previous occupation, and accepting greater wage declines. Besides, recipients were obliged to prove their efforts to find new employment. By late 2003, the federal government reformed the unemployment compensation payment system. With new regulations, which will become fully effective after a transition phase, the unemployment compensation payment system would be divided into two. The regular unemployment benefits will be restricted to 12 months and workers who have exhausted their unemployment insurance benefit and are still needy will receive another type of unemployment compensation payment. Contrary to the old unemployment benefit, which was based on a mix of means testing and social insurance principles, this new payment will be flat and fully means-tested. Essentially, this reform will result in substantial benefit reductions for the unemployed workers that previously earned comparatively high incomes and had been eligible for unemployment assistance payments after their regular unemployment insurance benefit expired. Moreover, by defining any job offer as suitable, the suitability of requirements has been considerably tightened for those receiving the new type of unemployment compensation payments. In addition to the above proposed changes, similar shifts in active labour market policy (ALMP) have occurred. Although, previously, the (re)training and public employment measures were primarily aiming to provide equivalent re-employment of unemployed workers, now these measures are mostly intending to elevate the marketability of workers and are dominated by activation measures, which include subsidized re-employment in atypical

employment relationships and subsidized self-employment (BMWA 2003). Furthermore, workfare measures for unemployed individuals who receive social assistance benefits already had been intensified (Seeleib- Kaiser 2004). In comparative terms, active labour market policies in Germany at the beginning of 21st century have been changing in a way similar to those implemented in other West European welfare states a few years earlier (Clasen and Clegg 2003). UK as the representative of liberal welfare state has the most deregulated labour market to begin with and it experienced a radical downscaling over the last twenty years. This has been done in order to constrain social expenditure as well as to enhance financial and behavioural incentives related to employment. The most important deregulatory reform during the Conservative era was the abolition of wage councils (Robinson 1996), creating a more flexible wage setting mechanism. Earnings-related supplements were also an early victim of Thatcherism, and the old basic unemployment benefit was subject to repeated cuts and more restrictive entitlement conditions in the 1980s and 1990s culminating in the introduction of the even more restrictive Jobseekers Allowance (JSA) in 1996 (Clasen 2001). A large part of the burden of social expenditures was shifted towards means-tested, in work benefits and tax-based wage subsidies for low income earners. Besides, the secondary labour markets were highly supported and any kind of job has been advocated. Grover and Stewart have referred to this social-security based activation strategy as market workfare. Since the New Deal launched by the first Blair administration in 1997, much attention has also been paid to increased activation through employment and training programs, which are understood to reflect their own compulsory workfare logic (Torfing 1999). Accordingly, the government introduced a series of make-work pay strategies and acknowledged that work is the best way to social inclusion. The reforms aimed at removing the barriers to work for groups such as long term youth unemployed, lone parents and disabled people. Nine different New Deals were designed for these purposes. As for the target of making work pay a new type of in-work benefit the Tax Credits was introduced. The aim of this benefit is to increase the earnings of low paid families (Daguerre & Larsen 2003.) The path of welfare reform in the UK is best demonstrated in the recent Labour Government's Green Paper on social security reform. The Green Paper was guided by several goals: 1) Targeting young social assistance recipients for welfare-to-work programs; 2) Focusing on programs for longterm unemployed; and 3) Streamlining and modernizing tax and benefit systems, so as to promote work incentives, reduce poverty and welfare dependency and strengthen community and family life (Walker, 1998). Often, the underlying worldview of UK policy makers results in interpreting the cause of unemployment as lack of incentives. The goal is to maintain a flexible labour market with structures that do not contribute to extensive equilibrium unemployment. And, the main problems are perceived to be disincentives to participate in the labour market, and consequently the best method to achieve the specified goal is to minimize the disincentives by suitable employment policy measures. Pierson describes the goals of British labour market policy as compensated commodification (Pierson 2001). It is highly commodifying, since the market is the primary mechanism enabling citizens to participate in society. Nevertheless, it is compensated as long as the social programs do not interfere with the operation of the market. The UK labour market policy can be best summarized by the slogans like work for those who can, and welfare for those who cannot.

