Unemployment in India

unemployment in India

1. Un-employment in India -Dr. Karishma Chaudhary

2. Current rates Unemployment Rate 27 Sep 2020* India 6.7% Urban 8.4% Rural 5.9%

3. The unemployment rate in India rose to 7.2 percent in February 2019, the highest since September 2016, and also up from 5.9 percent in February 2018, according to the latest data compiled by the Centre for Monitoring Indian Economy (CMIE). What is Unemployment? Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force.

4. National Sample Survey Organization (NSSO) defines employment and unemployment on the following activity statuses of an individual: Working (engaged in an economic activity) i.e. 'Employed'. Seeking or available for work i.e. 'Unemployed'. Neither seeking nor available for work. The first two constitutes labour force and unemployment rate is the percent of the labour force that is without work. Unemployment rate = (Unemployed Workers / Total labour force) × 100

5. Labour Participation Rate Labour Participation Rate defines that section of working population in the economy which is currently employed or seeking employment.

6. State wise unemployment rate(current) Unemployment Rate (%) States  (India) Aug 2020 States  (India) Aug 2020 Andhra Pradesh 7.0 Jharkhand 9.8 Assam 5.5 Karnataka 0.5 Bihar 13.4 Kerala 11.0 Chhattisgarh 5.6 Madhya Pradesh 4.7 Delhi 13.8 Maharashtra 6.2 Goa 16.2 Meghalaya 3.7 Gujarat 1.9 Odisha 1.4 Haryana 33.5 Puducherry 5.0 Himachal Pradesh 15.8 Punjab 11.0 Jammu & Kashmir 11.1 Rajasthan 17.5 Tripura 27.9 Sikkim 12.5 Uttar Pradesh 5.8 Tamil Nadu 2.6 Uttarakhand 14.3 Telangana 5.8 West Bengal 14.9

7. State wise unemployment rates(2017- 2018) https:// www.statista.com /statistics/642853/urban- unemployement -rate-by-state- india /

8. Types of Unemployment in India Disguised Unemployment: It is a phenomenon wherein more people are employed than actually needed. It is primarily traced in the agricultural and the un- organised sectors of India. Seasonal Unemployment: It is an unemployment that occurs during certain seasons of the year. Agricultural laborers in India rarely have work throughout the year. Structural Unemployment: It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market. Many people in India do not get job due to lack of requisite skills and due to poor education level, it becomes difficult to train them. Cyclical Unemployment: It is result of the business cycle, where unemployment rises during recessions and declines with economic growth. Cyclical unemployment figures in India are negligible. It is a phenomenon that is mostly found in capitalist economies.

9. Technological Unemployment: It is loss of jobs due to changes in technology. In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India is 69% year-on-year. Frictional Unemployment: The Frictional Unemployment also called as Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs. In other words, an employee requires time for searching a new job or shifting from the existing to a new job, this inevitable time delay causes the frictional unemployment. It is often considered as a voluntary unemployment because it is not caused due to the shortage of job, but in fact, the workers themselves quit their jobs in search of better opportunities. Vulnerable Employment: This means, people working informally, without proper job contracts and thus sans any legal protection. These persons are deemed ‘unemployed’ since records of their work are never maintained. It is one of the main types of unemployment in India.

10. Unemployement Trap Unemployment trap is a situation when unemployment benefits discourage the unemployed to go to work. People find the opportunity cost of going to work too high when one can simply enjoy the benefits by doing nothing. Description: While the purpose of social security and welfare systems is to provide relief to the unemployed, they end up providing them with an incentive not to return to work. An unemployment trap arises when opportunity cost of going to work is higher than the income received, discouraging people from returning to work and being productive.

11. Cycling Un-employment

12. Cyclical unmeployment Cyclical unemployment happens after an economy enters a period of contraction—that is to say, an economic decline or recession. Cyclical unemployment can be described as a chain of events that starts with a recession. The chain goes as such: First, when an economy goes into a recessionary phase, there is a decrease in demand. As in any recession, consumers are overall less likely to spend. As demand decreases, businesses are forced to lay off workers to make up for losses in sales and reduce expenses. They continue to do this until supply decreases to meet the new demand.

