Contents show
Meaning of Unemployment
- According to the International Labour Organisation (ILO), unemployment means being out of a job; being available to take a job; and actively engaged in searching for work.
- Therefore, an individual who has lost work but does not look for another job is not unemployed. Thus, unemployment is not synonymous with joblessness.
How the Unemployment Rate is measured?
- The unemployment rate is measured as the ratio of the unemployed to the labour force.
- The labour force is defined as the sum of the employed and the unemployed.
- Those neither employed nor unemployed such as students and those engaged in unpaid domestic work are considered out of the labour force.
- For example, in the US, the employment-to-population ratio (EPR) in 2019 was 60.8, while the unemployment rate was 3.7%. In 2022, the EPR was 60, but the unemployment rate had fallen to 3.6%.
- Even though there were fewer jobs (as a proportion of the total population), the unemployment rate was lower because many individuals had exited the labour force.
- The unemployment rate could also fall if an economy is not generating enough jobs, or if people decide not to search for work.
Different types:
- Frictional unemployment: This occurs when individuals are between jobs or voluntarily transitioning from one job to another.
- Structural unemployment: This arises from a mismatch between the skills and qualifications of workers and the available job opportunities.
- Cyclical unemployment: This stems from economic downturns and fluctuations in business cycles.
Causes of Unemployment in India
Rapid population growth:
- India’s population has been growing at a rapid pace, leading to an increased demand for jobs. The job market struggles to keep up with the growing labor force.
Inadequate skills development:
- There is a significant gap between the skills required for employment and the skills possessed by the workforce. Many individuals lack the necessary training and education to meet the demands of modern industries.
Rigid labor laws:
- India’s labor laws are often considered to be restrictive, making it difficult for businesses to hire and fire employees. This can hinder job creation and discourage investment.
Slow economic growth:
- Economic slowdowns and recessions can lead to business closures and job losses.
Informality of the Indian economy:
- A large portion of the Indian workforce is employed in the informal sector, which is characterized by low wages, poor working conditions, and limited job security.
Impact of Unemployment in India
Unemployment has a profound impact on individuals, families, and society as a whole.
Consequences:
Reduced income and poverty:
- Unemployment leads to a decline in household income, increasing the likelihood of poverty and financial hardship.
Social exclusion and marginalization:
- Unemployed individuals often face social stigma and exclusion, affecting their self-esteem and well-being.
- Unemployment can contribute to increased crime rates, social unrest, and political instability.
Economic loss and underutilization of resources:
- Unemployment represents a loss of potential economic output and underutilization of human resources.
Remedial Measures for Unemployment in India
Addressing the issue of unemployment requires a multi-pronged approach that includes:
- Promoting education and skills development: Investing in education and skills training is crucial to equip the workforce with the necessary skills for employment.
- Reforming labor laws: Making labor laws more flexible and business-friendly can encourage job creation and investment.
- Expanding the formal sector: Encouraging formalization of the informal sector can provide better job security and improve working conditions.
- Enhancing economic growth: Sustained economic growth is essential to create new employment opportunities.
- Promoting entrepreneurship: Fostering an entrepreneurial ecosystem can encourage job creation and self-employment.
- Targeted employment programs: Implementing targeted employment programs for specific groups, such as youth and women, can address their unique challenges in the job market.
Addressing unemployment in India is a complex and ongoing challenge. By implementing comprehensive measures that focus on education, skills development, economic growth, and labor market reforms, India can make significant progress in reducing unemployment and creating a more inclusive and prosperous society.