What is Unemployment, Types, Impact on Economy and Steps Taken by Government

Table of Content

• Rise of Unemployment During the Covid-19 Pandemic
• Unemployment: What is it?
• Different Types of Unemployment in India:
• Main Reasons for Unemployment
• What are the Impacts of Unemployment on Economy and Nation?
• Unemployment Rate in India
• Steps Taken by the Government to Reduce Unemployment in India

Rise of Unemployment During the Covid-19 Pandemic:

As of June 8th 2021, CMIE data indicate that the unemployment rate in India reached 12.81% amidst the lockdown and restrictions on mobility. A report from CMIE – Centre for Monitoring Indian Economy noted that India's unemployment rate increased to 14.7% in May from the previous 6.5% in March 2021. The employment rate also dropped to 36.8% from 37.6% in March. Since many diversified industries have been forced to shut down due to the coronavirus outbreak, unemployment has increased across the country.

Unemployment: What is it?

The state of unemployment arises when a person actively searches for work and is unable to do so. Economic health is measured by unemployment. A common way to measure unemployment is through the unemployment rate. According to the Labour Force Survey, the unemployment rate can be calculated by dividing the number of unemployed persons by the number of people employed.

Unemployment rate = (Unemployed Workers / Total labour force) × 100

An individual is classified as employed or unemployed based on their activity status as determined by National Sample Survey Organization (NSSO). India's unemployment is measured by three methods by NSSO, an agency under MoSPI - the Ministry of Statistics and Programme Implementation:

Daily Status Approach: According to this approach, unemployment status for a person is calculated every day in a reference week. The term "unemployed" is applied to someone who has not worked for even one hour of the day. The full day's labour is considered to be working when someone works for at least four hours, but not more than eight hours. Persons employed for less than 4 hours but who work for more than 1 hour are considered half-timers. In this sense, a person who has no gainful employment for even an hour during the day is considered unemployed.

Weekly Status Approach: This approach highlights individuals who were unemployed at least for an hour a week prior to the time that the survey was conducted or whose employment ended sooner than expected. Any individual who engages in any gainful activity for at least one hour during the reference week is considered employed. An unemployed person is considered to be someone who is seeking, but has not yet found work, but has been available to work.

Usual Status Approach: This calculates the unemployment rate for people who have been unemployed or haven't gainful employment for a considerable period of time. It indicates the activity status on which the employee spent a greater portion of their year through the Principal Activity Status (UPS), also known as Usual Status (PS). It is further used to determine whether a person is in or out of the labour force based on his usual activity.

Different Types of Unemployment in India:

Seven types of unemployment are prevalent in India. In this section, we discuss different types of unemployment:

Structural Unemployment: A structural unemployment situation is created when there is a mismatch between the skills of the worker and the jobs available on the market. The employment situation in India is such that many people lack the skills required for jobs or they do not get jobs because of their lack of skills, and because of their low education level, it becomes vital to provide them with relevant training for jobs. Structural unemployment is commonly caused by advancements in technology, robotics, AI, mechanization, and automation.

Technological Unemployment: It occurs when production techniques are modified to require less manual work, which makes technological unemployment more common. In modern times, the importance of and demand for manual labour have diminished, resulting in technological unemployment.

Seasonal Unemployment: A situation in which people who have worked at certain seasons of the year do not have it throughout the year. Some seasons of the year are associated with seasonal unemployment. A number of industries and occupations, such as agriculture, tourist resorts, and many others, only hold production activities during specific seasons. In this case, the companies offer employment only for a limited number of weeks each year. The off-season may be a difficult time to find employment for those engaged in such activities.

Frictional Unemployment: Unemployment can occur when people are looking for a new job or switching jobs. This is also known as Search Unemployment. Unemployment due to frictional factors is classified as voluntary unemployment because there is no shortage of jobs, but rather the workers themselves have left their jobs to find better employment opportunities.

Vulnerable Unemployment: Under this unemployment program, individuals are considered unemployed. There are a lot of people who work, but they are formally employed, meaning they do not have a proper job contract, so their work records are rarely maintained. Unemployment of this nature dominates the Indian job market.

Disguised Unemployment: There are more employed people than are actually needed in this type of unemployment. The unorganized sector or agricultural field tends to be the site of disguised unemployment.

Cyclical Unemployment: Business cycles result in unemployment, with the number of employed people rising while the economy is in a recession and decreasing as it grows. India has very low levels of cyclical unemployment. In times of low demand, firms will stop producing as a result of unsold inventory. Because of the stoppage of production, the firms lay off employees, leading to increased unemployment.

Under Employment: There is no greater threat to an economy than underemployment. It refers to situations where people with higher-level skills are employed in lower-productivity positions. This refers to a lack of utilisation of the Labour force of an economy based on their skills and experience.

