EMPLOYMENT & UNEMPLOYMENT

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Content in the order of Importance

 Data based question where tabular or graphical data will be

given and it should be analyzed with reasons.
 Types of unemployment
 Distinguish between Formal and informal sector.
 General Measures to eradicate unemployment
 Basic concepts of employment
 Short note on specific programmes of government to eradicate unemployment.

One of the most challenging problems that independent India faces is the problem of
unemployment. It is considered to be the most important factor that leads to vicious cycle of poverty.
India’s worker population ratio is alarming and need to be addressed effectively to foster economic
development ….

Meaning of Unemployment

Unemployment refers to a situation wherein the able bodied persons who are willing to work at
the existing wage rate and ready to work are unable to get work. It is a situation of involuntary
unemployment with people or human resource capable of performing an economic activity does not find an
opportunity to undertake an economic activity or pay entitled work.

Basic concepts related to Employment and Unemployment

Labour Supply Work Force Regular Workers

Labour Force Casual Workers Self Employed

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Labour Supply: It refers to the amount of labour that the workers are willing to offer corresponding to a
particular wage rate. Labour supply is measured in terms of man hours of work or man days.

Labour force: Labour force refers to the number of workers actually working or willing to work. It is not
related to wage rate.

Work Force: it refers to the number of persons actually working and does not include those who are willing
to work. Work Force = Labour Force – No. of persons not working but are willing to work.

𝐍𝐮𝐦𝐛𝐞𝐫 𝐨𝐟 𝐩𝐞𝐫𝐬𝐨𝐬 𝐮𝐧𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝

Rate of Unemployment = x 100
𝐋𝐚𝐛𝐨𝐮𝐫 𝐅𝐨𝐫𝐜𝐞

𝐓𝐨𝐭𝐚𝐥 𝐰𝐨𝐫𝐤 𝐅𝐨𝐫𝐜𝐞

Participation rate = x 100
𝐓𝐨𝐭𝐚𝐥 𝐩𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧

@ participation rate is also called Worker Population Ratio

Casual Workers: Casual workers are daily wagers. They are not hired by their employers on a regular basis.
They don’t have any social security benefits like gratuity, pension etc.

Regular Workers: These are the workers who are on permanent pay roll of their employers. They are
entitled to social security benefits. They are skilled and hired for a long period of time.

Self-employed: These are the persons who are engaged in their own business or own profession. Examples
are farmer working in his own farm, an entrepreneur running his own business

Worker Population Ratio

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 Worker Population Ratio - Analysis

✓ For every 100 persons, about 35 are workers in India.

✓ In urban areas, the proportion is about 34, whereas in rural India, the ratio is about 35.
✓ People in rural areas have limited resources to earn a higher income and participate more
in the employment market. Due to abject poverty, Women in Rural areas are forced to
work in casual wage to support family income showing more women participation in rural
areas.
✓ in urban areas, a considerable section is able to study in various educational institutions.
Urban people have a variety of employment opportunities.
✓ In Urban areas compared to females, more males are found to be working.
✓ The difference in participation rates is very large in urban areas: for every 100 urban
females, only about 14 are engaged in some economic activities.
✓ In rural areas for every 100 rural women about 18 participate in the employment market.
✓ Women, in general, and urban women, in particular are not working because men are able
to earn high incomes, families discourage female members from taking up jobs.

Self – Employment and Hired Workers Analysis

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 Analysis

✓ About 52 per cent workforce in India belongs to self-employed.

✓ The c casual wage labourers account for about 25 per cent of India’s workforce. Such
labourers are casually engaged get remuneration for the work done with no permanent
employment.
✓ Workers engaged by someone or an enterprise and paid his or her wages on a regular basis
account for 23 per cent of India’s workforce. They represent regular-salaried employees
✓ Self-employment is a major source of livelihood for both men and women as this category
accounts for more than 50 per cent of the workforce.
✓ Casual wage work is the second major source for both men and women, a little more than
regular salaried (24-27 per cent).
✓ When it comes to regular salaried employment, both women and men are found to be
evenly distributed. Men form 23 per cent whereas women form 21 per cent. The gap
between men and women is very less.
✓ When we compare the distribution of workforce in rural and urban areas the self-employed
and casual wage labourers are found more in rural areas than in urban areas.
✓ Self-employment and regular wage salaried jobs are greater in urban areas.
✓ In rural areas, majority depends on farming own plots of land and cultivate independently, the
share of self-employed is greater

