ASSIGNMENT ON

Economic and Unemployment Problem Face by the Youth in Urban City

Submitted by

Valdony E Mawlot
Msw 4th Semester
Subject – Community Development
INTRODUCTION
Youth unemployment and underemployment is prevalent around the world because young people lack skills, work
experience, job search abilities and the financial resources to find employment (United Nations, 2003; ILO, 2006;
Matsumoto et al., 2012). In developing countries, this situation is exacerbated by poverty and the competitive
pressures that result from a rapidly growing labour force. Moreover, the inadequacy of social protection schemes and
active labour market policies means that young people in such economies have little support outside their family and
friends. Globally, young people are, therefore, more likely to be unemployed or employed on more precarious
contracts or in the informal sector.
This is the case even during good economic times. In the midst of a severe recession, youth find it increasingly
difficult to both acquire a job as a new entrant in the labour market, particularly as a consequence of hiring freezes,
and remain employed, since they are more likely to be laid off than workers with more seniority (‘last in-first out’)
(Verick, 2009). According to ILO’s Global Trends Report 2012 on Youth, nearly 75 million young people are
unemployed across the world, which represents an increase of more than 4 million since 2007 (ILO, 2012).
These challenges are evident in India, which has the largest youth population in the world with around 66 per cent of
the total population under the age of 35. According to 2010 population figures, one in five young people in the world
is an Indian.1 In this context, much is often said about a ‘demographic dividend’; that is, the share of the working-age
population increases resulting in a fall in the dependency ratio (the number of children and elderly being supported by
workers). This has been a feature of the development success stories of countries such as those in East Asia that grew
rapidly in the latter half of the 20th century. However, failing to provide opportunities for this bulge of young people
as they enter the labour market risks a ‘demographic disaster’.
In this regard, governments are rightly concerned about rising levels of youth unemployment and underemployment
because of not only the direct economic costs, but also due to the social impact of joblessness as manifested by
increased crime, mental health problems, violence, drug taking and social exclusion.2 The uprisings of 2011, such as
the ‘Arab spring’, are reflections of a disillusioned and disenfranchised youth, many of whom were unemployed or in
jobs that did not fully utilize their skills and abilities. Spells of unemployment, particularly long spells, can lead to
scarring effects and a higher likelihood of being unemployed later in life and a wage penalty (Bell and Blanchflower,
2009).
In recognition of the importance of the youth employment challenge in India, the Prime Minister, Manmohan Singh,
stated at the 44th Indian Labour Conference in February 2012, ‘Youth employment is a high-priority agenda item for
our government. This can happen only if we equip our young people with skills that are required to meet the demands
of our rapidly growing economy.
Against this background, this paper looks at the situation of youth in India in terms of different indicators of labour
market outcomes. Section 2 addresses the labour force participation of young people in India. Section 3 delves further
into the nature of employment and the employment profile, before section 4 moves to the challenge of youth
unemployment in India. Section 5 presents an econometric analysis of the determinants of labour force participation of
youth, while section 6 concludes.
What is Unemployment?
Unemployment is a term referring to individuals who are employable and actively seeking a job but are unable to find
a job. Included in this group are those people in the workforce who are working but do 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 a country’s economic status.
Understanding Unemployment
The term “unemployment” is often misunderstood, it as it includes people who are waiting to return to a job after
being discharged, yet it does not include individuals who have stopped looking for work in the past four weeks due to
various reasons such as leaving work to pursue higher education, retirement, disability, and personal issues. Also,
people who are not actively seeking a job but do want to work are not classified as 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 labour force.” Within this category is
another category called “discouraged workers,” which refers to people who have given up looking for a job.
The categories mentioned above sometimes causes confusion and debate as to whether the unemployment rate fully
represents the actual number of people who are unemployed. For a full understanding, one should juxtapose
“unemployment” with the term “employment,” which the Bureau of Labour Statistics (BLS) describes as individuals
aged 16 and above who have recently put hours into work in the past week, paid or otherwise, because of self-
employment.