13. The workers who were laid off as a direct result of the decreased demand are the population we look at when we observe cyclical unemployment. Consider the following graph:

14. Causes of Unemployment problem in India Unemployment in India is a complex problem with numerous overlapping and intertwined causes; however, it is possible to identify several key causes. These causes, which vary from macro-level factors (e.g. overall slow economic growth as well as population increases) to more micro-level factors (e.g. the joint family system of business). Understanding the causes of unemployment is the first step in beginning to rectify this major problem and creating a society in which everyone is able to find a sustainable livelihood for themselves and their families

15. 1. The Caste System The caste system—a structure of social stratification that can potentially pervade virtually every aspect of life in India—is a major factor in generating unemployment. In some locations, certain kinds of work are prohibited for members of particular castes. This also leads to the result that work is often given to members of a certain community rather than to those who truly deserve the job—those who have the right skills. The result is higher levels of unemployment.

16. 2. Increased Population Growth Increases in population have been considerable over the half-century. The country’s overall population is made up of more than 1.38 billion people, second only to that of China. It will be the most populous country for the entirety of the 21st century. As the country’s economic growth cannot keep up with population growth, this leads to a larger share of the society being unemployed.

17. 3. Slow Economic Growth Because the Indian economy is relatively underdeveloped, economic growth is considerably slower than it might otherwise be. This means that as the population increases, the economy cannot keep up with demands for employment and an increasing share of people are unable to find work. The result is insufficient levels of employment nationwide.

18. 4. Slow Industrial Growth 4. Slow Industrial Growth Similarly, while industrialization has been considerable, its rate of growth is nevertheless fairly slow. There is a major emphasis on industrialization nationwide, which has elevated the Indian economy; however, industrial growth continues to generate relatively few new jobs overall as compared to increases in population.

19. 5. Seasonality of Agricultural Occupations 5. Seasonality of Agricultural Occupations Agriculture offers unemployment for a large segment of the population, but only for several months out of the year. The result is that for a considerable portion of the year, many agricultural workers lack needed employment and income. More stable sources of income are essential to permit the fulfillment of basic needs.

20. 6. Joint Family System 6. Joint Family System Large family businesses may often involve family members who depend on the family’s joint income but do not contribute substantive work. Although these individuals may appear to be working, they may not actually add anything to the business. The result is that their unemployment is “disguised.” Thus the joint family system may contribute to low productivity. However, this system also offers numerous positive benefits as a social and economic safety net in which those who cannot find work elsewhere can derive support from their families and contribute to their business. It’s likely, then, that this system may offer more benefits than drawbacks.

21. 7. Loss of Small-Scale/Cottage Industries Industrial development has made cottage and small-scale industries considerably less economically attractive, as they do not offer the economies of scale generated by large-scale mass production of goods. Oftentimes the demand for cheap, mass-produced goods outweighs the desire for goods that are handcrafted by those with very specific skill and expertise. The result is that the cottage and small-scale industry have significantly declined, and artisans have become unemployed as a result.

22. 8. Low Rates of Saving and Investment 8. Low Rates of Saving and Investment India lacks sufficient capital across the board. L ikewise , savings are low and the result is that investment—which depends on savings—is also low. Were there higher rates of investment, new jobs would be created and the economy would be kickstarted . Most of population in India works in informal sector with salaries merely to subsistence level. This is also reason of smaller number of tax payer in India. Income level has not increased in India, so poor savings or no savings.

23. 9. Shortage of Means of Production 9. Shortage of Means of Production Production is, quite simply, limited by the amount of materials, equipment, and energy available to fuel it. Shortages of raw materials, facilities, fuel, and electricity means decreased production of goods, which logically results in decreased availability of jobs.

24. 10. Ineffective (or absent) Economic Planning 10. Ineffective (or absent) Economic Planning This is a major source of unemployment in India. Problematically, there were no nationwide plans to account for the significant gap between labor supply (which is abundant) and labor demand (which is notably lower). It is crucial that the supply and demand of labor be in balance to ensure that those who need jobs are able to get them; otherwise, many individuals will compete for one job.

25. 11. Expansion of Universities 11. Expansion of Universities The numbers of white-collar workers have increased as well. This is due in part to the fact that the number of universities in India has increased in recent decades—currently, there are roughly 385 universities throughout the country. The result is that more people are educated and become white-collar workers, while unfortunately, the supply of white-collar jobs does not match their numbers

26. 12. Inadequate Access to Irrigation 12. Inadequate Access to Irrigation In recent years, less than half—only 39%—of India’s total cultivable land has access to irrigation. This means, then, that large areas of land can only grow one crop per year. Many farmers are unemployed for the majority of the year, during this off-season, due to lack of irrigation facilities.

