(IGP) GS Paper 1 – Economic & Social Development – “Unemployment”

Subject – Economic and Social Development
Chapter – Unemployment

Types of Unemployment

• Demand-Deficient or Cyclical Unemployment
  Demand-deficient unemployment occurs when there is not enough demand to
  employ all those who want to work. It is also often known as cyclical
  unemployment because it will vary with the trade cycle.
• Seasonal unemployment
  Seasonal unemployment is fairly self explanatory. In India agricultural
  employment is linked to monsoon and its behaviour. If there is a monsoon
  failure, unemployment results. The effects of seasonal unemployment are
  often highly regionalised.
• Frictional or Search Unemployment
  When a person loses his job or chooses to leave it, he/she will have to look
  for another one. On average it will take everybody a reasonable period of
  time as they search for the right job. This creates unemployment while they
  search. The more efficiently the job market is matching people to jobs, the
  lower this form of unemployment will be. However, if there is imperfect
  information frictional unemployment will be higher.
• Structural Unemployment
  Structural unemployment occurs when the structure of industry changes.
  Structural unemployment occurs when a labour market is unable to provide
  jobs for everyone who wants one because there is a mismatch between the
  skills of the unemployed workers and the skills needed for the available
  jobs.

National Sample Survey Organization (NSSO)

• The NSSO collects data through sample surveys based on scientific technique of
  random sampling through household enquiry both in rural and urban areas.
• National Sample Survey Organisation Concept of work
• The NSSO has defined ‘work’ or’ gainful activity’ as the activity pursued
  for-pay, profit or family gain or in other words, the activity which adds value
  to the national product. Normally, it is an activity, which results ‘in
  production of goods and services for exchange. However, all activities in
  ‘agricultural sector’ in which a part or whole of the agricultural production is
  used for own consumption and does not go for sale are also considered as
  gainful.

Okun’s law

A description of what happens to unemployment when the rate of growth of GDP
changes, based on empirical research by Arthur Okun (1928-80). It predicts that
if GDP grows at around 3% a year, the jobless rate will be unchanged. If it
grows faster, the unemployment rate will fall.

Labour Sector Reforms

Labour sector reforms are a part of the second generation
reforms aimed at making Indian industry competitive in the age of globalization.
The Indian labour scenario today is marked by rigid labour laws. 120 labour
related laws made by Union and State Governments to protect labour which makes
up 8% of the total labour force.

Labour reforms are necessary for the industries for the
following reasons:

• competition from imports in the post-QR regime where the
  foreign countries have-flexible labour laws

• reduced import duties create greater competition for the
  domestic industry

• to cut costs and be productive

• to make the economy export-intensive.

Globlisation & Labour

In response to globalisation, the following developments on
the labour market front are visible in Indian economy today

• other input costs being not amenable to cutting, labour
  has borne the brunt of restructuring process in the search of the employers
  to cut costs and improve profitability

• wage cuts are being offered to workers to retain jobs

• permanent jobs are becoming scarce as companies are
  relying on contract labour for reasons of flexibility and wage gains

• VRSs

• some PSUs signed collective agreements for a 20% job cut.

Trade Union Law Changes

In response to the demands and challenges of the process of
globalization, the Government found it necessary to rationalise the TU laws for
better labour relations and productivity. The changes relate to

• 10% of the total strength of the employees or at least 100 members must
  form a trade union unlike earlier when 7 members sufficed
• curbs on the participation of outsiders in the leadership of the TUs
• restriction in the number of TUs
• promotion of accountability in their functioning- main proper financial
  accounts and conduct elections

NSSO’s 66th Round Survey

• The National Sample Survey Organisation’s (NSSO) latest survey data (66th round)
  for 2010 on employment and unemployment shows a significant slowdown in job
  creation between 2004-05 and 2009- 10- a period of jobless growth. Although the
  country’s real GDP growth averaged a robust 8.6 per cent per annum, the total
  employment growth was only 0.8 per cent per annum over this period compared to
  an annual 2.7 per cent in the previous five year period. The Labour Force
  Participation rate, which is a part of labour force that is ready for
  employment- seeking work (excludes students etc) witnessed a decline to 39.2 per
  cent in 2009-10 from 42 per cent in 2004-05 It is seen that the labour
• participation rate for women dropped much more over this period from
  29.4 per cent to 23.3 per. cent. This appears to be one of the reasons for
  the lower employment growth between 2004- 05 and 2009-10 than between
  1999-2000 and 2004-05.
• The sample size of this 66th round was 1,00,957 households – 59,129 from
  rural areas and 41,828 from urban areas.

Growing Inequalities

• In spite of rising incomes, it is a matter of continuing concern that
  inequalities have also been widening which is a major, challenge relating to
  inclusive growth. The income disparities between the poorest and the richest in
  both rural and urban areas and between urban and rural population are on the
  rise. The current survey reveals that the spending of top 10 per cent of rural
  Indians was 5.76 times more than that of the bottom 10 per cent. This gap was
  slightly lower at 5.63 times during the previous survey period (2004-05).
• In urban India, this inequality has widened much faster. In 2009-10, the top 10
  per cent city-dwellers spent 10.11 times more than what the bottom 10 per cent
  could. In 2004-05, this ratio was 9.14.

12th Plan: Some Employment-Related Ideas

Currently, India is passing through an unpre-cedented phase of demographic
changes. The ongoing demographic changes are likely to contribute to an ever
increasing size of labour force in the country. The Census projection report
shows that the proportion of population in the working age group (15-59 years)
is likely to increase from approximately 58% in2001 to more than 64% by 2021.
But the overall population is not the issue the proportion of population in the
working age group of 15-59 years will increase-from 57.7% to 64.3%. To put it
another way, those in the 15-59 age-group would have increased by about 308
million during the period. The- large numbers of the 15-59 year olds would also
reflect in the workforce. It is estimated that by about 2025 India will have 25%
of the world’s total workforce. But beyond 2025 the numbers of the aged will
begin to increase even more dramatically, and consequently the window of
opportunity is between now and 2025.

National Rural Livelihood Mission

• National Rural Livelihoods Mission (NRLM), one of the major new
  initiatives under the Ministry of Rural Development to bring the poorest of
  the poor above the poverty line by ensuring viable livelihood opportunities
  to them was launched in Banswara, Rajasthan in mid-2011.
• The Mission aims to ensure that at least one member from each identified
  rural poor household, preferably a woman, is brought under the Self Help
  Group (SHG) network in a time bound manner. NRLM would reach out, mobilize
  and support 7 Crore BPL households across 600 districts, 6000 blocks, 2.5
  lakh Gram Panchayats, in 6 lakh villages across the country into their
  self-managed Self Help Groups (SHGs) and their federal institutions and
  livelihoods collectives. It would support them financially and
  institutionally.

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