Prof. Prabha PanthOsmania University,

Hyderabad

UNEMPLOYMENT

1 May 2023

Unemployment• Unemployment (or joblessness) – when

people want to work, but are without jobs.• Rate of Unemployment :

= Number of unemployed x 100%

Labour force• Labour force: all those in the working age

category (18 -65 years old), who are actively employed or seeking employment.

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Types of Unemployment1) Voluntary Unemployment.2) Involuntary Unemployment.

1) Voluntary unemployment:• Unemployed due to his/her own desire. • Either wants higher wages or does not want to

work at all. • Self-imposed situation.• Due to personal reasons, family problems,

illness, or no inclination to work.3

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2) Involuntary unemployment:• Persons want to work, but do not get a job.• Willing and Capable of working• Number of jobs < number of willing workers.• Or, types of jobs skills of workers.• Here government policy is required:

o To create the required kinds of jobs,o To hire workers to reduce unemployment

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Types of Involuntary Unemployment1. Structural Unemployment:• Due to change in technology, • Mismatch between skills of workers and job

requirement . E.g. computers ~ typewriters, or autos ~ rickshaws.

• Time required to learn new skills.• Older employees may be removed to give

chance to more skilled workers.

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Types of Involuntary Unemployment2. Cyclical unemployment:• Recession: slowing down or negative growth,

leads to retrenchment of workers.• Factories and businesses close down due to

lack of demand.• Wages and incomes fall, aggregate D falls,• Further retrenchment.• Leads to Economic Depression (2008, 1929)

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Types of Involuntary Unemployment3. Frictional unemployment:• Temporary unemployment.• Between shift from current job to a new job, • Workers seek higher wages, working and living

conditions.4. Seasonal unemployment:• Type of frictional unemployment --- work available in

only specific seasons.• Agriculture: more employment during sowing and

harvesting seasons, unemployment between seasons.

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Types of Involuntary Unemployment5. Underemployment (Educated

unemployment):• People with high qualifications, working in

jobs requiring lower qualifications.• Due to lack of job opportunities.• E.g. Ph. D working as primary school teachers.6. Chronic unemployment:• Continuously unemployed for at least two

years, due to any of above reasons.8

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Types of Involuntary Unemployment7. Disguised

Unemployment:• In underdeveloped

countries – more labour employed in agriculture than needed.

• Extra labour’s MP 0• If removed TP will actually

increase.• Extra L can be used more

productively elsewhere – for capital formation.

9

Q

0 L

MPL

MP =0

A

Disguisedunempt

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• Unemployment and Non-employment:Prof. Gautam Mathur definition: • Unemployed – those previously employed,• But lost their jobs. During recession.• Mostly in developed countries.• Non-employment:• Who were never employed. • Mostly in less developed countries.

Types of Involuntary Unemployment

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Measurement and Policies to reduce Unemployment

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Measurement of Unemployment• National Sample Survey Organisation (NSSO)

estimates unemployment. 5 yearly survey.• Three measures to estimate unemployment.1. Usual Status (US) basis, unemployed for the major

part of the reference year. Shows Long term and Open unemployment.2. Current Weekly Status (CWS), • persons who have not worked during an entire week.• Ignores those unemployed for less than a week.

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Measurement of Unemployment

3. Current Daily Status (CDS): • Proportion of labour force that is unemployed per

day.• Measured in terms of number of hours worked per

day.• 4 hours or < is half day employment.• More than 4 hours a day = full day employment.

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Unemployment in India• Unemployment rates in India

o 1983 to 2009: average 7.6%o 2009 : 9.4% (Maximum)o 2011: 3.8%.

• Higher rates of unemployment in:o Urban areas than in rural areasoWomen than for meno Educated than uneducatedo Youth than older persons

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Unemployment in India (% of total labour force)1994 2000 2004 2005

Youth (15-24 yrs) 8.2 10 10.53 10.5

Primary education 34.7 29.5 30 29

Secondary education 38.1 40.4 38.3 37.7

Tertiary education 27.3 30.1 31.6 33.3

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Measures to increase Employment

1. Mahatma Gandhi National Rural Employment Guarantee Act MGNREGA (2005-6): o To provide at least 100 days guaranteed wage

employment in a year @ Rs.130/dayo adult members in a householdo Unskilled manual work.o Panchayat Raj Institutions monitor NREGA,o 33 percent participation for women.

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• Aim: To prevent chronic poverty from drought, deforestation and soil erosion, encourage sustainable development.

• 90% of cost borne by Centre• 10% by State Government.

MGNREGANo. of

householdsEmployment

(Person days in lakhs)

year

2006-07 21,016,099 9,050.5

2007-08 33,909,132 14,368.0

2008-09 45,115,358 21,632.9

2009-10 52,585,999 28,359.6 17

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2. Prime Minister’s Employment Generation Programme (PMEGP) 2008

• credit linked subsidy programme of Government of India.

• By merging Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP).

• To Individual Entrepreneurs, Institutions, Co-operative Societies, Self Help Groups, Trusts.

• Rs. 10-25 lakhs credit, payback from 3rd year.

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3. Rajiv Yuva Kiranalu (Govt. of AP) to build job specific skills among unemployed and place them in appropriate private jobs.

• The mission proposes to employ 15 lakh youth in jobs in the private industry by 2014.o Employment given to Youth: 2,18,008 o Under Training Youth: 33,348

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