Unemployment

India as a nation is faced with massive problem of unemployment. Unemployment can be

defined as a state of workless ness for a man fit and willing to work. It is a condition of
involuntary and not voluntary idleness. Some features of unemployment have been
identified as follows:

1. The incidence of unemployment is much higher in urban areas than in rural areas.
2. Unemployment rates for women are higher than those for men.
3. The incidence of unemployment among the educated is much higher than the
overall unemployment.
4. There is greater unemployment in agricultural sector than in industrial and other
major sectors.

Economists and social thinkers have classified unemployment into various types.
Generally unemployment can be classified in two types:

(1) Voluntary unemployment

In this type of unemployment a person is out of job of his own desire doesn't work on the
prevalent or prescribed wages. Either he wants higher wages or doesn't want to work at
all. It is in fact social problem leading to social disorganization. Social problems and
forces such as a revolution, a social upheaval, a class struggle, a financial or economic
crisis a war between nations, mental illness, political corruption mounting unemployment
and crime etc. threaten the smooth working of society. Social values are often regarded as
the sustaining forces of society. They contribute to the strength and stability of social
order. But due to rapid social change new values come up and some of the old values
decline. At the same time, people are not is a position to reject the old completely and
accept the new altogether. Here, conflict between the old and the new is the inevitable
result which leads to the social disorganization in imposed situation. In economic
terminology this situation is voluntary unemployment.

(2) In voluntary unemployment

In this type of situation the person who is unemployed has no say in the matter. It means
that a person is separated from remunerative work and devoid of wages although he is
capable of earning his wages and is also anxious to earn them. Forms and types of
unemployment according to Hock are.

a. Cyclical unemployment - This is the result of the trade cycle which is a part of
the capitalist system. In such a system, there is greater unemployment and when
there is depression a large number of people are rendered unemployed. Since such
an economic crisis is the result of trade cycle, the unemployment is a part of it.
b. Sudden unemployment - When at the place where workers have been employed
there is some change, a large number of persons are unemployed. It all happens in
the industries, trades and business where people are employed for a job and
suddenly when the job has ended they are asked to go.
 c. Unemployment caused by failure of Industries - In many cases, a business a
factory or an industry has to close down. There may be various factors responsible
for it there may be dispute amongst the partners, the business may give huge loss
or the business may not turn out to be useful and so on.
d. Unemployment caused by deterioration in Industry and business - In various
industries, trades or business, sometimes, there is deterioration. This deterioration
may be due to various factors. In efficiency of the employers, keen competitions
less profit etc. are some of the factors responsible for deterioration in the industry
and the business.
e. Seasonal unemployment - Certain industries and traders engage workers for a
particular season. When the season has ended the workers are rendered
unemployed. Sugar industry is an example of this type of seasonal
unemployment.

The problem of unemployment has becoming a colossal. Various problems have caused
this problem. There are individual factors like age, vocational unfitness and physical
disabilities which restrict the people. External factors include technological and economic
factors. There is enormous increase in the population. Every year India adds to her
population afresh. More than this every year about 5 million people become eligible for
securing jobs. Business field is subject to ups and downs of trade cycle and globalization.
Economic depression or sick industries are often close down compelling their employees
to become unemployed. Technological advancement contributes to economic
development .But unplanned and uncontrolled growth of technology is causing havoc on
job opportunities. The computerization and automation has led to technological
unemployment. Strikes and lockouts have become inseparable aspect of the industrial
world today. Due to these industries often face economic loses and production comes
down. Since workers do not get any salary or wages during the strike period they suffer
from economic hardships. They become permanently or temporarily unemployed. Today
young people are not ready to take jobs which are considered to be socially degrading or
lowly. Our educational system has its own irreparable defects and its
contribution to the unemployment is an open truth.Our education does not prepare the
minds of young generation to become self-employed on the contrary it makes them
dependent on government vacancies which are hard to come. Our State right from the
beginning of Five year plans has introduced several employment generating schemes and
programmes over the years but in the absence of proper implementation and monitoring
have failed to achieve the required targets. Recently UPA Government has come up with
Rural Employment Guarantee program which aims to provide minimum days of
employment to people living in the villages. This is a laudable programme if
implemented sincerely because it will provide employment to people during natural
calamities like drought, floods etc. The remedial measures for reducing unemployment
may lay greater emphasis on creation of opportunities for self -employment,
augmentation of productivity and income levels of the working poor, shift in emphasis
from creation of relief type of employment to the building up of durable productive assets
in the rural areas and instead of attempting to revert somewhat to protectionist policies
the pace of privatization may be accelerated.
Problems

The problem of unemployment means the problem of providing work to those who are
willing to work. A large number of educated and uneducated people, who are capable of
work and are also willing to do it, roam here and there without any job. So the problem
has assumed an acute form.

