EMPLOYMENT- GROWTH, INFORMALISATION AND RELATED ISSUES

WHY DO PEOPLE WORK?

Work plays an important role in our lives as individuals and as members of the society. It is
clear from the following:

1. People work for ‘earning’ a living which helps them and their families to survive.

2. Being employed gives a feeling of self-worth and self-esteem.

3. Every working person is contributing to national income and development of the country.

4. We have a sense of accomplishment when we work to meet the requirements of those

who work for us.

NEED TO STUDY ABOUT WORKING PEOPLE

1. Studying about employment offers insights into the quality and quantity of our
human resource or human capital, which is an important determinant of economic
growth.

2. Employment study helps analyse the significance of different sectors (Primary,

Secondary and Tertiary Sectors) in the growth process of the country.

3. It helps analyse many social issues such as social security of the workers, work
environment, exploitation of workers, etc.

4. It offers inputs for manpower planning. Understanding the nature and extent of
existing employment, we can plan for our future requirement of manpower across
different sectors of the economy.

WORKERS AND EMPLOYMENT

1. Worker: A worker is an individual who is doing some productive employment to

earn living. He adds to the flow of goods and services in the economy.

2. Gross Domestic Product (GDP): Sum total of the goods and services produced
within the domestic territory of an economy during a year is called GDP. A worker or
an individual engaged in production activity contributes to the process of GDP by
rendering his services.

3. Economic Activities: All activities which contribute to gross national product

through production of goods and services are called economic activities. (Productive
activity is a part of economic activity.

4. Workforce: Persons who are engaged in economic activities are termed as workers
and they constitute the workforce. Workforce is the total number of persons actually
working. In other words, workers are employed persons because they get
employment in various types of economic activities in the economy. The employment
situation in an economy depends on how many persons get opportunities to work in
 different economic activities.

5. Types of Workers

Self-employed Workers Hired Workers

These are the people working in their
own business or profession. They earn
profit as a reward for their services.
These are the people hired by others.
They are paid wages / salaries as a
reward for their services.
Hired workers are of two types: Casual
workers and Regular workers.
Casual Workers are like daily wagers,
not on permanent rolls of the employer,
and are not entitled to social security
benefits.
Regular Workers are on permanent rolls
of their employer and entitled to social
security benefits.

6. Workforce Participation Rate (or ratio)

Workforce
Participation Ratio = X 100
Total Population

Population is defined as the number of people who reside in a particular locality at a

particular point of time.

Participation ratio is defined as the percentage of total population which is actually

participating in productive activity. It is also called worker-population ratio. It indicates the
employment situation of the country. A high ratio means that more proportion of population
is actively contributing to the production of goods and services of a country.

No. of persons unemployed = Labour force - Workforce

SIZE OF WORKFORCE IN INDIA

India has workforce of about 471 million persons.

1. Out of this, two-third of workforce is in rural areas and one-third is in urban areas.

2. Men form the majority of workforce in India. About 77 per cent of the workers are men
and 23 per cent are women.

3. Women workers account for one-third of the rural workforce whereas in urban areas,
they are just one-fifth of the workforce.
Conclusion:

1. Bulk of our workforce is rural based. Though 2/ 3 of workforce is in rural India, they
contribute very little to GDP. It shows their low productivity. Low productivity means low
income and more poverty.

2. The Percentage of female workers is low and lower still in urban areas? Because of the
following reasons:

(i) Female education in India is still a far cry, implying low opportunities for jobs.

(ii) Amongst most families in urban areas, job work for women is still not allowed.

(iii) Higher employment among women in rural areas is because of their poverty. The bulk
of female workers in rural areas are engaged in low paid, less productive jobs just to make
living for their families.

RATE OF PARTICIPATION IN INDIA

It refers to participation of people in employment and is measured as a ratio of workforce to

total population of the country.

1. Overall rate of participation in the country is about 52.5 per cent. Overall rate of
participation in the country is not very high, implying not many people are engaged
in production activity. It points to a high dependency ratio in the country.

2. Rate of participation is higher in rural areas compared with urban areas, implying
larger percentage of population is engaged in production activity in rural areas. This
is because:

(i) In rural areas, many do not go to schools, colleges and other training institutions. Even if
some of them go they discontinue in the middle to join the workforce; whereas, in urban
areas a considerable section is able to study in various educational institutions.

