What is Unemployment - Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy.
National Sample Survey Organization (NSSO) defines employment and unemployment on the following activity statuses of an individual:
- Working (engaged in an economic activity) i.e. 'Employed'.
- Seeking or available for work i.e. 'Unemployed'.
- Neither seeking nor available for work.
The first two constitutes labour force and unemployment rate is the percent of the labour force that is without work.
Unemployment rate = (Unemployed Workers / Total labour force) × 100
Worker population ratio is defined as the number of persons employed per thousand persons.
Working Population Ratio = (No of employed persons/Total Population) × 1000
Measurement of Unemployment in India
National Sample Survey Organization (NSSO), an organization under Ministry of Statistics and Programme Implementation (MoSPI) measures unemployment in India on following approaches:
Usual Status Approach: This approach estimates only those persons as unemployed who had no gainful work for a major time during the 365 days preceding the date of survey.
Weekly Status Approach: This approach records only those persons as unemployed who did not have gainful work even for an hour on any day of the week preceding the date of survey.
Daily Status Approach: Under this approach, unemployment status of a person is measured for each day in a reference week. A person having no gainful work even for 1 hour in a day is described as unemployed for that day.
Various Types of Unemployment
Disguised Unemployment: It is a phenomenon wherein more people are employed than actually needed.
- For Example in any project 30 persons are sufficient to do the work but it has 50 persons. Generally this type of Unemployment is seen in employment programs run by govt such MGNREGA. PM-GKRY etc. where focus is to provide employment to maximum no of People.
Seasonal Unemployment: It is an unemployment that occurs during certain seasons of the year.
- Agricultural labourers in India rarely have work throughout the year. After sowing and harvesting seasons end they are generally unemployed for a period of time.
Structural Unemployment: It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market.
- Many people in India do not get job due to lack of requisite skills and due to poor education level, it becomes difficult to train them.
Cyclical Unemployment: It is result of the business cycle, where unemployment rises during recessions and declines with economic growth.
- One concrete example of cyclical unemployment is when an automobile worker is laid off during a recession to cut labor costs. During the downturn, people are buying fewer vehicles, so the manufacturer doesn't need as many workers to meet the demand.
Frictional Unemployment: The Frictional Unemployment also called as Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs.
- In other words, an employee requires time for searching a new job or shifting from the existing to a new job, this inevitable time delay causes the frictional unemployment. It is often considered as a voluntary unemployment because it is not caused due to the shortage of job, but in fact, the workers themselves quit their jobs in search of better opportunities.
Gig Workers : Gig workers are independent contractors, online platform workers, contract firm workers, on-call workers and temporary workers. Gig workers enter into formal agreements with on-demand companies to provide services to the company's clients.
- This means, people working informally, without proper job contracts and thus sans any legal protection. These persons are deemed ‘unemployed’ since records of their work are never maintained.
- Individual: People who are unemployed cannot earn money to meet their financial obligations which reduces Consumption in economy and ultimately leads to less production. Unemployment can lead to homelessness, illness, and mental stress.
- Social: An economy that has high unemployment is not using all of its resources efficiently, specifically labor. When individuals accept employment below their skill level the economies efficiency is reduced further. Workers lose skills which causes a loss of human capital.
- Socio-political: High unemployment rates can cause civil and political unrest in a country.
- Economic: It also affects economy of the country as the workforce that could have been gainfully employed to generate resources actually gets dependent on the remaining working population, thus escalating socioeconomic costs for the State. For instance, 1 percent increase in unemployment reduces the GDP by 2 percent
- It is also due to Inadequate state support, legal complexities and low infrastructural, financial and market linkages to small and cottage industries or small businesses, making such enterprises unviable with cost and compliance overruns.
- MGNREGA is the largest social security scheme in the world — guaranteeing 100 days of unskilled manual work to all rural households in India.
- The MGNREG Act actually gives rural households the right to work — making it obligatory for the State to give them work on demand.
- The work is usually on projects to build durable assets like roads, canals, ponds and wells.
- The Act stipulates a minimum wage-material ratio of 60:40.
- The government has increased MGNREGA wage to Rs. 202 a day from Rs. 182 to benefit nearly 13.62 crore families
- Aim: To encourage and promote skill development in the country by providing free short duration skill training and incentivizing this by providing monetary rewards to youth for skill certification
- PMKVY 3.0 : The Ministry of Skill Development and Entrepreneurship (MSDE) has launched Pradhan Mantri Kaushal Vikas Yojana (PMKVY) 3.0, in a bid to empower India’s youth with employable skills by making over 300 skill courses available to them.
- Implementation: PMKVY is implemented by the National Skills Development Corporation (NSDC) under the guidance of the Ministry of Skill Development and Entrepreneurship (MSDE).
- The Scheme has been launched with effect from 1st October 2020 to incentivize creation of new employment along with social security benefits and restoration of loss of employment.
- This scheme reduces the financial burden of the employers and encourages them to hire more workers.
- Under ABRY, Government of India is providing for a period of two years both the employees' share (12% of wages) and employer's share (12% of wages) of contribution payable or only the employees' share, depending on employment strength of the EPFO registered establishments.
Q. Which of the following measures estimates the number of persons who remained unemployed for a major part of the year
A. Usual Status Approach
B. Monthly status approach
C. Weekly Status Approach
D. Daily Status Approach
E. All of the Above
Q. According to weekly estimate approach developed by NSSO, a person will be considered employed if he/she gets work for
A. One Day
B. Two Days
C. Three Days
D. Five Days
E. All Days
Q. Situation where the employed people contributing to production less than they are capable of
A. Structural unemployment
B. Functional unemployment
C. Under Employment
D. Cyclical unemployment
E. Disguised unemployment
Q. In which type of unemployment do the marginal productivity of the workers is zero?
A. Structural unemployment
B. Functional unemployment
C. Cyclical unemployment
D. Disguised unemployment
E. Seasonal unemployment
Q. Unemployment that arises during the phases of boom, recession, depression and recovery.
A. Structural unemployment
B. Functional unemployment
C. Cyclical unemployment
D. Disguised unemployment
E. Seasonal unemployment
Q. What type of unemployment can occur even in a situation of full employment.
A. Structural unemployment
B. Functional unemployment
C. Cyclical unemployment
D. Disguised unemployment
E. Seasonal unemployment
Q. Which of the following type of Unemployment refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs.
A. Structural unemployment
B. Functional unemployment
C. Cyclical unemployment
D. Disguised unemployment
E. Seasonal unemployment
Q. What type of unemployment is occur if an economy transform itself from labour intensive economy to capital intensive economy
A. Structural unemployment
B. Functional unemployment
C. Cyclical unemployment
D. Disguised unemployment
E. Seasonal unemployment
Explanation : Labour-intensive production means that the way that a good or service is produced depends more heavily on labour than the other factors of production, such as capital.