There is a large number of people who are either partly employed or wholly unemployed.
The lives of such people, as well as of their families, are extremely miserable. India
cannot claim to be a welfare state so long as this problem remains unsolved. Before
discussing the ways and means of solving this problem, let us first examine the causes
which have created it.

It is a well known fact that ours is a thickly populated country. The population is
increasing by leaps and bounds. But jobs and gainful avenues cannot be created in the
same proportion. So, naturally, a large section of the people is left unemployed.
Moreover, our education system is also responsible for this problem. The problem of
educated unemployment is peculiar to India. India is only country in the world where
even highly educated persons fail to to get employment. Every year thousands and
thousands of graduates pass out of schools and colleges. They are unfit for any work,
except office work. All of them cannot be absorbed in services. This increases
employment.

The problem of unemployment is mainly an economic one. It is essential, therefore, that

the economic policy of the country be overhauled. In our country, labor is available in
abundance. We should provide avenues for employment for them through cottage and
small-scale industries. besides this, stress must be laid on family planning. Every effort
must be made to check the rapid rise in population. This will help a great deal in the
solution of this problem.

More stress should be laid on technical and vocational education. The present bookish
education which produces clerks alone should be restricted. When people get technical
and vocational education, they will not hanker after services on completing their
education, they will come out well prepared to stand on their own legs. The problem will
be half-solved, if this suggestion is implemented.

Our joint-family system is gradually breaking down. This may be a good social change
from certain points of view, but front the point of view of unemployment it is harmful.
When we live jointly, some family members get employed in family professions. One
who gets a job, supports others who may not be equally fortunate. We should not be hasty
in breaking down this system.

Our country cannot advance economically, politically, or socially, unless this problem is
solved. Many a social evil is spread through the unemployed. Frustration, drug-addiction,
even suicides are, by and large, the evil results of unemployment. Unrest and disorder
increase in society. It is, therefore, the duty of the Government to make every possible
effort to solve this problem. However, we may stress again that the problem cannot be
solved till the population explosion is not checked. The two are closely inter-linked, and
the people must be made to realize this through and adequate process of social education.
We are happy to note that the government has come out with a plan to provide
employment to educated young men during the ninth plan period.

Causes Of Unemployment
In the set up of a modern market economy, there are many factors, which
contribute to unemployment. Causes of unemployment are varied and it may be due to the
following factors:

• Rapid changes in technology

• Recessions
• Inflation
• Disability
• Undulating business cycles
• Changes in tastes as well as
alterations in the climatic conditions.
This may in turn lead to decline in
demand for certain services as well as
products.
• Attitude towards employers
• Willingness to work
• Perception of employees
• Employee values
• Discriminating factors in the place of
work (may include discrimination on
the basis of age, class, ethnicity, color
and race).
• Ability to look for employment

Broadly speaking the above factors may be categorized into the following:

(I) Cyclical Unemployment

Cyclical unemployment goes hand in hand with the business cycle. Higher the GDP,
lower will be the cyclical unemployment at the peak of the business cycle and the vice
versa is true when the economy is in the trough of the business cycle. If cyclical
unemployment rate stretches for an extended period, it may cause irreparable damage to
the labor force in the country.
(II) Structural Unemployment

It is a well-known fact that everyday new products are being launched in the market. As a
result, the demand for certain goods and services also changes. This leads to increase in
unemployment rate in certain sectors of the economy and creates jobs in yet others. Under
these circumstances, re employment may be possible if the worker relocates or migrates to
other sectors (in demand).

(III) Agricultural Activities

It has also been observed that if there are undulations in the agricultural sector (due to
factors like low production, drought, famine or natural disaster), the effects are felt in
agribusiness. This may also be regarded as one of the factors in unemployment.

(IV) Hard Core Unemployment

Hard core unemployment usually results when a worker is disabled and is not in a position
to work. The worker may also give up his job after a few days due to dissatisfaction with
the wage.

Unemployment at any given point of time may be either due to one of the factors
mentioned above or a combination of several factors (mentioned above).

