Unemployment

•  People are ready to work – Labour Force or Work Force.
• Employed – People who got work.
• Unemployed – People ready to work, people searching for work still not get job.
• People are not ready to work (Children, Old people & People voluntarily not go to work) – Not a Labour Force.

Measuring Unemployment

A Working Definition of Unemployment

• People able, available and willing to find work and actively seeking work – but not employed
• The unemployed are included in the labour force

The Labour Force Survey (ILO measure)

• An internationally agreed standard measure of unemployment
• Must have actively sought work in the previous four weeks and be available to start work immediately

Measuring Unemployment

• Usual Principal Status – 1 Year – Major Part
• Current Weekly Status – 1 Week – 1 Hour
• Current Daily Status – 1 Week – Day basis – 4 Hours

Types of Unemployment

Structural Unemployment

• Structural Issues.
• Arises from the mismatch of skills and job opportunities as the pattern of labour demand in the economy changes. Ex: People have type writing skill but java is required.
• Occupational immobility of labour.
• Often involves long-term unemployment.
• Prevalent in regions where industries go into long-term decline.
• Good examples include industries such as mining, engineering and textiles

Frictional Unemployment  

• Transitional unemployment due to people moving between jobs: Includes people experiencing short spells of unemployment
• Includes new and returning entrants into the labour market
• Imperfect information about available job opportunities can lengthen the period of someone’s job search.

Cyclical unemployment

(Unemployment developed cyclic based on Boom & Recession of Economy)

• There is a cyclical relationship between demand, output, employment and unemployment
• Caused by a fall in aggregate demand leading to a loss of real national output and employment
• A slowdown or recession in economy can lead to businesses laying off workers because they lack confidence that demand will recover

Disguised Unemployment

(1 people is enough for the work, but 4 people work on it. Ex: Agriculture, Family store)

• There are also instances where we find too many people working when so many are not required.
• In agriculture we may find that all members of the family work.
• It is possible that 3-4 people can do a given work in the farm, but we find that the whole family of say 10 people doing the job.

Seasonal Unemployment

(Ex: Agriculture, Construction etc…)

•     During the peak agricultural seasons (when the crop is ready for harvesting) more people are required for work.
• Similarly, in the sowing, weeding and transplantation period more labour is required.
• unemployment therefore increases at this time. In fact, we will find that there is hardly any unemployment in rural areas during these peak agricultural seasons.
• However, once these seasons are over the agricultural workers remain unemployed.
• This type of unemployment is known as seasonal unemployment

Educated Unemployment

• A person who is educated/ trained and skilled, fails to obtain a job suited to his qualification, then its educated unemployment

Under Employment

• It refers to underutilization of man power available both in terms of time and skill.

Voluntary Unemployment

• People who are unwilling to work at prevailing wage rate and people who get a continuous flow of income from their property or any other sources and need not to work, such people are voluntarily unemployed. 

Unemployment

Natural Unemployment

• It is raging between 2 to 3 % in the country is considered natural and inevitable.
• It is minimum percentage of unemployment which cannot be eliminated at all.

Real Wage Unemployment

(Ex: 15,000 salary is enough for job but 20,000 is give and employed 10 people. The cost is 2,00,000. So fire 3 person and get work, increase Burdon on the 7 people. The cost is now 1,40,000. It is theoretical concept to calculate minimum wage.)

• Created when real wages are maintained above their market clearing level leading to an excess supply of labour at the prevailing wage rate
• Some economists believe that unemployment can be created if the national minimum wage is set too high.

Technological unemployment

(Ex: Computer developed cause unemployment)

• It is the loss of jobs caused by technological change.
• Such change typically includes the introduction of labour-saving machines or more efficient processes.

Causes of Unemployment in India

• Rapid Population Growth
• Limited Land
• Seasonal Agriculture
• Fragmentation of Land
• Backwardness of Agriculture
• Decline of Cottage Industries
• Defective education system & poor quality
• Absence of Skills
• Inadequate Employment Planning
• Poor growth of manufacturing sector
• Skipping of Manufacturing sector & Jumping to Service
• Demonetisation, COVID 19

Consequences of Unemployment

The private costs for the unemployed

• Loss of income
• Fall in real living standards
• Increased health risks
• Stress
• Reduction in quality of diet
• Social exclusion because of loss of work and income
• Loss of marketable skills (human capital) and motivation
• The longer the duration of unemployment, the lower the chances of finding fresh employment - the unemployed become less attractive to potential employers

Economic Consequences for Businesses

• Negative consequences
• Fall in demand for goods and services
• Fall in demand for businesses further down the supply chain
• Consider the negative multiplier effects from the closure of a major employer in a town or city

Consequences for the Government (Fiscal Policy)

• Increased spending on unemployment benefits and other income –related state welfare payments
• Fall in revenue from income tax and taxes on consumer spending
• Fall in profits – reduction in revenue from corporation tax
• May lead to rise in government borrowing (i.e. a budget deficit)

Consequences for the economy as a whole

• Lost output (real GDP) from people being out of work – the economy will be operating well within its production frontier
• Some of the long-term unemployed may leave the labour force permanently – fall in potential GDP
• Increase in the inequality – rise in relative poverty