CAUSES OF UNEMPLOYMENT (WORLD)

A lost generation
Unemployed youth has been called "a lost generation": not only because of productivity lost but also because of the
long-term direct and indirect impact unemployment has on young people and their families. Unemployment has been
said to affect earnings for about 20 years. Because they are not able to build up skills or experience during their first
years in the workforce, unemployed youth see a decrease in lifetime earnings when compared to those who had steady
work or those who were unemployed as an adult. A lower salary can persist for 20 years following the unemployed
period before the individual begins earning competitively to their peers. Widespread youth unemployment also leads
to a socially excluded generation at great risk for poverty. For example, Spain saw an 18% increase in income
inequality.
The lost generation effect impacts also their families. Youth in many countries now live with their parents into their
late twenties. This contributes to what is called the "full-nest syndrome". In 2008, 46% of 18- to 34-year-olds in the
European Union lived with at least one parent; in most countries the stay-at-homes were more likely to be unemployed
than those who had moved out. In families, it is common that when one person becomes unemployed, other members
of the family begin looking for or securing employment. This is called the added worker effect. This can sometimes
take the form of employment in the informal sector when necessary. Alongside the shift in youth living situations, the
impact of returning to live with parents as well as difficulty finding a fulfilling job led to mental health risks. Being
unemployed for a long period of time in youth has been correlated to decreased happiness, job satisfaction and other
mental health issues. Unemployed youth also report more isolation from their community. Youth who are neither
working nor studying do not have the opportunity to learn and improve their skills. They are progressively
marginalised from the labour market and in turn can develop an anti-social behaviour.
Political unrest and increased public spending
The rise of political unrest and anti-social behaviour in the world has been recently attributed to youth unemployment.
During the course of 2011 it became a key factor in fuelling protests around the globe. Within twelve months, four
regimes (Tunisia, Egypt, Libya, Yemen) in the Arab World fell in the wake of the protests led by young
people. Riots and protests similarly engulfed a number of European and North American cities (Spain, France, United
Kingdom between 2008 and 2011 for example). The lack of productive engagement of young people in wider society,
underlined by high levels of unemployment and under-employment, only serves to add to this feeling
of disenfranchisement.
Youth unemployment also dramatically increases public spending at times when economies are struggling to remain
competitive and social benefits increase along with an aging population. Youth unemployment has direct costs such as
increased benefit payments, lost income-tax revenues and wasted capacity. "In Britain a report by the London School
of Economics (LSE), the Royal Bank of Scotland and the Prince's Trust puts the cost of the country's 744,000
unemployed youngsters at £155m ($247m) a week in benefits and lost productivity". Similarly, the economic loss
from youth unemployment in Europe is estimated at €153 billion or 1.2% of GDP in 2011.
Youth unemployment has indirect costs too, including emigration. Young people leave their countries in hope to find
employment elsewhere. This brain drain has contributed to deteriorating countries' competitiveness, especially in
Europe.
Effects of minimum wages
Economic research indicates that minimum wages increase youth unemployment in competitive labour market for
unskilled youth labour, and that the resulting delayed entry into the job market (for youths who are unable to obtain a
job) leads to a reduction in training opportunities and thus a reduction in lifetime income. However, research also
indicates that "imposing a minimum wage may increase the income of working youths if their hours of work are not
reduced in response to the minimum wage" and "minimum wages may increase the aggregate income of youths if the
gains for those who work exceed the losses for those who cannot find work.” As a policy measure to support young
unskilled workers, economist Charlene Marie Kalenkoski suggests that "instead of a minimum wage, policymakers
should use less distortionary means to support young unskilled workers, such as cash or in-kind assistance."
A lack of innovation
The economic crisis has led to a global decrease in competitiveness. "There is a risk of loss of talent and skills since a
great amount of university graduates are unable to find a job and to put their knowledge and capabilities into
producing innovation and contributing to economic growth". Excluding young people from the labour market means
lacking the divergent thinking, creativity and innovation that they naturally offer. This fresh thinking is necessary for
employers to foster new designs and innovative ideas. Fighting youth unemployment is therefore key to maintaining
the economic performance of a country.