(ii) People cannot stay at home due to poverty as they are economically poor. Thus, given
the fact that contribution of rural economy to GDP is lower than that of urban economy,
higher rate of participation in rural areas only implies lower productivity, lower level of
income and greater poverty.

3. Rate of participation for women is higher in rural areas compared with urban areas. This
is so because:

(i) In rural areas, poverty compels women to avoid education and seek employment.

(ii) Without education, people in rural areas find only less productive jobs and get low
wages. Low wage rate acts as a compulsion for a large number of persons in family to look
for sustainable jobs. Thus, women also work to supplement the income of men in the
family.
(iii) In urban areas on the other hand, high priority for education implies low priority for
jobs at an early age. This keeps the rate of participation relatively low for women also.

(iv) Women rendering household services as housewives are not deemed as workers.
Because:

(a) They are not paid for it.

(b) It is difficult to ascertain market value of the service rendered by the housewives.

(v) Women rendering services on the family farm in rural areas and in the family business in
the urban areas are often not treated as workers, largely because of the convention of not
considering unpaid women as workers, even when unpaid men working on family farms or
in family business are considered as employed and therefore as workers.

SELF-EMPLOYED AND HIRED WORKERS

Self-employment is more in rural areas than in urban areas. It is because in urban areas
people are skilled and work for jobs in offices and factories. But in rural areas, people work
on their own farms. Also, non-farm job opportunities are not much.

Self-employment and hired employment are equally important for male workers. But female
workers give preference to self-employment than to hired employment. It is because of the
following reasons:

(a) Owing to family and social constraints, mobility of women workers in search of jobs is
less compared to that of men workers.

(b) Women in rural areas find ample opportunities of self-employment, engaging

themselves in traditional jobs like spinning, weaving, dyeing and bleaching.

Conclusion: In India, self-employment is a significant source of livelihood. Because:

(i) Literacy rate is low implying low acquisition of skill for wage jobs.
(ii) Owing to diverse social environment across different regions, mobility of workers
is less
(iii) India is an underdeveloped economy generating less jobs owing to constraints of
investment.

OCCUPATIONAL STRUCTURE OR DISTRIBUTION OF WORKFORCE BY INDUSTRY

(a) Primary sector includes agriculture, forestry and logging, fishing, mining and quarrying.

(b) Secondary sector includes manufacturing, construction, electricity, gas and water
supply.

(c) Tertiary sector includes trades, transport and storage, and services (like banking,
insurance, etc.)
JOBLESS GROWTH

(a) Increase in the level of output is achieved in two ways:

(i) Through greater employment, and / or

(ii) Through better technology.

In poor countries like India where unemployment exists in very large proportions, economic
growth becomes meaningful only when it is associated with greater opportunities of
employment, implying reduction of poverty.

(b) Jobless growth is a situation when the level of output in the economy tends to rise
without a proportionate rise in the opportunities of employment. So that unemployment
continues to exist, even when there is a perceptive rise in GDP.

(c)” During the period 1951-2010 our growth rate of GDP has risen but growth rate of
employment has tended to slide down from. This means that we have been able to produce
more goods and services without generating additional employment.

(d) Thus, our growth process is being increasingly hijacked by MNCs (Multinational
Companies) which specialise in achieving high growth rate through efficient use of the
means of production (implying better technology) rather than through a greater use of the
means of production (implying greater employment). The obvious result is that growth is
moving faster than employment, implying jobless growth.

CASUALISATION AND INFORMALISATION OF WORKFORCE

Casualisation of workforce refers to a situation when the percentage of casually-hired

workers in the total workforce tends to rise over time.

Over time people are shifting from self-employed status to the status of casual workers.

Reasons:

a. The bulk of self-employed workforce is found in rural areas.

b. People work on their farms and fields, not because everybody is gainfully employed,
but simply because many of them are not getting non-farm jobs even when they
wish to migrate in fact they are disguisedly unemployed.
c. When these marginal workers tend to migrate to urban areas, they get employment
only as casual workers or as daily-wages.

INFORMALISATION OF WORKFORCE

Employment may broadly be classified as:

(I) formal sector employment and

(II) informal sector employment
Formal sector refers to organised sector of the economy. It includes all government
departments, public enterprises and private establishments, which hire 10 or more workers.