Distribution of Work force by Region and Industry

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 Analysis

✓ Primary sector is the main source of employment for majority of workers in India.
✓ Secondary sector provides employment to only about 24 per cent of workforce and 31 per
cent of workers are in the service sector.
✓ Around 60 per cent of the workforce in rural India depends on agriculture, forestry and
fishing.
✓ About 20 per cent of rural workers are working in manufacturing industries, construction
and other industrial activities.
✓ Service sector provides employment to about 20 per cent of rural workers.
✓ Agriculture is not a major source of employment in urban areas where people are mainly
engaged in the service sector. About 60 per cent of urban workers are in the service sector.
✓ The secondary sector gives employment to about one-third of urban workforce.
✓ About 57 per cent of the female workforce is employed in the primary sector whereas less
than half of males work in that sector.

GDP and Employment

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 Analysis

✓ During the period 1950–2010, GDP of India grew positively and was higher than the
employment growth.
✓ There are fluctuations in the growth of GDP. During this period, employment grew at the
rate of not more than 2 per cent
✓ in the late 1990s: employment growth started declining
✓ There is widening gap between the growth of GDP and employment.
✓ This means that in the Indian economy, without generating employment, we have been
able to produce more goods and services. This phenomenon as jobless growth.

Jobless Growth

Jobless growth refers to a situation where economic growth and GDP growth of a country is
achieved without corresponding increasing in employment opportunities. The growth is achieved
through adoption of advanced technology and mechanization. The jobless labour force swells
overtime in spite of economic growth.

Informalisation of Work Force

informalisation of workforce is the situation of growing tendency of existing and upcoming
workforce to get employed in the informal sector due to varied reasons.

Casualisation of Work Force

Casualisation of workforce refers to a situation in which the percentage of casually hired
workers in the workforce tend to grow overtime. It refers to the situation of growing tendency of workforce
to join the casual wage work due to varied reasons.

Reasons for Informalisation and Casualisation of Work Force

✓ Acute deficiency of Industries in Formal sectors to absorb growing work force.

✓ Growing self-employed work force in agriculture and other Marginal occupation
✓ Lack of employment opportunities in rural and urban areas owing to increasing population
✓ Lack of job opportunities and skills to work in Formal sector.
✓ Unskilled workforce from rural areas migrate to urban areas and work as casually hired workers.

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\

FORMAL SECTOR INFORMAL SECTOR

The organized sector of the economy offering The unorganized sector of the economy offering
employment is called formal sector employment is called Informal sector.
Employees are entitled to social security Employees are not entitled to social security
benefits like pension, paid leave, gratuity etc. benefits
They are protected by labour laws and are They are not protected by labour laws and are
permanently employed casually employed.
Regular income and better standard of living Irregular income and poor standard of living.

Statistics on Formal and informal Sector Employment

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 Analysis

✓ 473 million workers in India. There were about 30 million workers in the formal sector.
✓ Only six per cent (30/473×100). 94 per cent are in the informal sector.
✓ About 20 per cent of formal sector and 30 per cent of informal sector workers are women.
✓ The proportion of women working in Informal Sector indicates social and economic
backwardness and lack of women empowerment.
✓ Indian government has initiated the modernization of informal sector enterprises and
provision of social security measures to informal sector workers.

Unemployment
Unemployment refers to a situation wherein the able-bodied persons who are willing to work at
the existing wage rate and ready to work are unable to get work. It is a situation of involuntary
unemployment with people or human resource capable of performing an economic activity does not find an
opportunity to undertake an economic activity or pay entitled work

Rural Unemployment and Urban Unemployment

Unemployment prevalent in the rural areas are called Rural Unemployment. Major types of Rural
unemployment are the following.
1. Disguised unemployment: Disguised unemployment occurs when the number of workers engaged in
a job are more than the actual number needed to do that job. It means that even if some of them
are not working, the total production will not fall. Disguised unemployment occurs due joint family
system where the entire family in engaged in farming, no alternative employment opportunities
existing and increase in family size.
2. Seasonal Unemployment: It is a situation of unemployment that occurs during off-season.
Agriculture is a seasonal occupation and the farmers remain unemployed during off-season. The
seasonal unemployment is more intense if farmers undertake mono-cropping.

