NAME Kajal Rai

DIVISION/ROLL NO A-31
SUBMITTED TO Prof. Mala Sane
BATCH MBA 20-22
PRN 20020441113
WORD COUNT 3083 (without references)
DATE 27 AUGUST 2020
Assignment No. 1 Managerial Economics
RESEARCH PAPER ON UNEMPLOYMENT

INTRODUCTION
Unemployment is a term referring to individuals who are employable and seeking a job but are unable
to find a job. Furthermore, it is those people in the workforce or pool of people who are available for
work that does not have an appropriate job. Usually measured by the unemployment rate, which is
dividing the number of unemployed people by the total number of people in the workforce,
unemployment serves as one of the indicators of an economy’s status.

The term “unemployment” can be tricky and often confusing, but it certainly includes people who are
waiting to return to a job after being discharged. However, it does not anymore encompass individuals
who have stopped looking for a job in the past four weeks due to various reasons such as leaving work
to pursue higher education, retirement, disability, and personal issues. Even people who are not actively
seeking a job anywhere but actually want to find one are not considered unemployed.

Interestingly, people who have not looked for a job in the past four weeks but have been actively
seeking one in the last 12 months are put into a category called the “marginally attached to the labor
force.” Within this category is another category called “discouraged workers,” which refers to people
who have lost all their hope of finding a job.

A better idea is always to refer to the definition under which the Bureau of Labor Statistics (BLS)
describes “unemployment”, as individuals aged 16 and above who have recently put hours into work in
the past week, paid or otherwise, because of self-employment.

Types of Unemployment in India-

There are various different types of unemployment in India.
  Disguised Unemployment-
Disguised unemployment is a term which is defined as the kind of unemployment where the
workers or the people are visibly employed but in reality, they are unemployed, in other words
it is a situation of unemployment with surplus manpower in the activity. It is also known as
“Hidden Unemployment”, in this situation more people or workers are engaged in a work than
required
 Seasonal Unemployment-
Seasonal unemployment is a phenomenon where in people or workers are unable to find jobs in
a particular season. This happens mainly in the agricultural sector or in industries who produce
products like woolen clothes and amenities only, ski resorts, ice factories etc. so people working
in these industries are unemployed in the off season.
 Structural Unemployment-
This kind of unemployment is caused because of the mismatch in the skills of the workers and
the job they are required to do. It is a long-lasting event which is caused by the fundamental
changes in the economy. For example, the introduction of new technologies leads to the
obsoletion of many existing jobs, which leads to severe unemployment.
 Cyclical Unemployment-
Cyclical unemployment is a kind of unemployment which happens because of the cycles of
economy going up and down. Unemployment of people or workers increase when the economy
goes down and decrease when the economy goes up.
 Frictional Unemployment-
Frictional unemployment is defined as the unemployment of a person or a worker who is in the
transition phase or in search of another job after leaving the previous job. Frictional
unemployment is also present in a growing or a stable economy as it involves workers who are
in transition phase from one job to the other.
 Open Unemployment-
Open unemployment is a kind of unemployment where a large section of people who belong to
the workforce do not have jobs that might yield them a monthly income. This kind of
unemployment is mainly because of the expansion of labour force at a very rapid rate because
of which economic growth rate cannot keep up.
 Educated Unemployment-
In this type of unemployment many people tend to remain unemployed because their
educational qualifications do not match the type of jobs they are getting or the job profiles
available.
 Chronic Unemployment-
An unemployment is called a chronic unemployment when it becomes a permanent or a long
term component of a country or a person. This is because of unsatisfactory economic
development because of swift population growth and large scale poverty.