Informal sector refers to unorganised sector of the economy. It includes all such private
enterprises which hire less than 10 workers, besides farming and self-employment ventures.
Those working in the organised sector are called ‘formal workers’, and those working in the
unorganised sector are called ‘informal workers’.

WORKERS IN FORMAL WORKERS IN INFORMAL SECTOR (UNORGANISED

SECTOR(ORGANISED SECTOR) SECTORS)

Formal Sector includes Public Sector It includes private units that employ less than 10
Units and Private Units that employ workers.
more than 10 workers.

Workers get fair wages Wages are generally very low.

They enjoy social security benefits like They do not enjoy any social security benefits.
pension, provident Fund, gratuity etc.

They have paid leave and paid holidays They do not have paid leave and paid holidays.

They have regular work and job security They do not have regular work and job security.

Big farmers, workers in Public Sector Small and marginal farmers, land less workers,
Units and workers in large private units workers in small units and casual workers are in
are in formal sector unorganised sector.

lnformalisation of workforce refers to a situation where percentage of workforce in the

formal sector tends to decline and that in the informal sector tends to rise over time.

With economic reforms in 1991, there has been significant rise in informalisation of workers.
Since informal workers face uncertainties of making of living, it is surprising that such a
high percentage of total workforce prefer to be employed in the informal sector.

Who is unemployed?

According to Prof. Pigou, “A man is unemployed only when he is both without a job or not
employed and also desires to be employed.”

When we talk of unemployed persons we are only referring to those in the age group of 15-
60 years. We do not expect children below 15 years and the old people beyond 60 years of
age to contribute to the workforce, even when they may be able to work as well as willing to
work.
TYPES OF UNEMPLOYMENT

Unemployed person is one who is not able to get employment for even an hour in a day.
Unemployment can be broadly classified into six categories. These are:

1. Open Unemployment. It refers to that situation wherein although the worker is

willing to work and he has the necessary ability to work yet he does not get work. He
remains unemployed for full time and falls to get any work, casual or full time.

2. Structural Unemployment. Structural unemployment is caused by a decline in

demand for a product in a particular industry. It results in reduction in its manpower
requirement.

3. Frictional Unemployment: It occurs due to imperfections in the mobility of labour

across different occupations. One wishes to move from one job to the other, but in
the process of change may remain (or may even prefer to remain) unemployed for
some time. Example: working ladies getting married may decide to remain out of job
for a couple of weeks or months. This is called frictional unemployment. Some
persons prefer to remain unemployed for a while, this type of unemployment may be
deemed as a variant of voluntary unemployment.

4. Cyclical Unemployment: It occurs owing to cyclical fluctuations in the economy.

Phases of boom, recession, depression and recovery are typical characteristics of a
capitalist economy. Boom characterises high level of economic activity and
accordingly a high degree of employment. Recession is a phase when aggregate
demand in the economy tends to decline and depression is a phase when aggregate
demand declines significantly, compelling the producers for a cut in output and
employment. This is cyclical unemployment. Recovery is a phase when economic
activity starts picking up: aggregate demand starts increasing and the cuts in
production and employment are gradually withdrawn.

5. Seasonal Unemployment: It occurs in case of agriculture, ice-cream factories,

woollens factories, etc. which are a seasonal occupation. They have busy seasons
and they have slack seasons. In the off-season, there is no work. The result is
seasonal unemployment.

6. Disguised Unemployment: This means a type of unemployment which is not

openly seen by everyone. It emerges due to pressure of population on land, i.e., as
the size of the family of a farmer grows, increasing number of children work on a
given sized farm. In other words, there is excess of labour which does not add to the
productivity of land. That is, marginal productivity of labour is zero or negative.
 TYPES OF UNEMPLOYMENT IN INDIA

Unemployment in India

Rural Unemployment Urban Unemployment

Open Disguised Seasonal Industrial Educated Technological

Unemployment Unemployment Unemployment Unemployment Unemployment Unemployment

Rural Unemployment

Rural unemployment can be of following three types:

(a) Open Unemployment: In the agricultural sector, there are large number of landless
workers who are openly looking for work. Open unemployment or chronic unemployment is
a situation where a large number of labour force does not get work opportunities which will
get them regular income.