It has also been observed that if the labor market in the economy does not work in an
optimum manner, it leads to unemployment. There are other factors, which point at the
tempo of an economic activity in a region.

Measurement of Unemployment in India

The National Sample Survey Organization (NSSO), which provides estimates of the rates
of unemployment on the basis of its quinquennial surveys, uses three different concepts.
A person is considered unemployed on Usual Status (US) basis, if he/she was not
working, but was either seeking or was available for work for the major part of the
reference year. On the basis of a week as the reference period, a person is considered
unemployed by Current Weekly Status (CWS), if he/she had not worked even for one
hour during the week, but was seeking or was available for work. The third concept

of unemployment is the Current Daily Status (CDS), which is in terms of total person
days of unemployment, and is the aggregate of all the unemployment days of all persons
in the labor force during the reference week. Thus, unemployment is measured through
labor force surveys which elicit the `activity status of the respondent for a given reference
period. First, the respondent is identified as notworking. Second, for those not working,
the typical question is of the form are you available for work, and have you made some
effort to find work during the last x days. Those who

answer in the affirmative are the unemployed while those who answer in the negative are
the people who have opted out of the labor force. The labor force is the sum of the
employed and the unemployed and the rate of unemployment is the proportion of labor
force that is unemployed. The reference period could vary from a week, to four weeks to
a year. Such an approach works well when the activity status is invariant within the
reference period, i.e., either the person is employed, unemployed or out of the labor force.
Beginning with the 27th round in 1972/73,

labor force surveys have been conducted every five years using standardized concepts
and procedures based on the recommendations of the Committee of Experts (Planning
Commission, 1970). The usual status unemployment measure is defined with respect to a
reference period of a year. The multiple activity status issue, which is more acute longer
the reference period, is resolved on the basis of majority time. This criterion is used first
to classify a person as either belonging to the labor force (i.e., employed or unemployed)
or not belonging to the labor force. If the person belongs to the labor force, then whether

the person is to be classified as employed or unemployed is decided once again on

majority time. The survey also uses a reference period of a week to compute a `weekly¶
status unemployment measure. Here a person is regarded as employed if she or he
worked for at least one hour during the reference week. It follows that a person is
unemployed if she or he did not work for even one hour during the reference week and
sought work or was available for work during the reference week. Clearly, the usual
status measure reflects only long unemployment spells. For

instance, a male in the working age group (who is never out of the labor force) would be
unemployed on the usual status measure only if the unemployed spell during the year is
longer than the employed period. While, the weekly status measure captures short
unemployment periods, it ignores unemployment for less than a week. A third approach
is to abandon the effort to assign every individual a unique activity status over the
reference period. The NSS employment survey elicits an individual’s time disposition
during each day of the reference week. A day is split into two half-units and an

individual is assigned a unique activity status for that period (rather than the reference
week). This information can be used to compute person days of unemployment in the
economy. As households are surveyed uniformly throughout the year, the aggregates
derived from weekly data are representative of annual aggregates. The daily status rate of
unemployment is the proportion of labor force (measured in person days) that s
unemployed (also in person days). For most of the labor force work is seasonal, short-
term and without tenure. Consequently, an individual’s activity status can vary even
within as short of a reference period as

a week. The daily status unemployment rate would therefore seem the appropriate one for
capturing their unemployment from weekly data are representative of annual aggregates.
The `daily¶ status rate of unemployment is the proportion of labor force (measured in
person days) that is unemployed (also in person days). For most of the labor force work is
seasonal, short-term and without tenure. Consequently, an individual’s activity status can
vary even within as short of a reference period as a week. The daily status unemployment
rate would therefore seem the appropriate one for capturing their unemployment. There
are basically two categories of measurement of unemployment.
General Measurement of Unemployment in India
They are: Claimant Count
This method of calculating unemployment was widely used in the 1980s as well as the
1990s. This method, basically takes account of the number of heads unemployed and
receiving unemployment benefits. Computation should be done with care since there may
be double counting of people who have registered themselves inemployment exchanges
and those who are receiving the unemployment benefits. The method has two advantages
of calculating unemployment by using administrative records. Firstly, this method takes a
complete count of the unemployed and so it is free from any sampling error. Secondly,
obtaining such data is also very cost effective

