Unemployment

An economic condition marked by the fact that individuals actively seeking jobs remain unhired. Unemployment is expressed as a percentage of the total available work force. The level of unemployment varies with economic conditions and other circumstances

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

Types of Unemployment
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.

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.

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. 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.

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.

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.

What are the causes of unemployment in India?

It is obvious that the unemployment situation is grim indeed. It has, therefore, to be tackled with appropriate measures and on an urgent basis. However, before we discussed the ways and means of removing unemployment, it is necessary that we understand the causes that given rise to it. The major causes which have been responsible for the wide spread unemployment can be spelt out as under.

1) Rapid Population Growth:

It is the leading cause of unemployment in Rural India. In India, particularly in rural areas, the population is increasing rapidly. It has adversely affected the unemployment situation largely in two ways. In

the first place, the growth of population directly encouraged the unemployment by making large addition to labour force. It is because the rate of job expansion could never have been as high as population growth would have required. It is true that the increasing labour force requires the creation of new job opportunities at an increasing rate. But in actual practice employment expansion has not been sufficient to match the growth of the labor force, and to reduce the back leg of unemployment. This leads to unemployment situation secondly; the rapid population growth indirectly affected the unemployment situation by reducing the resources for capital formation. Any rise in population, over a large absolute base as in India, implies a large absolute number. It means large additional expenditure on their rearing up, maintenance, and education. As a consequence, more resources get used up in private consumption such as food, clothing, shelter and son on in public consumption like drinking water, electricity medical and educational facilities. This has reduced the opportunities of diverting a larger proportion of incomes to saving and investment. Thus, population growth has created obstacles in the way of first growth of the economy and retarded the growth of job opportunities.

2) Limited land:
Land is the gift of nature. It is always constant and cannot expand like population growth. Since, India population increasing rapidly, therefore, the land is not sufficient for the growing population. As a result, there is heavy pressure on the land. In rural areas, most of the people depend directly on land for their livelihood. Land is very limited in comparison to

population. It creates the unemployment situation for a large number of persons who depend on agriculture in rural areas.

3) Seasonal Agriculture:
In Rural Society agriculture is the only means of employment. However, most of the rural people are engaged directly as well as indirectly in agricultural operation. But, agriculture in India is basically a seasonal affair. It provides employment facilities to the rural people only in a particular season of the year. For example, during the sowing and harvesting period, people are fully employed and the period between the post harvest and before the next sowing they remain unemployed. It has adversely affected their standard of living.

4) Fragmentation of land:
In India, due to the heavy pressure on land of large population results the fragmentation of land. It creates a great obstacle in the part of agriculture. As land is fragmented and agricultural work is being hindered the people who depend on agriculture remain unemployed. This has an adverse effect on the employment situation. It also leads to the poverty of villagers.

5) Backward Method of Agriculture:

The method of agriculture in India is very backward. Till now, the rural farmers followed the old farming methods. As a result, the farmer cannot feed properly many people by the produce of his farm and he is unable to provide his children with proper education or to engage them in any profession. It leads to unemployment problem.

6) Decline of Cottage Industries:

In Rural India, village or cottage industries are the only mans of employment particularly of the landless people. They depend directly on various cottage industries for their livelihood. But, now-a-days, these are adversely affected by the industrialization process. Actually, it is found that they cannot compete with modern factories in matter or production. As a result of which the village industries suffer a serious loss and gradually closing down. Owing to this, the people who work in there remain unemployed and unable to maintain their livelihood.

7) Defective education:
The day-to-day education is very defective and is confirmed within the class room only. Its main aim is to acquire certificated only. The present educational system is not job oriented, it is degree oriented. It is defective on the ground that is more general then the vocational. Thus, the people who have getting general education are unable to do any work. They are to be called as good for nothing in the ground that they cannot have any job here, they can find the ways of self employment. It leads to unemployment as well as underemployment.

8) Lack of transport and communication:

In India particularly in rural areas, there are no adequate facilities of transport and communication. Owing to this, the village people who are not engaged in agricultural work are remained unemployed. It is because they are unable to start any business for their livelihood and they are confined only within the limited boundary of the village. It is noted that the modern means of transport and communication are the only way to trade and commerce. Since there is lack of transport and communication in rural areas, therefore, it leads to unemployment problem among the villagers.

