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Economics Commentary 2

Commentary topic:

Section of Syllabus to be covered in this commentary Section


2: Macroeconomics- Chapter- Unemployement

Title of extract:

Unemployement levels rising in

India

Source of extract: Internet:


http://articles.economictimes.indiatimes.com/2014-0127/news/46684891_1_ilo-report-international-labour-organisationunemployment-rate

Date of extract: 27/01/2014


Word Count: 750
Date of commentary:30/01/2014

Article by Economic Times: January 2014

Unemployment , A cause of concern


for India!
Unemployment is certainly defined as people of working age, available for work
and are actively seeking for employment 1.India being a developed country is
suffering massively due to rising unemployment in the country. In 2008, The
country suffered from a massive long term recession in which millions of Indians
either lost their jobs and were unable to find a suitable job. According to the article,
unemployment rate current is 3.8%, which is still a very high rate. Due to Hidden
unemployment which is termed as people without job for a long period of time
,people with part time work and do not want to switch over full time work . and
those who are over qualified for the job they are working in the present. This type
of unemployment leads to damaging of emotions and mental state of any
unemployed person which is a cause of serious health issues such as depression.
The article mentions that due to geographical disparities and migration, the
unemployment is increasing in India. Geographical disparities such as the inner
city of India, the villages do not have access to full time work or the inhabitants are
employed into the primary sector of the business, the agricultural sector. Migration
is very normal in India as most industries either pay their employees very less
salary or are paying less than the national minimum wage (This situation is very
common with the low paid sectors of employement such as Wastepickers or
road constructors which are paid on a daily basis in India.
What are the cost incurred by the unemployed people of being Unemployed?
1. They are cost to themselves as they become dejected due to non availability
of job and eventually which leads to anxiety and depression. Also, high
levels of suicide were recorded in India due to unemployment because the
person who is employed thinks that he/she is a burden to the family or is not
1 Definition from Oxford Economics Course Companion by Ian Dorton

successful .Emotionally , Unemployment just deepens or worsens the


situation of life of any unemployed person .
2. They are responsible to the society in the form of poverty and crime rates
being high: Crime rates and unemployement are directly related as
unemployemeny often leads to serious crime activities such as theft to earn
more money
3. They are also responsible to the economy as unemployement reduces the
actual output produced by the economy, Gross domestic product of a country
worsens down.
What is the cause of unemployment in India?
The article mentions that due to gap between demand and the supply of skills
required in Job, the country is suffering from unemployement as employement is
getting shifted due to migration.This is often reffered to as structural employement
where there is a mismatch between the skills and number of jobs available.
A diagram is shown below to depict this:D

S1
S

W
W1
S1
S

Q1

This diagram shows that due


to shortage of labour, the
wage rate of the country
decreases and also decreasing
the quantity of labour

Are there any solutions to this deep rooted problem of unemployment in


India?
Unemployement is certainly not easy toreduce but to some extent it can be
overcomed .The Government of India has introduced the scheme of
Unemployement allowance in India wherein the unemployed registers with the
government the skills he/she currently has and the government has to provide a job
within a year .If the government is unable to find a job, the allowance is given to
the unemployed person till the time there is no job provided by the government.
But will this still reduce the unemployement rate? No, certainly not as this is not an
effective method.
There are two types of solutions to the structural unemployement:1. Interventionist policies which requires intervention of the government which
include an education system that trains the unemployed people to be
occupationally fit and flexible to work.It also includes any apprenticeship
programmes provided by the government to provide necessary skills
required
2. Market Based supply side policies: This includes reducing unemployement
benefits to the unemployed so that they get motivated to work and an
incentive to work for. Also this includes deregulation of labour markets by
removing legal barriers in job hiring and unemployement practices
Reducing Unemployment has always been a macroeconomic aim of the
government but is not able to fulfil to the maximum as some or the
other region suffers from unemployment.

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