Unemployment existing in Urban area are called Urban unemployment. The major types of
Urban unemployment are the following

1. Industrial Unemployment: industrial unemployment exist in urban areas when less skilled and
illiterate people depends on various industries like construction, mining, textile and other industries
for work and remain unemployed as these industries cannot absorb them. It happens due to rising
population, migration of rural unemployed to urban areas in search of job in industries and more
mechanization of industries...
2. Educated unemployment: This kind of urban employment exist when educated people in urban
areas do not find work. The number of educated youth is increasing due to expansion of educational
institutions but the educated do not find job due to lack of skill or over supply of labour force. The

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 feature of education qualification in India is degree oriented and not job oriented creating educated
unemployed.

General types of Unemployment prevalent in Urban and Rural areas

1. Open unemployment: This refers to the general unemployment when a person willing to
work and has the ability to work does not find work due to non-availability of work. They
depend on other earning members for livelihood. It is common in rural agriculture sector,
urban educated and people migrating from rural area to urban area.
2. Structural unemployment: Structural unemployment occurs when there are structural
changes in the economy. It may happen due to change in technology and change in the
pattern of demand due to which certain industries are closed down and people lose job.
Developing countries like India faces frequent structural changes often resulting in
structural unemployment both in urban and rural areas.
3. Underemployment: Underemployment is a situation when workers does not get a full time
job. He remains unemployed for some months in a year or some hours in a day.
Underemployment are classified as visible underemployment and invisible
underemployment. Visible underemployment occurs when a person is working less than
standard hours of work in a day. Invisible unemployment occurs when a person working full
time gets an income not proportionate to their abilities.
4. Frictional unemployment: Such type of unemployment occurs due to imperfections in the
mobility of labour across industries or occupations. A person moving from one job to
another may remain unemployed or prefer to remain unemployed for some time.is a case
of frictional unemployment.
5. Cyclical unemployment: Such unemployment occurs due to cyclical fluctuations in the
economy. Phases of boob, recession, depression and recovery are cycles of market
economy. Due to such phases people may lose job and such unemployment is called cyclical
unemployment.

Natural rate of Unemployment – Secular Unemployment

Natural rate of unemployment is said to exist in the economy even when there is a situation of Full
Employment. It occurs due to Frictional Unemployment and Structural Unemployment.

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Causes of Unemployment in India
The causes of unemployment can be sited as follows

1. Slow rate of economic growth: The rate of GD growth in India is staggering around 5 -6%. The
consequence is low volume of economic activities. This will result in low generation of employment
opportunities. Size of labour force is much larger than the available employment opportunities.
2. Rapid growth in population: Constantly rising population is a major challenge in India. It is one of
the major factors contributing to unemployment. The employment opportunities does not
commensurate with the growth rate of population.
3. Faulty employment planning: The five year plans in India was not designed to specifically address
the chronic problem of unemployment. It was assumed that economic growth programmes will
automatically take care of unemployment issue. Specific rural and urban unemployment eradication
programme was ineffective. Thus unemployment sustained.
4. Emphasis on capital intensive projects: An increasing thrust has been given to capital intensive
projects on the process of development. In a labour surplus economy, excessive automation and
technology in production has led to large scale unemployment. For example modernization of large
scale textile mills like jute and cotton has displaced labour and resulted in massive unemployment.
5. Low savings and investments: Low savings and investments has resulted in scarcity of capital. The
available capital is channelized towards large scale projects where the capital –output ratio is high.
Capital flow into labour intensive projects have been low creating unemployment.
6. Limited mobility of labour: Mobility of labour in India is very low. Owing to varied family and social
constraints, people are reluctant to move to far off places even when jobs are available. Factors like
language, culture, religion, security all hinders the mobility of labour especially for women. Lower
the mobility, higher will be the unemployment.
7. Other factors like low education, joint family system, lack of adequate infrastructure, conventional
farming methods, Jobless Growth, faulty education system etc. are other causes of unemployment
in India.

Causes of Rural Unemployment & Urban Unemployment

RURAL UNEMPLOYMENT URBAN UNEMPLOYMENT

Backwardness of Agriculture Fault employment planning
Pressure of population on land holdings Emphasis on capital intensive projects
Lack of financial resources Low growth process
Low mobility of labour Deficiency of skilled entrepreneurs
Limited diversification of Agricultural activities

Consequences of Unemployment

1. Loss of man power: Unemployment results in loss of manpower. The human resource which has the
potential to be used for productive purpose is wasted. It I a national waste.