The Causes of Unemployment at Urban Areas in India

Some of the Causes of Unemployment at Urban Areas are as follows:
According to Madan, the causes of unemployment can be divided into three categories, namely:
(i) Personal factors:
Personal factors refer to the physical disability, weak mentality, accidents, defective education and training. Elliott and
Merill have explained the following under the personal factors.
a. Age factor:
The very young and old persons are at a disadvantage in securing employment due to inexperience and inefficiency,
respectively.
b. Vocational unfitness:
Many young people have no understanding of their own abilities or interests and have no particular task in mind when
they have to get their training. Willingness to do anything may seem to indicate a worthy desire on the part of the
person seeking work. Employers, on the other hand, may seek qualified and competent trained workers. Similarly,
there may be more men trained in a particular profession than required. The demand is less than the supply and hence
unemployment.
c. Illness or physical disabilities:
A number of workers may be temporarily unemployed because of illness or physical disabilities. Illness may be
caused due to conditions in the occupation and disabilities may arise due to accidents.
(ii) Technological and economic factors:
Another important factor causing unemployment is disorganization in the economic structure and the dislocation in
industries. Due to advancement in science and technology, a high specialization in the division of labour takes place.
Due to this, able-bodied and capable men remain unemployed. The unemployment generated under this category is
due to trade cycles, technological advancement, seasonal variations and lack of mobility among the labour force.
Unemployment is a result of both technological changes and cyclical variations of business and trade, which are
deeply connected with the production process.

(iii) Mass migration:

Mass migration is an important cause for unemployment in urban areas. People migrate from rural areas in large
groups when there is drought or when any other unfavourable conditions occur. A city or town can ill-afford to
provide employment opportunities to all of the migrated people, thus, causing mass unemployment.
The problem of unemployment that exists in India is an outcome of several cumulative factors such as the British rule
and its policies, the Zamindari system, which exploited the farmers, the policy of laissez faire and free trade, which
hindered the progress of rapid industrialization, the rapid growth of population, the decay of small-scale and cottage
industries, which led to a large-scale migration from rural to urban areas, and the low levels of investment that
resulted in the slow expansion of the secondary and tertiary sectors.

UNEMPLOYMENT IN URBAN AREAS

Most of the unemployment in urban areas is open and disguised. Unemployment of this kind is not only painful at
personal level but it is also a source of social tension, which often threatens the whole fabric of society. According to
the 61st round of employment and unemployment for July 2004 to June 2005 carried out by the National Sample
Survey Organization, the unemployment rate — the number of person unemployed per 1,000 persons in the labour
force — was 17 in the rural areas and 45 in the urban areas. Moreover, the survey also found that the unemployment
rates for females was higher than that for males and was highest among urban females.

Broadly speaking, urban unemployment may be classified into:

i) Industrial Unemployment: The size of the industrial unemployment is not known because the necessary
data for its estimation is not available. A disquieting phenomenon, however, is that over the past years
unemployment in the industrial sector has increased. This is the result of extremely low growth rates of
employment in the organized manufacturing sector. It is observed that employment elasticity has
significantly declined in manufacturing during the last two decades. There are many factors that have
contributed to this decline. First, there has been a large increase of the economically active population in
the country, while the economy has failed to grow at the pace commensurate with the growth of labour
force. Secondly, 41 population in the urban areas has grown faster than in rural areas, because Urban
Unemployment of migration on a large scale from villages to cities. The industrial growth in India has
been very modest, and thus could not absorb all those who migrate to cities with the hope of getting some
job or the other.