Thus we see that the unemployment benefit schemes in European countries like Sweden, Germany and England are quite extensive and have evolved over the years according to the economic conditions to meet the needs of the unemployed citizens. However in India the schemes are not renewed from time of time and thus can be termed as old and bucolic.


The bottom line of the Indian experience with regard to labour market policies and social insurance is that despite a plethora of legislation, the economy has been able to achieve neither efficiency nor equity. Indian industries lack of competitiveness has been evident for some time. Even after the reforms of 1991, their export performance remains poor. There was a period of rapid export growth during 1993.95, but recent trends suggest that performance in this regard has deteriorated drastically. It is revealing that total Indian exports (in fact, that of all of South Asia) are lower than that of Thailand alone. The competitiveness of an economy depends, apart from labour costs, on a large number of factors such as quality control, financial infrastructure, legal infrastructure, trade and communication facilities, and so on. However, labour costs are a crucial element in competitiveness and the weakness of the Indian economy in this respect is clearly indicated by table 10. As shown in the table, compared with Southeast Asian countries such as Indonesia, India has higher wages and lower productivity of labour in manufacturing. If India is to join the ranks of the rapidly growing Asian economies, it needs to introduce some profound reforms in its policies on labour market and social insurance. In this context, it may have a lot learn from East Asian countries. Many of these countries started with a situation that was not too different from what India finds itself in today. In what follows, we make some observations on possible lessons of the East Asian experience, which India can utilize for redesigning its labour market and social insurance policies. While looking for lessons, it is important to remember that economic policy in each country is the product of a complex set of factors relating to social, political, and historical circumstances. In that context, the experience of each country is unique and policy profiles cannot be replicated in Toto. In fact, the history of development shows that there are no magic bullets for success; successful reforms grow from the roots of each country. However, by studying success stories, one can get some insights that may be of use while designing policy reforms in another country. Reality Check One such insight to be gained from the labour market and social insurance policies in East Asian countries is their focus on an .Implementation Culture.. Japanese and Koreans did not introduce extensive social welfare provisions in the early phases of their development. Their economies had not yet advanced to a point at which they would be able to handle the burden of social welfare. In India, labour market policies and social welfare programs have often been running ahead of the implementation capacity and affordability for the country. For

example, the Minimum Wage Act for the unorganized sector has been totally beyond the capacity for implementation. Similarly, implementation was not given much thought when designing the hospital system for the masses, which pretends to provide free access for medical services to the common individual. The same goes for many other provisions of the State Insurance Act and the Employment Schemes in the unorganized sector. In the light of the East Asian experience, it may be useful for India to make a thorough review of the existing legislation of labour and social insurance and subject them to a hard reality check. Acts and programs that are clearly beyond the implementation capacity should be scrapped. Building on Indias Individualistic Ethos In the Indian context, it seems that the capacity of the State to implement social welfare programs is highly limited. The countrys ethos suggests a strong individualistic bent: things move when they are in the private interest. Government officials take the attitude of ruling rather than serving the people. And the common individual regards the government less as a contributor to the peoples welfare then as an instrument of taxation and power. In the Indian context, therefore, it seems that for labour market and social service provision, as with economic services, market orientation and private sector incentives should be used to the maximum extent available rather than relying on the State. Greater Role for Nongovernmental Organizations (NGOs) In addition to private incentives, the role of NGOs should be carefully considered. India has a long tradition of charitable organizations in health, education, and social assistance to the deprived. On the whole, the functioning of these NGOs is much better than that of government organizations. Efforts should, therefore, be made to see how the country can capitalize on its tradition of charitable trusts and involve NGOs in a more substantial way for the provision of social services. Social Insurance Rather Than Social Welfare In the context of the role of the private sector, the Singaporean social assistance system should be studied carefully. Singapores policy on social security and welfare is clearly reflected in the following frequently cited statement. We want to teach the people that the government is not a rich uncle. You get what you pay for.... We want to disabuse people of the notion that in a good society the rich must pay for the poor. We want to reduce welfare to the minimum, restrict it only to those who are handicapped or old. To the others, we offer equal opportunities... Everybody can be rich if they try hard.. For health care, labour redeployment, labour safety and pensions, it should be possible to treat the problem as a financial sector issue rather than a fiscal sector issue. The purpose of social insurance will be to give basic minimum protection to all those in need of assistance whether or not they qualify on the basis of the principle of commercial insurance business. The contributions for these social insurance programs should not be a part of the general government budget and these contributions should be proportional rather than progressive with respect to income. Regarding health care, Indian authorities are moving toward a greater acceptance of the insurance principle. According to recent policy indicators, even foreign insurance companies will be allowed into the health insurance business. This is a welcome move and efforts should be made to implement these reforms as soon as possible. Even for labour safety and labour redeployment, it would be desirable to explore the scope for insurance. If there are properly developed insurance schemes, employers and employees can make their contribution to an insurance company and in case of injury or unemployment, the insurance company would pay the benefits. For labour deployment, it would be useful to rely on private placement companies rather than on the state-run Employment Exchanges. Such placement services