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 2. Loss of output: There is loss of output to the extent of man power that is not utilized. He actual
output in the economy is much less than potential output. The pace of GDP growth which the
country could have achieved through proper employment planning is permanently wasted.
3. Low capital formation: Low employment results in low income generation and savings. The
purchasing power of the economy is less causing less motivation for investments. It creates a vicious
cycle of low income - low demand – low investments – low employment.
4. Low productivity: Disguised unemployment, seasonal unemployment all leads to low productivity.
Low productivity implies low rate of growth.
5. Social ill-effects: The social consequences of unemployment are low standard of living, greater
inequality of income, social and civil unrest, and rise in poverty, psychological imbalance and
frustration among youth. Brain Drain etc.

General measures to solve the problem of unemployment in India

1. Increase in production: Production in primary, secondary and tertiary sector should be increased to
increase employment. Development of small and cottage industries should be encouraged. Focus
should be given on promoting foreign trade, plantations and other labour intensive industries.
Greater the production, greater the employment opportunities.

2. High rate of capital formation: Rate of capital formation in the country should be increased.
Investments should be directed to projects were employment generation is high. There is a need to
decrease capital output ratio for those industries which can be operated efficiently with labour
intensive methods.

3. Increase in labour productivity: Demand for labour is directly related to labour productivity.
Adequate skill training should be imparted to increase productivity. Higher productivity results in
higher profits leading to more investments and more employment opportunities.

4. Focus on self-employment: Around 505 of the working population in India are self-employed. People
are employed in agriculture and other marginal occupation. Effort should be made to increase the
skills in self-employment. Government programmes should be initiated for providing technical
training and provision of credit should be made more accessible to start self-employment projects
for rural and urban youth.

5. Educational reforms: The educational system in the country should be transformed to industrial skill
oriented rather than degree oriented. The demand supply profile of employment should be
matched to suit ready availability of jobs to trained people. Vocational courses and programmes
should be promoted in urban and rural areas.

6. Population control: there is an urgent need to control population of the country through all possible
means. It will reduce the number of new entrants in the job market and greater per person
availability of resources. Generation of employment opportunities will have minimal effect if
population not brought under control. Other measures that could be highlighted are diversification

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 of agricultural activities, promotion of small scale and village industries, promoting co-operative
inductors etc.

Specific measures by the government to eradicate unemployment

Unemployment breeds poverty. They are so interrelated that the problem of poverty in the country
is addressed through generating employment opportunities. Hence all the programmes to eradicate
poverty can be associated as government programmes to eradicate unemployment. Some notable
programmes of the government are

1. Training Rural Youth for self-employment –TRYSEM

2. Mahatma Gandhi National Rural employment Guarantee ACT – MGNREGA
3. Skill India, make in India, START-UP India programmes.
4. All employment programmes of poverty alleviation initiated by the government can be written as
government specific measures to eradicate unemployment.

Statistics on employment and unemployment across different sectors

INDICATORS STATISTICS
Total work Force 40 crores
Gender % 70% - Males , 30% - Females
Region % 70% -Rural Areas, 30% Urban areas
Low female work force 30% in Rural areas and 20% in Urban areas indicates social and
economic backwardness.
Rate of participation in India 50% - indicates high dependency ratio.
Higher in rural areas 53% and in Urban areas 43.5 %
Contribution to GDP Lower in rural areas indicating lower productivity, low income and
greater poverty In rural areas.
Self-employed Higher in rural areas 45 % and in urban areas – 37%
High in men than in women
Reason – Urban areas people look for skilled jobs
Rural areas non-farm job opportunities are limited so people are
self-employed in own farms with family.
Occupational distribution – Primary sector – 46 % Secondary sector – 21% and Tertiary sector –
sector vise 32%
Majority engaged in primary sector in spite of low wages and
productivity indicates backwardness of the economy.
Secondary and tertiary sector failed to generate employment.
More people working in tertiary sector than in secondary sector
indicates low industrialization has failed to be leading sector of
growth.
Female workers More employed in primary sector indicating agriculture as primary
occupation in rural areas and low mobility of women work force.
@ Scales of 2015-16. Only brief knowledge required and can be written while explaining points

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