ii) Educated Unemployment: Educated unemployment is, by and large, a part of urban unemployment. It is
a very serious and menacing problem, yet the size of the unemployment remains largely unmeasured. Not
only are their conceptual difficulties in estimating it, but the kind of statistical information that is required
for its estimation is also not available. Hence the quantitative base for analysing the problem of educated
unemployment is weak. Nonetheless, on the basis of fragmentary information available, it is not difficult
to understand the basic issues involved in the problem. According to the Ministry of Labour and
Employment, the number of educated unemployed was around 2.44 lakh in 1951. It rose to 9.2 lakh in
1966 and to 32.8 lakh in 1972. The Planning Commission’s estimates suggest that at the beginning of
1980, approximately 34.72 lakh-educated persons were unemployed. Using the same approach as in the
Sixth Plan, unemployment among the educated people works out to 47 lakhs in 1985 and 68 lakhs in
1992. According to Ninth Five Year Plan- “National Sample Surveys shows that over the period 1983 to
1993-94, the proportion of those educated to a level of secondary school or higher among the unemployed
persons increased from 47 per cent to 64 per cent. While a high proportion of the literates among
unemployed shows un-utilization of scarce resources put in for education of the people, it also indicates a
mismatch between the kind of job opportunities that are needed and those available in the job market.
Clearly the increase of literates among the unemployed and further among the literate unemployed, of
those with higher level of educational attainment points to the need for skilled jobs rather than the simple
low productive manual labour that an illiterate has to resort to for a living”.

Thirdly, there are emerging trends of underemployment of those who are seeking job on part-time basis,
while they pursue their studies. Such job seekers, if they do not get jobs of their satisfaction, could be
called underemployed. There could be many others, who have completed their education, but are not able
to get job to the best of their abilities and capacities. There are many causes of educated unemployment.
The defective educational system, with its theoretical bias, lack of aptitude and technical qualifications for
various types of work among job seekers and maladjustment between demand and supply of educated
workers are some well-known causes of educated unemployment.

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. Five-year plans have
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.
Types of Unemployment
Economists and social thinkers have classified unemployment into various types. Generally, unemployment can be
classified in two types:
i) 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 a social problem leading to social Urban Unemployment 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 in 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.

ii) 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 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 in underdeveloped economies is different from that in developed
economies. In developed economies generally unemployment takes the form of cyclical unemployment or
frictional unemployment. Cyclical unemployment arises due to cyclical movements in economic
activities. Frictional unemployment takes place because of shift to a new technology. Thus, cyclical and
frictional unemployment are temporary in nature.
On the other hand, the nature of unemployment in underdeveloped economies is basically structural in
nature. In an under-developed economy, the demand for labour is less mainly due to agricultural
backwardness, undeveloped industries and small size of the service sector. Although the type of
unemployment found unemployment, it is much different from the nature of unemployment found in
developed economies.
 Besides this, there is category of underemployment where people are working fewer hours (daily, weekly,
or seasonal) than they would like to work. The visibly active but underutilized: those who would not
normally be classified by the above definition, but who in fact, have found alternative means “marking
time” include the following:

i) Disguised underemployment: Many people seem occupied on farms or publicly owned

enterprises on full time basis even though services they render may actually be much less than full
time. Social pressure on private industry may also result in substantial amounts of disguised
underemployment. If available work is openly shared among those employed, the disguised
disappears and underemployment becomes apparent.

ii) Hidden underemployment: Those who are engaged in second choice non employment activities,
perhaps notably in education and household chorus primarily because job opportunities are not
available at the level of education already attained, or open to women, given social mores.

CONCLUSION
Rising unemployment and underemployment are two crucial problems that many developing economies face. The
problem of unemployment has serious socioeconomic implications. While at the individual level, unemployment leads
to malnutrition, illness, mental stress, depression, and deterioration of human values, at the level of the economy it
implies underutilization of existing human capital. A high incidence of unemployment adversely affects growth, not
only via social unrest and political instability, but also through various other means. This unit has analysed the types,
the trend, and various dimensions of the urban unemployment problem. Magnitude and pattern of unemployment have
also been discussed. We further discussed the unemployment problem in relation to levels of education and the
incidence of poverty Estimation of underemployment has also been analysed.

REFERENCES
https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---sro-new_delhi/documents/publication/
wcms_211552.pdf
https://en.wikipedia.org/wiki/Youth_unemployment#:~:text=Unemployment%20has%20been%20said%20to,were
%20unemployed%20as%20an%20adult.
https://egyankosh.ac.in/bitstream/123456789/39196/1/Unit-3.pdf
https://www.yourarticlelibrary.com/unemployment/the-causes-of-unemployment-at-urban-areas-in-india/4705