Current Unemployment Scenario in India

According to the reports of the Centre for Monitoring Indian Economy (CMIE), the country’s
unemployment rate has fallen down from 23.5 percent in May to 11 percent in June. This is because of
the fact that various businesses have restarted their operations after a very long Lockdown period.
Unemployment Rate (CMIE) But the decline in the unemployment rate is flattening out, the rate started
to decline at the end of the month of May when it fell to 20.2 percent after hovering around 24 percent.
The rate of the labour participation recovery is also slowing down. The basis points of recovery in June
was 218 which was lower than in the month of May which was 258 points. The unemployment rate,
according to the Trading Economics Global Macro models and analysts’ expectations, is expected to be
15 percent by the end of this quarter in India. Going even further the unemployment rate will hover
around 11 percent in 12 months’ time and in the long run the rate will hover at around 9.8 percent in
2021 and 8.5 percent in 2022, according to the models.

India’s Tryst with Unemployment

7.32 % of the labour force, in the year 1999-2000, was unemployed. In absolute terms the
number of unemployed stood at 26.58 million.

Since the above estimates are on Current Daily Status basis, the number of unemployed also
includes the number of those who are underemployed in terms of underutilization of the labour
time. But it excludes such underemployed who are working at very low levels of income and
productivity.

Among the employed, the proportion of poor is as high as in the population at large, suggesting a
large proportion of workers engaged in subsistence employment.
Only about 8 % of the total employment is in organized sector. More than 90 % are engaged in
informal sector activities, which is, largely outside the reach of any social security benefits and
also suffers from many handicaps in form of limited access to institutional facilities and other
support facilities.

The educational and skill profile of the existing work force is very poor.

 Indian economy had started slowing down in 2019 causing unemployment to steadily rise.  As can be
seen in the chart above, the jobless rate had hovered between 7-8% in the preceding months, according to
data collected by CMIE.

This scale of unemployment, at a time when the Indian economy was growing at a fair speed, shows that
there was something inherently wrong with the policies as well as the whole system. What was going
wrong was this: inequality was increasing as high growth only meant that the rich got richer and the poor
get poorer.

According to an Oxfam report in 2019, the top 10% of the Indian population owned 77% of the total
national wealth. It was estimated that 73% of the wealth generated in 2017 went to the richest 1%, while
670 million Indians who comprise the poorest half of the population saw only a 1% increase in their
wealth.

With pandemic bringing the world to a standstill and persisting lockdowns from 24 th of March, 2020, the
Indian economy had its fair share of lows. The loss of nearly 80 lakh jobs in March, data collected by
CMIE shows that a staggering loss of 12.8 crore jobs took place in April. Almost a third of jobs compared
to last year were lost in a month.
These figures show that there was unprecedented economic distress in the country, mostly being
shouldered by common people. Industries, offices, shops etc. shut down for a month along with the vast
informal sector (in both industry and services) collapsed because of it. The bulk of India’s 440 million
strong workforce is employed in this sector which spans agriculture, industry and services.

Causes of Unemployment
1) The Caste System
It is a structure of social stratification that pervades virtually every aspect of life in India—is a major
factor in generating unemployment. In some locations, certain kinds of work are prohibited for
members of particular castes. This also leads to the result that work is often given to members of a
certain community rather than to those who truly deserve the job—those who have the right skills.
The result is higher levels of unemployment.

2) Increased Population Growth

Increases in population have been considerable over the half-century is made up of more than 1.3
billion people, second only to that of China which is predicted to exceed China’s by the year 2024.
The country’s economic growth cannot keep up with population growth thus leading to a larger share
of the society being unemployed.

3) Slow Economic and Industrial Growth

The economy cannot keep up with demands for employment as the rate with which the population is
increasing and hence a large number of people are unable to find work. The result is insufficient
levels of employment nationwide. This also applied to industrialization that has been considerable
and a major emphasis is laid on industrialization nationwide, which has elevated the Indian economy;
however, industrial growth continues to generate relatively few new jobs overall as compared to
increases in population.
4) Seasonality of Agricultural Occupations
Agriculture offers unemployment for a large segment of the population, but only for several months
out of the year. The result is that for a considerable portion of the year, many agricultural workers
lack needed employment and income. More stable sources of income are essential to permit the
fulfilment of basic needs.