27. 13. Labor Immobility 13. Labor Immobility Culturally, attachment and maintenance of proximity to family is a major priority for many Indian citizens. The result is that people avoid traveling long distances from their families in pursuit of employment. Additionally, language, religion, and climate can also contribute to low mobility of labor. As one might expect, when many of those who might otherwise be suited to jobs are unable to travel to reach them, unemployment is magnified. *Immobility of labour is not 100 % true, in covid-19 one must have seen huge number of migrated labourers .

28. Contractualization

29. Summary Large population. Low or no educational levels and vocational skills of working population. Inadequate state support, legal complexities and low infrastructural, financial and market linkages to small/ cottage industries or small businesses, making such enterprises unviable with cost and compliance overruns. Huge workforce associated with informal sector due to lack of required education/ skills, which is not captured in any employment data. For ex: domestic helpers, construction workers etc. The syllabus taught in schools and colleges, being not as per the current requirements of the industries. This is the main cause of structural unemployment. Inadequate growth of infrastructure and low investments in manufacturing sector, hence restricting employment potential of secondary sector . Low productivity in agriculture sector combined with lack of alternative opportunities for agricultural worker which makes transition from primary to secondary and tertiary sectors difficult. Regressive social norms that deter women from taking/continuing employment.

30. Impact Impact The problem of unemployment gives rise to the problem of poverty . Young people after a long time of unemployment indulge in illegal and wrong activities for earning money. This also leads to increase in crime in the country . Unemployed persons can easily be enticed by antisocial elements. This makes them lose faith in democratic values of the country. It is often seen that unemployed people end up getting addicted to drugs and alcohol or attempts suicide, leading losses to the human resources of the country . It also affects economy of the country as the workforce that could have been gainfully employed to generate resources actually gets dependent on the remaining working population, thus escalating socioeconomic costs for the State. For instance, 1 percent increase in unemployment reduces the GDP by 2 percent

31. Schemes Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA): It is an employment scheme that was launched in 2005 to provide social security by guaranteeing a minimum of 100 days paid work per year to all the families whose adult members opt for unskilled labour-intensive work. This act provides Right to Work to people. Pradhan Mantri Kaushal Vikas Yojana (PMKVY), launched in 2015 has an objective of enabling a large number of Indian youth to take up industry-relevant skill training that will help them in securing a better livelihood. Start Up India Scheme, launched in 2016 aims at developing an ecosystem that promotes and nurtures entrepreneurship across the country. Stand Up India Scheme, launched in 2016 aims to facilitate bank loans between Rs 10 lakh and Rs . 1 crore to at least one SC or ST borrower and at least one women borrower per bank branch for setting up a greenfield enterprise.

32. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) National Rural Employment Guarantee Act 2005 (or, NREGA No 42, later renamed as the “Mahatma Gandhi National Rural Employment Guarantee Act”, MGNREGA), is an Indian labour law and social security measure that aims to guarantee the ‘right to work’. It aims to enhance livelihood security in rural areas by providing at least 100 days of wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. The act was first proposed in 1991 by P.V. Narasimha Rao. In 2006, it was finally accepted in the parliament and commenced implementation in 625 districts of India. Based on this pilot experience, NREGA was scoped up to covered all the districts of India from 1 April 2008.The statute is hailed by the government as “the largest and most ambitious social security and public works programme in the world”.In its World Development Report 2014, the World Bank termed it a “stellar example of rural development”.

33. The MGNREGA was initiated with the objective of “enhancing livelihood security in rural areas by providing at least 100 days of guaranteed wage employment in a financial year, to every household whose adult members volunteer to do unskilled manual work”.Another aim of MGNREGA is to create durable assets (such as roads, canals, ponds, wells). Employment is to be provided within 5 km of an applicant’s residence, and minimum wages are to be paid. If work is not provided within 15 days of applying, applicants are entitled to an unemployment allowance. Thus, employment under MGNREGA is a legal entitlement. MGNREGA is to be implemented mainly by gram panchayats (GPs). The involvement of contractors is banned. Labour -intensive tasks like creating infrastructure for water harvesting, drought relief and flood control are preferred. Apart from providing economic security and creating rural assets, NREGA can help in protecting the environment, empowering rural women, reducing rural-urban migration and fostering social equity, among others.

