Unemployment: Types, Causes & Consequences

Unemployment refers to the situation where an individual actively seeking employment is unable to secure a job. It is often used as an indicator of overall economic well-being. The National Statistical Office (NSO) defines employment and unemployment based on specific activity statuses:

Employed: Individuals who are currently engaged in economic activities.

Unemployed: Individuals who are seeking or available for work but are currently without employment.

Not seeking or available for work: Individuals who are neither actively seeking nor available for employment.

The combination of employed and unemployed individuals forms the labor force, and the unemployment rate is calculated as the percentage of the labor force without work.

The formula for calculating is: Unemployment Rate = (Number of Unemployed Workers / Total Labor Force) × 100

Types of Unemployment

Disguised: This occurs when more people are employed than necessary, commonly found in the agricultural and unorganized sectors of India.

Structural: It arises from a mismatch between job opportunities available in the market and the skills possessed by the available workforce. Lack of required skills and inadequate education often hinder job prospects for many individuals in India.

Cyclical: This type fluctuates with the business cycle, increasing during recessions and decreasing during periods of economic growth. Cyclical unemployment is more prevalent in capitalist economies.

Technological: It occurs when jobs are lost due to technological advancements. In India, the World Bank predicted in 2016 that automation could threaten 69% of jobs.

Causes of Unemployment in India

This can be attributed to various factors, both structural and cyclical. Here are some of the major causes:

1. Population Growth: The supply of labor surpasses the available job opportunities, leading to higher unemployment rates.
2. Lack of Skill Development: There is often a mismatch between the skills possessed by the workforce and the skills demanded by the industries, resulting in high unemployment rates, particularly among the youth.
3. Slow Industrial Growth: Limited investment in industries can lead to fewer job opportunities, exacerbating the existing situation.
4. Agricultural Dependence: Overdependence on agriculture, coupled with limited diversification into other sectors, contributes to high unemployment rates.
5. Technological Advancements: As technology replaces manual labor, certain jobs become obsolete, leaving workers unemployed.
6. Economic Disparities: Some areas lack adequate infrastructure, industries, and job opportunities, leading to higher unemployment rates in those regions.
7. Inadequate Education System: The education system in India often struggles to provide practical skills and job-oriented training, leading to a gap between education and employment.
8. Informal Sector Dominance: A significant portion of employment in India is in the informal sector, which lacks job security, social security benefits, and stable income. Informal sector workers face uncertain employment prospects, contributing to overall unemployment.

It’s important to note that the causes are multifaceted, and addressing the issue requires comprehensive strategies that address education and skill development, promote industrial growth, encourage investment, and create an enabling environment for job creation.

Consequences of Unemployment

Being unemployed in India can have several consequences on individuals and society as a whole. Here are some of the common consequences:

1. Financial Difficulties: This leads to a lack of regular income, making it difficult for individuals to meet their basic needs and sustain a decent standard of living.
2. Reduced Purchasing Power: It decreases personal purchasing power, as individuals have limited or no income to spend on goods and services.
3. Social Stigma and Psychological Impact: It can result in social stigma and a sense of social exclusion. Individuals may face criticism, low self-esteem, and psychological stress due to the inability to find work.
4. Increased Inequality: The lack of job opportunities and income disparities can widen the gap between the rich and the poor, leading to social unrest and dissatisfaction.
5. Brain Drain: Qualified professionals may seek employment opportunities abroad, causing a loss of skilled workforce and hindering the country’s overall development.
6. Social Unrest: Frustrations arising from a lack of jobs can manifest in protests, strikes, and demonstrations, demanding better employment opportunities and government intervention.
7. Economic Burden: The government has to bear the burden of providing social welfare programs, unemployment benefits, and job creation initiatives. Additionally, the loss of productive human capital hampers economic growth and development.

Government Policies to Address Unemployment

The Government of India has taken several measures:

• One such initiative is the Mahatma Gandhi National Rural Employment Guarantee Scheme. Under this scheme, unemployed individuals are guaranteed 100 days of employment in a year. It has been implemented in 200 districts and will be expanded to 600 districts. People working under this scheme receive a daily wage of 150 rupees.
• To tackle disguised unemployment, where there are more people employed than necessary, the government has focused on sectors other than agriculture. The surplus labor from agriculture has shifted to industries like small-scale manufacturing and emerging service sectors such as biotechnology and information technology.
• The National Career Service Scheme has been initiated by the government and includes a web portal called the National Career Service Portal. Job-seekers and employers can use this platform to search for and update job information. It covers both private and contractual job opportunities in the government sector.
• The National Rural Employment Programme aims to provide equal job opportunities to people in rural areas across the country. This helps reduce the disparity in personal finances between rural and urban areas and prevents excessive migration to urban areas, which can strain urban management.
• The Deen Dayal Antyodaya Yojana is a scheme implemented by the Ministry of Rural Development. It aims to support the poor by providing them with skills recognized by industries. The goal is to alleviate urban and rural poverty by equipping individuals with the necessary skills to find well-paying jobs.

Conclusion

The unemployment rate in India inched higher to 7.45% in February 2023, taking the total number of unemployed in the country to 33 million. India needs to make dedicated efforts in order to decrease the number of unemployed people.

By following a comprehensive approach including skilling of people, better education, increased focus on labor-intensive sectors, etc. India will be able to decrease the unemployment rate substantially.

Frequently Asked Questions (FAQs)

Source: https://www.rba.gov.au/education/resources/explainers/unemployment-its-measurement-and-types.html

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