5) Joint Family System

Large family businesses may often involve family members who depend on the family’s joint income
but do not contribute substantive work. The result is that their unemployment is “disguised” and
contribute to low productivity. However, this system also offers numerous positive benefits as a
social and economic safety net in which those who cannot find work elsewhere can derive support
from their families and contribute to their business. It’s likely, then, that this system may offer more
benefits than drawbacks.

6) Loss of Small-Scale/Cottage Industries

Industrial development has made cottage and small-scale industries considerably less economically
attractive, as they do not offer the economies of scale generated by large-scale mass production of
goods. Thus these goods are cheap and outweigh the desire for goods that are handcrafted by those
with very specific skill and expertise.

7) Low Rates of Saving and Investment

India lacks sufficient capital across the board. Likewise, savings are low and the result is that
investment—which depends on savings—is also low. Were there higher rates of investment, new jobs
would be created and the economy would be kick-started.

8) Shortage of Means of Production

Production is, quite simply, limited by the amount of materials, equipment, and energy available to
fuel it. Shortages of raw materials, facilities, fuel, and electricity means decreased production of
goods, which logically results in decreased availability of jobs.

9) Ineffective Economic Planning

This is a major source of unemployment in India. Problematically, there were no nationwide plans to
account for the significant gap between labour supply (which is abundant) and labour demand (which
is notably lower). It is crucial that the supply and demand of labour be in balance to ensure that those
who need jobs are able to get them; otherwise, many individuals will compete for one job.

10) Expansion of Universities

Thus far, this article has primarily addressed working-class unemployment, as this affects the
majority of the population. However, the numbers of white-collar workers have increased as well.
This is due in part to the fact that the number of universities in India has increased in recent decades
—currently, there are roughly 385 universities throughout the country. The result is that more people
are educated and become white-collar workers, while unfortunately, the supply of white-collar jobs
does not match their numbers.

11) Labour Immobility

Indians like to maintain their proximity with family and thus people avoid traveling long distances
from their families in pursuit of employment. Additionally, language, religion, and climate can also
 contribute to low mobility of labour. As one might expect, when many of those who might otherwise
be suited to jobs are unable to travel to reach them, unemployment is magnified.

Employment Generation

Employment generation is a natural process of social development

Employment Generation Programmes During Pre-Liberalisation and Post- Liberalisation Period

Though removal of unemployment has always been a proclaimed objective of India's economic planning,
yet until the sixth five-year plan, one does not find any reference to long-term employment policy with a
bold approach to tackle the unemployment problem in a forthright manner. This happened as it was
assumed that employment situation would automatically improve as a result of economic growth. Direct
measures to eliminate unemployment were not preferred as the apprehension was that they could slow
down the growth process by raising consumption expenditure and cut down economic surplus. For two
decades or so in peripheral manner, reliance was placed on cottage and agro-based industries and
infrastructural projects for absorbing the backlog of unemployed and the additional labour force joining
the labour market in search of jobs. This Policy was inadequate to tackle the unemployment problem and
as a result, the number of unemployed rose to about 22 million in 1969.

India is a mixed capitalist economy, private and cooperative sectors coexist with public sector, the
government committed itself to a policy of employment generation in all the sectors. It was admitted that
production in the public sector is highly capital intensive and, thus, there was not much scope for the
creation of fresh employment in this sector. Therefore, the government decided to concentrate particularly
on policy measures seeking to influence the private demand and utilisation of manpower in private sector.
This required emphasis on self-employment ventures in agriculture, cottage and small industries and
allied activities as well as non-farm operations. Some of the major employment programmers undertaken
were: Integrated Rural Development Programmers (IRDP), National Rural Employment Programme
(NREP), National Scheme of Training for Rural Youth for Self-Employment (TRYSEM), Operation
Flood II Dairy Project and Fish Farmers Development Agencies.