34. Way Forward Way Forward There are number of labour intensive manufacturing sectors in India such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments. Special packages, individually designed for each industry are needed to create jobs. Public investment in sectors like health, education, police and judiciary can create many government jobs. Decentralisation of Industrial activities is necessary so that people of every region get employment. Development of the rural areas will help mitigate the migration of the rural people to the urban areas thus decreasing the pressure on the urban area jobs. Entrepreneurs generate employments to many in a country; therefore government needs to encourage entrepreneurship among the youth . Concrete measures aimed at removing the social barriers for women’s entry and their continuous participation in the job market is needed. Government needs to keep a strict watch on the education system and should try to implement new ways to generate skilled labour force.

35. Way Forward Contd … Effective implementation of present programs like Make in India, Skill India, Start up and Stand-Up India. There is a need for National Employment Policy (NEP) that would encompass a set of multidimensional interventions covering a whole range of social and economic issues affecting many policy spheres and not just the areas of labour and employment. The policy would be a critical tool to contribute significantly to achieve the goals of the 2030 Agenda for Sustainable Development. The underlying principles for the National Employment Policy may include enhancing human capital through skill development; creating sufficient number of decent quality jobs for all citizens in the formal and informal sectors to absorb those who are available and willing to work; strengthening social cohesion and equity in the labour market; coherence and convergence in various initiatives taken by the government; supporting the private sector to become the major investor in productive enterprises; supporting self-employed persons by strengthening their capabilities to improve their earnings; ensuring employees’ basic rights and developing an education training and skill development system aligned with the changing requirements of the labour market.

36. Rate of Unemployment in India

37. COVID-19 Lockdown Effect: Unemployment Rate Over 23%

38. How years of jobless growth have come back to haunt India during Covid-19 pandemic Millions of Indians have lost jobs in the formal sector since April due to the economic stress caused by novel coronavirus. However, the pandemic is not the only reason behind the ongoing job crisis in the country.

39. GROWTH HURDLE Five months into the lockdown, India has witnessed a sharp decline in the number of jobs in the formal sector — the largest source of salaried employment in the country. Even after unlocking the economy, there has been no improvement in the salaried jobs space. The government has cited the unprecedented economic crisis behind the job situation in the country. However, the coronavirus pandemic may not be the only reason why salaried jobs — one of the most secure forms of employment — are losing prominence in India. Unemployment in the country had been a problem since 2017-18. A government job survey, whose publication was delayed just ahead of 2019 Lok Sabha election, showed how the country’s unemployment reached a four-decade high of 6.1 per cent in 2017-18.

40. The report noted that unemployment was higher in urban areas in comparison to rural areas — an indication that salaried jobs have been dwindling in India for at least three years.

41. Data show that despite India’s rapid growth before 2019, salaried jobs grew at a snail’s pace. Salaried jobs grew from 21.2 per cent in 2016-17 to just 21.6 per cent in 2017-18. It inched to 21.9 per cent in 2018-19. But the period of jobless growth hit a roadblock in 2019-20 when salaried employment fell to 21.3 per cent. The CMIE explained that the stagnation in the salaried job market in spite of India’s economic growth in recent years is not the only anomaly. The CMIE found it “equally odd” that India has been witnessing a rapid increase in entrepreneurship without any increase in salaried jobs. It is no secret that entrepreneurship has been rising in India over the past years. By FY20, India had over 7.8 crore entrepreneurs. But surprisingly, the increase in entrepreneurship did not add more salaried jobs which remained steady at 8.6 crore. This indicates that much of the entrepreneurship growth in India was self-employed and consisted only of very small-scale businesses.

42. THE URBAN JOB MELTDOWN The fact that all salaried jobs put together account for just 21-22 per cent of total employment in India is worrying as it directly impacts a large share of private consumption. “There are many more farmers than salaried jobs. And, there are even more daily wage labourers . Farmers and daily wage earners together account for nearly two-thirds of the Indian working population,” said CMIE.

43. It indicates that a large part of India’s workforce is employed by the informal sector, where it is easy comparatively easier to get jobs. However, such form of employment heavily depends on demand originating from the urban economy, comprising mostly of salaried jobs. With the sudden meltdown of salaried jobs in India, the informal economy is also feeling the heat with thousands of small-scale traders and hawkers shutting shop.

44. Only the rural economy has seen a steady rise during the lockdown period as farming became the last resort for those who lost their urban jobs. Most daily wage labourers who were forced to return to their native places were the main reason behind a 14 million rise in farm employment. However, rural growth is not enough for an economy which needs at least 10 lakh formal jobs to be created every year to support the country’s rising youth population. Salaried job holders working in urban areas are among the worst-hit workers during the coronavirus pandemic in India.