9) Inadequate Employment Planning:

The employment planning of the government is not adequate in comparison to population growth. In India near about two lakh people are added yearly to our existing population. But the employment opportunities did not increase according to the proportionate rate of population growth. As a consequence, a great difference is visible between the job opportunities and population growth. On the other hand it is a very difficult task on the part of the Government to provide adequate job facilities to all the people. Besides this, the government also does not take adequate step in this direction. The faulty employment planning of the Government expedites this problem to a great extent. As a result the problem of unemployment is increasing day by day.

How shall we measure unemployment?

Macroeconomic unemployment is typically measured and comes to be known repeatedly as unemployment rate. But what exactly is unemployment rate? How is it measure? The unemployment rate (UR) expresses the number of people unemployed as a percentage of the labor force (LF). With labor force (LF) comprising of all unemployed (U) and employed (E) people, that is,

LF = U + E
We have unemployment rate or UR, expressed as

UR = U / LF * 100%
In a case of 100,000 people in the labor force and 10,000 of whom are unemployed (lost jobs and actively seeking one), the unemployment rate would be calculated as

UR = U / LF * 100% = 10,000 / 100,000 * 100% = 10%

In addition to labor, land and capital can also be unemployed. With a little common sense, we would expect that a high unemployment rate of labor would result in a low level of utilization of capital, land and other forms of production factors, simply because men are the operators that make these things work for the economy and produce economic value. If more men are laid off their work, more resources are left to rot rather than utilized in production. In case you are confused with concepts like labor force, not in labor force, employed or unemployed used in this section, please refer back to the beginning section what is unemployment anyway? for clarification. And if theres no problem we will have a look at the compositions of both the adult population and the labor force of United States in 2006 below to have a better grip of where unemployment stands in the economy.

The costs of unemployment

To a certain extent, these were covered in the topic called 'Macroeconomic objectives'. They are reproduced here in a little more detail.

Implications for government spending and taxation. High unemployment is expensive for the government
and, therefore, for the taxpayer. For every unemployed person, there are two costs to the government. First, the unemployed worker will be entitled to benefit, and if he/she is young, or older but remains unemployed for a long period of time, he/she will be offered training under the 'New Deal'. Secondly, there is the less obvious cost of the loss of income tax revenues the worker would have paid in work. These workers would have been paying VAT as well through their purchases. Put together, some economists have estimated that the cost to taxpayers of each unemployed person is up to 9,000 a year.

Economic cost to the economy as a whole.

is the cost to the whole economy in terms of wasted, unused

There

resources. The existence of any idle resources means that the economy will be at a point within its production possibility frontier (PPF).

Social costs of unemployment.

Unemployed workers (young men, in particular) may create other external costs in the economy, like crime for example. The governments of the 80s always dismissed the coincidence of rising crime figures and rising unemployment. Was it really a coincidence; given that many of

the new unemployed were young school leavers with no experience in work?

In

The cost of unemployment to the individual.

the short term the unemployed worker has to put up with the loss of

earnings, although this may be balanced by redundancy payments. But in the long run, the long term unemployed will find it harder and harder to find a job, as they find that the skills they have become less relevant and they have had no new training.

What are possible solutions to unemployment?

cuts in real wages -Cuts in real wages are a reaction to the view that through their demands for higher wages, some groups of workers have priced themselves out of a job Methods of accumulation and dissemination of information on available jobs and workers could be improved -Swedish model, in which job centers have a nationwide, integrated database of jobs, employers, and available employees. This type of database could reduce the time spent by an average worker on the unemployment roll and thus reduce the unemployment rate Unemployment agencies could tighten their job search and job acceptance requirements. Here could be improvements to the education and training provided to young people, with a greater focus on vocational skills.

countries need to ensure that their welfare systems do not provide disincentives to work

Policies affect the labor market by reducing the supply of labor - For example, work sharing, early retirement, and reduced migration.

Generalized income guarantees - Guaranteed Minimum Income (GMI), Negative Income Tax (NIT) and Basic Income. This provides some limited security for those facing unemployment and it provides an income floor below which no one falls without imposing a ceiling beyond which no-one rises. With a Basic Income, because it is a universal payment, people are always advantaged by any extra income obtained.

Government support to struggling industries in order to try to save jobs.

Provide more training and education to the unemployed. This could help improve computer skills and communication. These people will become more confident and employable.

The Government needs to try to create demand in the economy. It could; Give grants to businesses to produce goods have projects such as road building Cut interest rates to encourage spending