India’s liberalization in 1991 was premised on the idea that it would make local industries more
competitive, helping them capture world markets, which in turn would enable millions of Indian workers
to move away from low-productivity farm jobs to high-productivity factory jobs.

In India, where employment elasticity is quite low, an annual growth rate of 8-9 per cent can provide only
a partial solution to the unemployment problem. The employment elasticity has further declined. It had
been estimated to be 0.16 for the period of 1993-94 to 1999-2000. This implies that for generating
additional employment at 3 per cent annum, GDP should register an annual growth of 18-19 per cent
which is something impossible in the given structure of the Indian economy. Therefore, in India,
economic growth by itself can never solve the unemployment problem and the government policy which
gives overriding priority to economic growth would add to unemployment backlog rather than reducing it.
It was however, essential to produce a growth process in which employment would be available not only
for the new entrants to labour force but also in the non-agricultural sector for the workers leaving
agriculture. Over 1999-00 to 2004-05, urban employment has grown at a faster rate than population.
However, since more urban women have joined the workforce, the unemployment rate has increased over
these years.

Rapid growth focused on labour intensive industries and small and medium enterprises created
employment opportunities in the manufacturing and services sectors. This ability to create jobs enhanced
by greater labour flexibility required some changes in labour laws. This is a controversial issue on which
it is difficult to reach a consensus but the weight of evidence suggests that while outright hire and fire
approaches may not be desirable, there is room for creating greater flexibility short of this position.

Government’s Initiatives

 Legislative Initiatives the Minimum Wages Act (1948), the Minimum Wages Act (1948),
the Maternity Benefit (Amendment) Act (2017) and pension schemes are now focused on
the current scenario than in past where policy renewal is done more often. The
Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 provides for
Provident Fund, Pension Scheme and Insurance

 The Ministry of Labour & Employment has developed a unified Web Portal ‘Shram
Suvidha Portal’, to bring transparency and accountability in enforcement of labour laws
and ease complexity of compliance

 Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) is a dual benefit scheme where the
employer is incentivized for increasing the employment base of workers in the
establishment, and these workers will have access to social security benefits of the
organized sector
 Under the Atal Beema Vyakti Kalyan Yojana of ESIC (Employees’ State Insurance Corporation
scheme), the government gives 25 per cent of the monthly salary as unemployment benefit for
three months and has now relaxed the age to avail the same

Conclusion

March 2020 brought in COVID-19 pandemic spread that lead to a population of 1.36 billion to push a
pause to theirs lived and stay at home. This shut down also brought pre-existing societal divisions based
on caste and class resulting in the marginalised communities suffering the most. With many being left
unemployed, and salary slices as that of piece of cake. It brought in the stealthy walking recession to our
face. The country had already been in an economic slowdown since early 2018. The pandemic accelerated
the pace of reaching recession. There is no official data on job and income losses due to the lockdown
because no government agency is tracking it. A few private initiatives have tried but their assessment
varies so widely that one would have to be very careful in reaching any conclusions.

The Prime Minister and finance minister have reiterated that green shoots are seen three sectors viz
agriculture, manufacturing and services sectors. Green shoots of economic revival have also emerged in
May and June with real activity indicators like electricity and fuel consumption, inter and intra-state
movement of goods, retail financial transactions witnessed a pick up. Agriculture is likely to flourish even
further as healthy monsoon is expected this year. India’s manufacturing sector has also gained momentum
and has helped India become the world’s second largest maker of Personal Protective Equipment (PPE) in
under two months. 

India’s services sector has had a fourfold increase since lockdown and has been recovering too with the
average daily electronic toll collections increasing from Rs. 8.25 crore in April, 2020 to Rs. 36.84 crore in
May.

With the emergence of all these positive attributes the horizons for employment seem vast and
welcoming. India has a bright growth curve.

 References

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