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Employment Insights: An In-Depth Analysis of Unemployment Trends

and Job Market Dynamics

2333358 Areha Kumari

Department of Economics

CHRIST (Deemed To Be University)

Macroeconomic Theory - I

Mr. Benito Lyndon

16 January 2024
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Introduction

When someone actively looks for work but is unsuccessful, it is referred to as

unemployment. One important indicator of the state of the economy is unemployment.

Because it shows whether or not workers can find gainful employment and contribute to the

economy's productive output, unemployment is an important economic indicator. A higher

unemployment rate translates into lower overall economic output. The broader concept of

unemployment excludes people who quit the workforce due to disability, retirement, or

further education. Unemployment is one of the most critical issues affecting India's economic

growth and landscape. Being the world's most populous country with a diverse workforce,

fluctuations in the unemployment rate have far-reaching implications for the country's

growth and development. The Centre for Monitoring Indian Economy (CMIE) for July

data, cited in a recent Bloomberg report, states that as of July 2023, the overall

unemployment rate in India is 7.95 percent.

The labor market is a complex and dynamic landscape that plays an important role in

shaping industrial trends, opinions, and economic growth. It includes the relationship

between employment supply and demand, the variables affecting hiring decisions, and the

flow of workers between different industries and jobs. Macroeconomic factors that impact

supply and demand include immigration, population aging, and educational attainment, in

addition to the dynamics of both domestic and foreign markets. Relevant indicators include

unemployment, productivity, participation rates, total income, and GDP.

Businesses and legislators can stay competitive and adjust to changing conditions by

better understanding labor market dynamics and making better decisions.

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Types of Unemployment

There are mainly two types of unemployment: voluntary and involuntary. Voluntary
unemployment is a situation where a person is able but not willing to work. In contrast,
involuntary unemployment is a situation in which a person is willing and able to work but
cannot find a job. There are various other types of unemployment that fall into these
categories. These types are:
● Structural unemployment - Such unemployment is created by various fundamental
changes in the economy and the labor market evolving technology, government
policies, competition, etc. This means that while the jobs are available, the people
who fill them are either not skilled enough or not in the right location. For example, -
Workers in the tech sector may contribute to such types of unemployment because,
due to continuous advancements in technology, they may not be able to cope with the
development.
● Frictional Unemployment - Such unemployment occurs when people resign or leave
their jobs to find a new one. People who have resigned from their positions and
graduates looking for their first jobs require time to locate work, leaving them
unemployed in the meantime. Looking for a job, finding a replacement employee, and
finding the ideal employee for a job all take time, but frictional unemployment isn't
always awful. This sort of unemployment is often temporary, and it can occur even in
a thriving economy as people leave their jobs to pursue other opportunities.
● Cyclical Unemployment - This refers to the variation in the number of unemployed
people in the economy during the various cycles of the economy. To boost the
economy and end this kind of unemployment, government representatives implement
economic programs. Production also decreases when there is less demand for a good
or service. As a result, firms are less inclined to hire job seekers, which raises the
unemployment rate.
● Natural Unemployment - Natural unemployment is a combination of frictional and
structural unemployment. It's the lowest rate of unemployment that a robust economy
can maintain without leading to inflation. This kind of unemployment never goes
away because people are continuously willingly searching for new positions, which
results in frictional unemployment, and because job needs are constantly changing,
which results in structural unemployment.
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● Seasonal unemployment: Workers in seasonal jobs occasionally lose their jobs after
the season ends because their employment is only available for a set amount of time.
Seasonal unemployment is caused by a fall in labor demand after each season, making
the seasonal rate more predictable than other types of unemployment. As most tourist
attractions are only open for a limited time each year, seasonal unemployment is
common in these types of locations.
● Underemployment: People who are working but not using their full potential are
referred to as being underemployed, which is different from being unemployed. The
economy can measure how well it uses the talents, experience, and availability of the
labor force by looking at underemployment.

