Unemployment

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  •  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 

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