Main Reasons for Unemployment:

• The main reasons for unemployment in India are mentioned below –
• The working population lacks suitable skills or has a low educational level.
• Small businesses are unviable due to legal and compliance difficulties, insufficient state support, inadequate infrastructure, financial, and market infrastructure.
• Transitioning from the agriculture sector to the three sectors is difficult because of the low productivity in the sector and the limited alternatives available to agriculture workers.
• Infrastructure growth is insufficient and manufacturing investment is at a low level, which restrains the growth of the secondary sector.
• Schools and colleges are failing to provide the appropriate education to meet the current demands of the industry as a cause of structural unemployment.
• Private investment has slowed down in labour-intensive sectors, especially because of demonetisation.
• There is a large informal sector among the economy's workforce because the required skills and education are lacking. This information does not appear in employment statistics.
• The population is large.
• Women are deterred from and prevented from finding employment due to regressive social norms.

What are the Impacts of Unemployment on Economy & Nation?

Here are some effects of unemployment on the economy –

• Poverty is caused by unemployment.
• Long-term unemployment may lead to people engaging in illegal and unlawful activities for money, which increases criminal activity in a country.
• Due to unemployment, the government faces an extra borrowing burden since a decrease in product output and lower consumption by the public causes’ unemployment.
• When the labour force could have been gainfully employed, the economy benefits, but the remaining population ends up being dependent on the rest, escalating socio-economic costs. In other words, an increased unemployment rate results in a 2 percent drop in GDP.
• An antisocial element can easily entice unemployed people. Consequently, they become less inclined to believe in the democratic values of the country.
• People who lose their jobs tend to become addicted to drugs and alcohol or attempt suicide, a fact that ends up costing the country significant human resources.

Unemployment Rate in India:

The unemployment rate declined from 9.1 per cent in December 2020 to 6.52 per cent in March 2021 as per the Center for Monitoring Indian Economy (CMIE) data.

Steps Taken by the Government to Reduce Unemployment in India:

The unemployment rate declined from 9.1 per cent in December 2020 to 6.52 per cent in March 2021 as per the Center for Monitoring Indian Economy (CMIE) data. In order to reduce unemployment, the following measures have been taken by Government:

• TRYSEM (Training of Rural Youth for Self-Employment): This scheme was designed to help rural youth between the ages of 18 and 35 acquire skills for self-employment in rural areas by providing them with training. It was launched by the government in 1979. In this program, women and youth from SC/ST categories were given priority.
• A comprehensive rural employment program was launched by the Government in the year 1980 named IRDP - Integrated Rural Development Programme (IRDP).
• There was a new initiative, RSETI/RUDSETI in 1982, which was jointly initiated by Canara Bank, Syndicate Bank and Sri Dharmasthala Manjunatheshwara Educational Trust. By creating RUDSETI, the acronym for Rural Development and Self Employment Training Institute, rural development and self-employment training were intended to mitigate unemployment problems among the youth. In the current scenario, the state and central governments are actively working together with banks to manage RSETIs.
• A fusion of two existing wage employment programmes -- Rural Landless Employment Guarantee Program and National Rural Employment Programme -- was implemented by the Jawahar Rozgar Yojana (JRY) in April 1989, with an 80:20 cost-sharing arrangement between the State and Centre.
• MNREGA: It was established in 2005 under the Mahatma Gandhi National Rural Employment Guarantee Act to guarantee that people have the right to work in rural areas. The MGNREGA employment program was designed to provide social security for all individuals working in unskilled or labour-intensive jobs.
• PMKVY: Launched in 2015, the Pradhan Mantri Kaushal Vikas Yojana aims to empower the youth. PMKVY provided training in industry-relevant skills for the youth of the country with a view to providing them with a better livelihood.
• Launched in 2016, the Start-Up India Scheme encourages entrepreneurs to start their own businesses. Entrepreneurship began to be nurtured and promoted across the nation as part of Startup India programmes.
• As part of the Stand-Up India scheme, which was launched in 2016, bank loans were made available to women and SC/ST borrowers between 10 lakh and 1 crore for starting greenfield businesses.
• To maximize the scale and quality of skill training efforts by combining scale and quality of skills, the National Skill Development Mission was launched in November 2014 in a mission mode.
• Step has taken for Disguised Unemployment: Among all sectors of the economy, agriculture absorbs the most labour. Due to disguised unemployment, the population has become less dependent on agriculture in recent years. There has been a shift in surplus labour from the agricultural sector to secondary and tertiary sectors. A small-scale manufacturing sector occupies the most labour in the secondary sector. Different new services such as biotechnology and information technology are now being offered in the tertiary sector. In order to help disguised unemployed people in these sectors, the government has taken several measures.
• National Career Center Scheme: The Ministry of Labour and Employment (India) has launched a web portal called the National Career Service Portal (www.ncs.gov.in) to facilitate the National Career Service Scheme. The portal provides a common platform for job seekers and employers to share and update information about available jobs. On the portal, you will find not only vacancies in the private sector but also jobs in the public sector.
• Deen Dayal Antyodaya Yojana: Deen Dayal Antyodaya Yojana aims to provide the poor with recognized industrial skills through a scheme to help them. Developed by the Ministry of Rural Development, the program is aimed at improving rural incomes. By providing individuals with the necessary skills that help them find well-paying jobs, the scheme aims to eradicate urban and rural poverty in the country. Training and skill upgrades are aimed at enabling the poor to become self-employed, move above the poverty line, qualify for bank loans and become self-sufficient.