have developed in India in high-skill areas and there is a considerable scope for applying this approach for labour redeployment for a wider front. Similarly for the pension issue, there is a growing consensus that State-managed pension funds have usually low rates of return and they can impose an unmanageably high burden on the State. It would be desirable to develop a largely .defined contribution system of pension and allow greater use of private sector investment opportunities to maximize the rate of return on pension funds.

Market Forces and Insurance Principles for the Unorganized Sector For the unorganized sector, it is not possible for the State to enforce Acts to ensure minimum wages or health or pension benefits. Here again, the only realistic option is to encourage the development of the insurance principle with a strong regulatory framework provided by the government. (It should be useful to see to what extent East Asian countries used State intervention to improve the conditions of labour and social service provision in the unorganized sector in the early phase of their development.) Toward a Partnership Approach in Labour Relations In the area of labour relations, India has a lot to learn from the Japanese experience. The way Japanese labour relations succeeded in moving away from militancy in the late 1940s and early 1950s to a partnership approach in the late 1950s is worth studying for Indian policymaking. Japanese bonus practices as part of the wage package is also worth studying. The bonus system provides a linkage between wages and profitability. It thus creates an incentive for labour to help increase productivity while at the same time providing flexibility to the management when profitability declines. This system has also been found useful for increasing the savings rate in the economy. The Indian wage system has the basic structure of the bonus payment but, as noted earlier, over time, the bonus system has been delinked from profitability. If this link could be restored, it would improve the competitiveness of the Indian industries. Imperatives of Rapid Growth for Harmonious Labour Relations and Effective Social Insurance One of the most important lessons of East Asia is that rapid growth helps in improving the conditions of labour and social insurance. Unless there is rapid growth in the system, it becomes difficult to find resources for effective provision of social services including labour redeployment. East Asian countries have also demonstrated that export orientation is one important source of increasing productivity and growth. The more recent experiences of the Southeast Asian countries and China show how foreign investment and export promotion can become a mutually reinforcing process. India now has the benefit of being a latecomer in this area and it can learn from the experiences of Southeast Asia and China to launch a serious program of attracting foreign direct investment and promoting exports. As Chinas experience shows, even for a large country, export orientation can make a big difference to its productivity and overall growth. With a determined effort for export promotion, India can perhaps achieve growth rates similar to what China has experienced over the last two decades. With such growth, the problems of labour relations and social services will be much more manageable than has been the case in the past.

The evaluation of performance of the unemployment benefit schemes must be made in terms of not only their targets but also their wider social and human impact. If we look at the statistics of some of these schemes it would be observed that although the volumes of expenditure in these schemes have increased, the employment generated has not increased proportionately. In fact, there has been a decline in the employment generated in many years (most of unemployment benefit schemes act as employment generating schemes). As a result the expenditure per man-day of employment created has increased more than six fold during 1972-1992. The expenditure these schemes have often remained stagnant in nominal terms, and it has declined in real terms. The schemes have been able to provide employment only for a short duration. According to the planning commission, JRY could generate only about 15 days employment per person in 1990-1991, and that all of this little employment generated has not necessarily directed towards those who are landless and poorest.


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