(b) Disguised Unemployment: Disguised unemployment is a situation wherein the

number of workers engaged in a job is much more than actually required to accomplish it. If
some of them are withdrawn from that job, the total production will not fall. For example, if
just two persons are required to cultivate a farm measuring one hectare but actually five
persons are engaged there, then three persons are disguisedly unemployed. On account of
joint family system in India, small size of holdings and lack of alternative avenues of
employment, all members of the farmer’s family keep themselves occupied with the
cultivation of family farm. Thus, apparently all members appear to be employed whereas in
reality they are not contributing anything to total production.

(c) Seasonal Unemployment: It occurs simply because agriculture is a seasonal

occupation. Crops are grown according to respective seasons. During off-season, usually the
farm workers are rendered idle. The volume of seasonal unemployment depends upon the
conditions and methods of cultivation in different states. It is estimated that a farmer who
grows one crop in a year usually remains unemployed for 5 to 7 months.
In rural areas, besides agriculture, there are many other seasonal activities like sugarcane
crushing, brick kilns etc. Workers engaged in these activities remain occupied for a few
months in a year. Rest of the period, they remain unemployed.

Urban Employment

In urban area, unemployed people are often registered with employment exchanges.
Unemployment in urban sector can be divided into three categories:

a. Industrial Unemployment: Unemployment among industrial labour has assumed

alarming proportion as the modern industrial development based on latest capital
intensive technology been able to absorb the ever increasing labour force. Lakhs of
people pour into cities every year from the distant rural places in search, of jobs and
better living standards. But the every growth of industry and the fixed capital
requirements in the modern industrial sector make it impossible to provide jobs to
the migrated labour force. This causes widespread unemployment among the
industrial workers.

b. Educated Unemployment: In India the problem of unemployment among the

educated class is also quite serious. Principal factors accounting for educated
unemployment are as under:

(i) On account of expansion of educational institutions, viz., universities, colleges, schools,

the number of educated persons has substantially increased.

(ii) Education system in India is not job-oriented; it is just degree-oriented. Consequently,

educated persons often fail to find jobs.

(iii) In India, employment opportunities have not increased as much as the number of
educated persons. No wonder, the number of educated unemployed registered with
employment exchanges has been on the increase.

c. Technological Unemployment: Technological upgradation is taking place in all

spheres of activity. People who have not updated their skills in the latest technology
become technologically unemployed.

Measurement of Unemployment

There are three sources of data on unemployment:

(a) National Sample Survey Organisation’s reports on employment and unemployment

situation

(b) Reports of Census of India

(c) Directorate General of Employment and Training data of registration with employment
exchanges.

Rate of Unemployment in our country is nearly 9 per cent. [3% (Urban) and 2% (Rural)
Total 10.8 million (2013 NSSO]
CAUSES OF UNEMPLOYMENT IN INDIA

CAUSES OF
UNEMPLOYMENT

Slow Growth Increase in Lack of Mobility of

Process Labour Force Financial Emphasis on Lack of Labour
Resources Capital Irrigation
Intensive Facilities
Projects

1. Slow Growth Process: When a country grows, its production and employment expands.
In India, production has expanded and the economy has grown. As a result of this,
employment opportunities have increased. But these opportunities are not adequate enough
to solve the problem of unemployment. Supply of labour is much more than the available
employment opportunities.

2. Increase in Labour Force: The population explosion stage of Indian economy has
added young people to the labour force who are seeking employment.

3. Lack of Financial Resources: The expansion and diversification programme of

agriculture and small scale industries have suffered because of lack of financial resources.
This has been accompanied by increasing government control of economic activities.

4. Emphasis on Capital Intensive Projects: An increasing significance has been given to

capital intensive projects during the process of development. Use of automated machines
and other sophisticated equipment has resulted in large scale unemployment. For example,
gradual introduction of modernisation in certain key industries like jute and cotton has
displaced labour which has resulted in the rise in number of unemployed people.

5. Lack of Irrigation Facilities: Despite the completion of Eleven Five Year Plans,
irrigation facilities could be provided only to around 34 per cent of agriculture area. For
example, in case of irrigation only one crop is grown in a year on the large part of
agricultural land. Consequently, the farmers remain unemployed for quite some time during
the year.