Unemployment in India

According to an employment survey by the Centre for Monitoring the Indian

Economy (CMIE), total employment remains at pre-pandemic levels of 8 million
(between January 2020 and January 2022). Moreover, the labor force participation
rate has decreased by close to 3.0 percentage points in the past two years. A labor
force participation rate is defined as the section of the working population in the age
group of 16–64 years in the economy currently employed and unemployed but active
in the job market. A bigger concern is that a larger section of the population has lost
jobs because of the pandemic and has dropped out of actively looking for jobs. These
are the discouraged or marginally attached workers who are overly pessimistic about
job conditions, do not have the necessary schooling or training for jobs, or are being
refused jobs by employers over their inability to do so, among other types of
discrimination. This section of the population is not getting captured as they are out of
the labor force participation rate. The unemployment rate in India decreased to 8.65
percent in December from 9.16 percent in November of 2023. The unemployment rate
in India averaged 8.22 percent from 2018 until 2023, reaching an all-time high of
23.50 percent in April 2020 and a record low of 6.40 percent in September 2022.
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The latest quarterly data from the Periodic Labor Force shows that the unemployment rate

in urban areas declined to 6.6% in the quarter of September compared to the same time in the

previous year. Particularly in recessionary and difficult economic times, the unemployment rate

garners significant media attention. This is because the unemployment rate affects more than

simply those who are unemployed; the level and persistence of unemployment variables have far-

reaching consequences for the entire economy.

Challenges and Opportunities

There are various challenges that both job seekers and employers face. These challenges

include a lack of knowledge about how to conduct a proper job search, a failure to understand the

importance of networking, attracting and retaining top talent, and reducing compliance and data

security risks. Different regions of India have varying levels of economic activity and

development. For example, increased rainfall may help states that are agribusinesses, but industrial

states may still face joblessness.

Youth frequently need abilities that are in line with what employers are looking for.

Although there are open positions, this disparity makes it difficult to get employment. A significant
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portion of India's labor force is employed in the unorganized sector. This implies that not only are

they susceptible to economic shocks, but they also frequently evade government assistance.

The government can target subsidies for industries with strong job prospects. For instance,

providing incentives to the MSME sector, which is a significant employer, may result in the

creation of jobs. MGNREGA and other initiatives have functioned as safety nets during difficult

times. To alleviate unemployment in cities, a plan for an urban job guarantee might be designed.

Focusing on skill training and vocational education suited to market needs can help overcome the

skill gap. India's economy needs to be more diverse. Promoting agro-based industries, for

example, can guarantee greater employment prospects in rural areas, given the ongoing difficulties

in agriculture. The government has taken various initiatives to curb unemployment in the country,

which include both wage and direct employment. Such initiatives include:

● Aatmanirbhar Bharat Rojgar Yojana (ABRY) has been launched with effect from

October 1, 2020, as part of Atmanirbhar Bharat Package 3.0 to incentivize employers

for the creation of new employment along with social security benefits and restoration

of lost employment during Covid-19 pandemic.

● Pradhan Mantri Mudra Yojana (PMMY) is being implemented by the Government to

facilitate self-employment

● Garib Kalyan Rojgar Abhiyaan (GKRA) of 125 days on June 20, 2020, to boost

employment and livelihood opportunities for returnee migrant workers and similarly

affected persons, including youth in rural areas, in 116 selected districts across the six

states of Bihar, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, and Uttar Pradesh.

Besides these initiatives, various flagship programs of the government, such as Make in

India, Start-up India, Digital India, Smart City Mission, Atal Mission for Rejuvenation,
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Urban Transformation, Housing for All, Infrastructure Development, and Industrial

Corridors, are also oriented towards generating employment opportunities.

Conclusion

In conclusion, we can say that unemployment is an important indicator of the economy.

Unemployment rates are largely influenced by both structural and cyclical causes. The findings

highlight the importance of adopting a diversified strategy to tackle unemployment concerns. To

provide the workforce with the skills required by developing industries, investments in education,

training, and reskilling programs are essential. Initiatives that promote inclusivity and minimize

gaps in access to opportunities can help to make the labor market more egalitarian.
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