and is available on a regular basis. However, this method of computation is fraught with
certain limitations. The collection of data follows administrative rules and regulations,
which may not be in line with statistical principles. Again, since different countries
follow different computational rules, it is difficult to compare the unemployment
statistics across different countries. Another difficulty is that the rules tend to change over
time and so the unemployment data cannot be compared across different time horizons.
Another disadvantage of using the claimant count as a measure of unemployment is that
it takes intoaccount only that portion of the

population, which has registered themselves in the employment exchanges or has claimed
unemployment benefit. The individuals who have not registered in both but are
unemployed are left out of the unemployment count of the administrative records. Hence,
the administrative records give a lower estimate of the actual employment scenario. The
above-mentioned limitations of administrative records gave rise to the most current
computation method, that of Labor ForceSurvey.
Labor Force Survey
The Labor Force Survey is done by taking household samples. A standard questionnaire
is prepared. All individuals in the workable age are asked about theiremployment status
and the

relevant data is taken. Individuals are next classified into employed, unemployed or
economic active. The sample data is then utilized to estimate the number of individuals
employed, unemployed or underemployed. The labor force survey also has many
disadvantages. The use of standard questionnaire is itself faulty. The respondents may
provide subjective answers, which in some case may be misleading. Next, the sampling
method has many statistical errors, which gets magnified with smaller size of thesample .
Again a well-equipped statistical infrastructure is mandatory for a more accurate
collection of data. Experienced supervisors and interviewers are required. The greatest
advantage of

this computational method is that they meet international standards. Unemployment

statistics obtained hence can be used to compare data across countries and across
different periods of time.
Recommendations on Measurement of Unemployment in India
1. Revision of approach for estimating unemployment rate in the economy should be
given an importance.

2. Different machinery should be set up to estimate the open unemployment among

educated youths.

3. The concept of current weekly status approach to estimating unemployment should be

given up.

4. The unemployment details should be broadened up to facilitate the target population

specific programmers for solving unemployment problems.

5. The unemployment details should be related to the poverty estimates of the country.

6. A separate estimate of different categories of unemployed should be made for example

an estimate of unemployment among street dwellers of a metropolitan city is made.

Measurement of Unemployment
Unemployment accounts for the part of the labor force willing to work at
the current wage rate. The definition of unemployment may sound simple but its
computation is equally difficult. Various measures are devised to measure the same. In
this article we have elucidated some such measures.

Claimant Count

This method of calculating unemployment was widely used in the 1980s as well as the
1990s. This method, basically takes account of the number of heads unemployed and
receiving unemployment benefits. Computation should be done with care since there may
be double counting of people who have registered themselves in employment exchanges
and those who are receiving the unemployment benefits.

The method has two advantages of calculating unemployment by using administrative

records. Firstly, this method takes a complete count of the unemployed and so it is free
from any sampling error.

Secondly, Obtaining such data is also very cost effective and is available on a regular
basis.

However, this method of computation is fraught with certain limitations. The collection of
data follows administrative rules and regulations, which may not be in line with statistical
principles. Again, since different countries follow different computational rules, it is
difficult to compare the unemployment statistics across different countries. Another
difficulty is that the rules tend to change over time and so the unemployment data cannot
be compared across different time horizons.
Another disadvantage of using the claimant count as a measure of unemployment is that it
takes into account only that portion of the population, which has registered themselves in
the employment exchanges or has claimed unemployment benefit.
The individuals who have not registered in both but are unemployed are left out of the
unemployment count of the administrative records. Hence, the administrative records give
a lower estimate of the actual employment scenario.

The above-mentioned limitations of administrative records gave rise to the most current
computation method, that of Labor Force Survey.

Labor Force Survey

The Labor Force Survey is done by taking household samples. A standard questionnaire is
prepared. All individuals in the workable age are asked about their employment status and
the relevant data is taken. Individuals are next classified into employed, unemployed or
economic active. The sample data is then utilized to estimate the number of individuals
employed, unemployed or underemployed.

The labor force survey also has many disadvantages. The use of standard questionnaire is
itself faulty. The respondents may provide subjective answers, which in some case may be
misleading. Next, the sampling method has many statistical errors, which gets magnified
with smaller size of the sample. Again a well-equipped statistical infrastructure is
mandatory for a more accurate collection of data. Experienced supervisors and interviewers
are required.

The greatest advantage of this computational method is that they meet international
standards. Unemployment statistics obtained hence can be used to compare data across
countries and across different periods of time.