Indian Economy-Unemployement

Unemployment

14.1 Unemployment

Unemployment is a situation in an economy, when, a person willing to work but does not get an opportunity to get gainful employment.

14.1.1Types of Unemployment

a.     Voluntary Unemployment: In every society, there are some people, who are not interested to work at the prevailing wage rate. Similarly, there may be some people, who get a regular source of income from their property, and so they need not to work. In the like way, there may be some persons, who never like to work and always like to depend upon their parents/brothers/relatives etc. Such unemployment cannot be eradicated through economic policy.

b.    Frictional Unemployment: Frictional Unemployment is a temporary phenomenon. It may result when the work is suspended due to strikes or lockouts. To some extent, frictional unemployment is also caused by imperfect mobility of labour. So, frictional unemployment is caused due to not getting workers and vacancies together.

c.    Causal Unemployment: In industries, workers are employed on a day-to-day basis, like building constructions, agriculture etc. In these cases, casual unemployment may occur due to short-term terminable contracts.

d.    Seasonal Unemployment: There are some industries, in which production activities are seasonal in nature, like agriculture, agro-based activities like sugar mills and rice mills etc. Seasonal unemployment is a common type of unemployment in seasonal industries.

e.    Cyclical Unemployment: Normally, developed countries are subject to trade cycle. During the contraction phase of a trade cycle in an economy, aggregate demand declines and this leads to disinvestments, fall in production and unemployment. ‘

For handling cyclical unemployment, the purchasing power of the people is enhanced by rising total expenditure in the economy. This increases the demand of commodities/services. Further, easy money policy and fiscal measures like deficit financing assist to boost up economy.

Since cyclical phase is temporary, cyclical unemployment remains only a short-term phenomenon.

f.     Chronic Unemployment: When unemployment becomes a long-term feature of a country, it is termed chronic unemployment. Underdeveloped countries suffer from chronic unemployment due to-

(i)     Backwardness,

(ii)    Poverty,

(iii)  Lack of resources,

(iv)   Under utilization of resources,

(v)    High population growth,

(vi)   Even primitive state of technology,

(vii) Low capital formation, etc.

g.    Disguised Unemployment: Disguised unemployment commonly means a situation of employment, with surplus manpower in which some workers have zero marginal productivity so that their removal will not effect the volume of total output. Disguised unemployment in the strict sense implies underemployment of labour. When more manpower is employed than required, then excess manpower creates disguised unemployment.

Overcrowding in an occupation leads to disguised unemployment. In agricultural sector disguised unemployment is highly present because in agriculture, generally more manpower is engaged than requirement.

h.    Structural Unemployment:  It refers to the mismatch between the unemployed persons & the demand for specific types of workers. It is the result of backwardness & low rate of economic development of a country. This occurs when demand for one kind of labour is expanding, the demand for another kind of labour is declining either due to changes in the structure of demand for the industrial products or due to the changes in technology. The unemployed workers lack skills required by the expanding industries. Structural unemployment is most present in India. [Q:7]

i.      Technological unemployment:  The use of improved scientific technology of production makes it possible to produce more output with lesser amount of labour force. The resulting displacement of workers is known as Technological unemployment.

14.2 Unemployment problems in India

Nature of unemployment in India differs in rural and urban areas:

a.     Nature of unemployment in rural areas: Rural sector suffers from following type of unemployment

(i)    Casual Unemployment

(ii)   Seasonal Unemployment

(iii)  Disguised Unemployment and

(iv)  Chronic Unemployment.

b.    Nature of unemployment in urban areas:

Urban unemployment is the offshoot of rural unemployment:

In urban unemployment, presence of the following types of unemployment an common:

(i)     Cyclical Unemployment

(ii)    Technological Unemployment

(iii)   Frictional Unemployment

(iv)   Structural Unemployment.

Now India is suffering from both rural and urban unemployment.

 14.2.1 Reasons for unemployment problem in India

Unemployment is the most acute problem presently facing by the Indian economy. Some of these causes are:

i.      Rapid growth of population: The population is growing by leaps and bounds. With a growth rate of 2.5% it is becoming difficult to generate employment for the million new entrants per annum. Our economic policy fails to tackle this massive growth of population and generate adequate employment opportunities through optimum usage of available resources.

ii.     Poverty: Poverty and unemployment are 2 faces of same coin. A person is poor because he is unemployed and is unemployed because he is poor.

iii.    Lack of Employment Policy: There has been no serious effort at manpower planning. In the absence of a clear-cut employment policy, unemployment and underemployment tends to increase.

iv.    Defective Education system: Unemployment among the educated is due to defective educational system. Our education system is highly academic than practical. People without practical knowledge cannot find suitable job.

v.     Use of capital Intensive Technology: The use of capital intensive techniques, imported from western developed countries to enhance industrial sector is also an important factor causing unemployment. Even modern small scale industries in Indian economy prefer capital-intensive techniques. In agriculture, mechanization of various agricultural operations has reduced the employment augmenting effect.

vi.   Slow growth of agricultural sector: Agricultural sector is slow & cannot respond to the needs of growing economy, which in turn, provides only low productivity employment. Productivity in agricultural suffers due to various institutional & technological constraints. Therefore, this sector is unable to exploit fully the employment potential.

vii.  Inequitable distribution of land: In India agricultural households have no adequate access to land, an essential asset for agricultural production & employment. Sub-division of land holdings under the pressure of rapid population growth has further reduced access to land for several agricultural households. As  a result, many persons who were self-employed in agriculture, have become landless agricultural labourers suffering from acute unemployment & under employment.

14.3 Remedial steps to eradicate unemployment

i.      Rapid economic development: Diversified industrialization should take place, which will open new avenues of employment. Government should try to bring rapid industrialization to generate employment opportunities to urban people.

ii.    Encouraging self-employment: Adequate financial facilities should be made available so as to encourage people to go in for self-employment. Self employment is most effective way to solve the problem of unemployment which simultaneously boosts up per capital income and the economy of the country.

iii.    Controlling the growth of population: Through effective birth control measures the need of the galloping rate of population could be brought down. Population control is moment to tackle the problem of unemployment.

iv.   Restructuring the education system: The educational system should aim at providing employment oriented education rather than bare academic degrees. Our educational system should be more practical oriented.

v.     Development of cottage and small-scale industries: Cottage & small-scale industries provide ample employment opportunities. Government should take motivational steps to develop more small scale industries through easy finance, suitable technology etc. Small scale industries and cottage industries play a pivotal role in generation of employment opportunities in rural areas.

vi.   Development of export industries: Government should try to develop export business through suitable incentives. Export expansion will create more job opportunities for our educated youths.