6. Mobility of Labour: Mobility of labour in India is very low. Owing to their attachment to
the family, people generally do not move out to far-off area even when jobs are available
there. Factors like diversity of language, religion and customs in different states also
contribute to low mobility. Lesser the mobility greater the unemployment.
ADVERSE EFFECTS OF UNEMPLOYMENT

1. Economic Consequences

(a) Loss of Output: There is a loss of output to the extent manpower resources are not
utilised. Unemployed persons only live as consumers not as producers.

(b) Non-utilisation of human resource: To the extent people are unemployed,

manpower resources of the country are not utilised. It is sheer wastage for the society.

(c) Decline in Capital formation: Living only as consumers (and contributing nothing to
production) unemployed people only add to consumption. They do not earn nor do they
save for investment. Accordingly, rate of capital formation remains low.

(d) Low Productivity: Owing to disguised unemployment (occurring largely in agricultural

sector) there is a low level of productivity (output per worker or output per hectare). Low
productivity implies lesser surplus from an output for future growth.

Thus economic implications of unemployment not only point to low level of present output
(because manpower is not fully utilised) but also to the low level of further output because
of lesser surplus for future investment.

ii. Social Consequences

(a) Unemployment is depressing: Unemployment is a curse and a calamity. An able-

bodied person willing to work but unable to get a job creates a sense of unwantedness and
frustration for the unemployed person. Unemployment results in starvation for the family of
the unemployed person.

(b) Social Unrest: Unemployment adversely affects the peace of a society. Unemployment
leads to theft, dacoit, deception, gloom, terrorism etc.

(c) Greater Inequality: Higher the degree of unemployment, greater the extent of
inequality in the distribution of income and wealth. In such situations growth does not occur
with social justice.

(d) Class Struggle: Unemployment divides the society into haves and have-riots.
Accordingly, there is class conflict that compounds the problem of social unrest.

Thus unemployment is a social menace as it denies social justice and enhances social unrest
by increasing the disparity between ‘haves’ and ‘have-nots’.
MEASURES TO SOLVE THE PROBLEM OF UNEMPLOYMENT IN INDIA

GENERAL MEASURES

a. Increase in Production and productivity:

To increase employment, it is essential to increase production in agriculture and
industrial sectors. Development of small and cottage industries should be
encouraged. Greater the production, greater is the demand for labour. Demand for
labour is directly related to the productivity of labour. Higher productivity generates
higher profits and therefore, greater demand for labour. Accordingly, productivity
(implying efficiency) of labour must improve.

b. Change in Educational Patterns:

There is urgent need to completely change educational policy in the country. Only
such students be admitted to colleges and universities who have some definite
objective to pursue their studies. Educated persons must inculcate the spirit of
serving in villages in the capacity of teachers, doctors, etc. Qualified engineers
should be given financial assistance to set up their own small units. Institutions
providing employment information and guidance should be strengthened and their
activities be properly coordinated with employment agencies.

c. Change in Industrial Technique:

Technique of production should suit the needs and means of the country. It is
essential that labour-intensive technology is encouraged in place of the capital-
intensive technology. Quick yielding industries be given preference.

d. Diversification of Farm Activities:

A high growth of value-added agro-business like fishery, animal husbandry,
horticulture and aquaculture, offers scope for employment expansion. The potential
of these sectors for income and employment generation can hardly be
underestimated.

e. Development of Village and Small Industries (VS1):

VS1 are less capital intensive. They employ more labour per unit of capital. Thus,
development of VSI will help to solve the problem of unemployment in both rural and
urban areas.

GOVERNMENT POLICY and PROGRAMMES

Problem of unemployment is essentially the problem of poverty. The special measures taken
by the government for employment generation are same as that for poverty alleviation.

One scheme recently implemented by the government is NREGA.

NREGA
(a) The National Rural Employment Guarantee Act 2005 (NREGA) was passed by the
government In the Parliament to generate employment for those in need of jobs in rural
areas.

(b) NREGA Scheme was implemented is 2006 in 200 identified districts currently 661.

(c) It promises 100 days of guaranteed wages employment to all adult members of rural
households who volunteer to do unskilled manual work.

(d) The families which are living below poverty line are covered in this scheme.

(e) At least 1 / 3rd of beneficiaries should be women.

(f) Wage material ratio 60 : 40.

(g] This act implemented by State Government, with funding from Central Government.

(h) The average wage per person/day has gone up by 81%.