45. Un- Employement Rate January to May 2020( CoVID 19)

46. According to the latest report by think-tank Centre for Monitoring Indian Economy (CMIE) the employment rate had fallen to an all-time low of 38.2 percent in March 2020. It stated, “The fall since January 2020 is particularly steep – almost spectacular. It seems to have nosedived in March after having struggled to remain stable over the past two years. Then, there is a precipitous fall.” Further, CMIE also pointed out that the labour participation rate in March this year was 41.9 percent, as compared to 42.6 percent in February, suggesting the fall happened even before the lockdown.

47. Lockkdown impact: Every fourth person in India is unemployed Urban India is ailing more with 26.3 per cent of unemployment while rural parts of the country have reported 23.7 per cent of the unemployment rate ban India is ailing more with 26.3 per cent of unemployment while rural parts of the country have reported 23.7 per cent of the unemployment rate.

48. Rural unemployment was expected to increase as the industries were allowed to restart as well as MNREGA works to have started after May 17. The states with more industrial units like Maharashtra, Karnataka, and Gujarat saw a steep decline in employment post lockdown. Gujarat had an unemployment rate of 6.7 in March which shot up to 18.7 in April. Maharashtra saw more than a three-fold increase from 5.8 to 20.9 per cent. Karnataka, on the other hand, reported 29.8 per cent of unemployment in April from a mere 3.5 per cent in March. The state has one of the best track records in keeping the unemployment rate low for years.

49. The migrant source states – Bihar (46.6) and Jharkhand (47.1) – have reported more than 50 per cent unemployment for the current month. Odisha reported a 23.8 per cent rate while UP reported 21.5 per cent of the unemployment rate. Tamil Nadu has the highest rate of unemployment for the current month at 49.8 per cent. The ground reality could be worse. The reason could be the ‘disguised unemployment’ which gets slipped off during the normal calculation. Disguised unemployment means when the labour is employed within a company or institution but is not actually contributing to the output of the organization. This had been the case for many industries for over two months. Thus, the crisis looks much bigger.

50. Reasons of fall During COVID 19 Reductions in trade As countries face enduring lockdowns across the globe, unemployment is rising each day as quality of life decreases for many. Aside from this, loss of livelihood is a loss of access to goods, as many nations have experienced reduced availability of products due to stricter border controls and trading mechanisms. Many across the developing world are employed via the informal sector in marketplaces that are now closed due to social distancing efforts and lockdowns. Hence more needs to be done to not only boost employment but to restock the marketplace domestically.

51. Solution Investing locally To remedy this, the panel spoke about the need for governments to invest in local production of goods via innovation and industrialization. This increase in domestic production has the potential to not only to support and formalize the work done by many in the informal sector but also bides against future shortages given that the supply of goods would be domestic, thereby lessening the chance of supply side disruptions.                     

52. Looking out for the most vulnerable With growing unemployment, more and more people are being pushed into poverty, reversing the global progress on ending poverty back to pre-1998 levels. With a totalizing effect on society, governments must make a real effort to look after the most vulnerable. The panel pointed to the need for development of tailor-made fiscal policies specifically intended to help certain subsets of the population, such as youth and women. These relief efforts present an opportunity for countries to address the underlying issues in society such as gender pay inequality, and youth underemployment. As vulnerable subsets of the population are dealing with unique obstacles in attaining economic agency, the policies to remedy them must be equally unique to create true change.

53. Building back better Lastly, in the fight against COVID-19 the panel spoke about the need for coordination and collaboration amongst countries. In this new world order, unprecedented action needs to be taken in ensuring no country is left to languish in their fight against the virus.

54. Current The unemployment rate fell to its pre-lockdown level of 8.5% in the week ended June 21, led by big gains in the rural areas, economic think tank Centre for Monitoring Indian Economy (CMIE) said. The rate had gone up from 8.75% in March to 23.5% in April and May. It had peaked at 27.1% in the week ended May 3. The CMIE survey showed the gains in rural areas may even be bigger in the months ahead. The latest data on the jobs front provides huge relief to the government which has been grappling with job losses due to the coronavirus pandemic.

55. Current

56. https:// timesofindia.indiatimes.com /business/ india -business/cmie-unemployment-rate-back-to-pre-lockdown-level-of-8-5/ articleshow /76540727.cms

57. https:// unemploymentinindia.cmie.com /