Introduction
Unemployment (or joblessness), as defined by the International Labour Organization, occurs when people are without jobs and they have actively looked for work within the past four weeks.[1] The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.
India is a developing economy, the nature of unemployment, therefore, sharply differs from the one that prevails in industrially advanced countries. Lord Keynes diagnosed unemployment in advance economies to be the result of a deficiency of effective demand. It implied that in such economies machines become idle and demand for labour falls because the demand for the products of industry is no longer there. Thus, Keynesian remedies of unemployment concentrated on measures to keep the level of effective demand sufficiently high so that the economic machine does not slacken the production of goods and services.[2]
This type of unemployment caused by economic fluctuations did arise in India during the depression in the 1930’s which caused untold misery. But with the growth of Keynesian remedies, it has been possible to mitigate cyclical unemployment. Similarly, after the Second World War, when war-time industries were being closed, there was a good deal of frictional unemployment caused by retrenchment in the army, ordinance factories, etc. These workers were to be absorbed in peacetime industries. Similarly, the process of rationalisation which started in India since 1950, also caused displacement of labour. The flexibility of an economy can be judged from the speed with which it heals frictional unemployment.
Types of Unemployment
Unemployment can be categorised as structural unemployment, frictional unemployment, seasonal unemployment, cyclical unemployment, classical unemployment, disguised unemployment, residual unemployment, and technological unemployment. Though there have been several definitions of voluntary and involuntary unemployment in the economics literature, a simple distinction is often applied. Voluntary unemployment is attributed to the individual's decisions, whereas involuntary unemployment exists because of the socio-economic environment (including the market structure, government intervention, and the level of aggregate demand) in which individuals operate. In these terms, much or most of frictional unemployment is voluntary, since it reflects individual search behaviour. Voluntary unemployment includes workers who reject low wage jobs whereas involuntary unemployment includes workers fired due to an economic crisis, industrial decline, company bankruptcy, or organizational restructuring. On the other hand, cyclical unemployment, structural unemployment, and classical unemployment are largely involuntary in nature. However, the existence of structural unemployment may reflect choices made by the unemployed in the past, while classical (natural) unemployment may result from the legislative and economic choices made by labour unions or political parties. [3]
Estimates of Unemployment in India
A large number of workers are forced to remain jobless in rural and urban areas is rue and beyond dispute. The precise estimate of the size of the problem could not be traced out at any cost. How many workers are generally unemployed in India in different types of labour markets and for how long? Nobody could possibly give any factual information with confidence.
The Committee of Experts on Unemployment under the chairmanship of B. Bhagwati in its report submitted to the Government in May 1973, observed: On the basis of the data, the likely number of unemployed in 1971 may be reasonably taken at 18.7 million including 9 million who were without any job whatsoever and 9.7 million who work for less than 14 hours per week may be treated at par with the unemployed. [4]
Contrary to popular belief, the incidence of rural unemployment is very low in several agriculturally less developed States of India. However, because of low wages, incidence of poverty is likely to be much higher in these States. The main plank of public policy aimed at improving the levels of income and living standards of rural poor in these States should, therefore, be on the development of agriculture, small-scale agro-based industries, helping rural poor to set up subsidiary occupations, and proper enforcement of minimum wages in agriculture. Effective organization of landless workers into unions may also help in protecting their real incomes. (ii) The experience of Kerala, however, warns against excessive militancy on the part of agricultural workers' unions. In the absence of alternative employment opportunities elsewhere, substantial wage-hikes may result in higher incidence of unemployment and redistribution of poverty among agricultural labourers. (iii) Large-scale mechanization of various agricultural operations seems to be displacing human labour in the Punjab. Landless agricultural labourers are not able to get gainful employment for their available man-days. The incidence of rural unemployment may increase further if farmers increasingly adopt mechanization and if youths and females have to join the labour force to protect and augment their real household income to meet inflationary price rise as well as their rising expectations. [5]
Causes of Unemployment
The major causes which have been responsible for the wide spread unemployment can be spelt out as under.
1) Rapid Population Growth: It is the leading cause of unemployment in Rural India. In India, particularly in rural areas, the population is increasing rapidly. It has adversely affected the unemployment situation largely in two ways. In the first place, the growth of population directly encouraged the unemployment by making large addition to labour force. It is because the rate of job expansion could never have been as high as population growth would have required. It is true that the increasing labour force requires the creation of new job opportunities at an increasing rate. But in actual practice employment expansion has not been sufficient to match the growth of the labour force, and to reduce the back leg of unemployment. This leads to unemployment situation secondly; the rapid population growth indirectly affected the unemployment situation by reducing the resources for capital formation. Any rise in population, over a large absolute base as in India, implies a large absolute number. It means large additional expenditure on their rearing up, maintenance, and education. As a consequence, more resources get used up in private consumption such as food, clothing, shelter and son on in public consumption like drinking water, electricity medical and educational facilities. This has reduced the opportunities of diverting a larger proportion of incomes to saving and investment. Thus, population growth has created obstacles in the way of first growth of the economy and retarded the growth of job opportunities.
2) Limited land: Land is the gift of nature. It is always constant and cannot expand like population growth. Since, India population increasing rapidly, therefore, the land is not sufficient for the growing population. As a result, there is heavy pressure on the land. In rural areas, most of the people depend directly on land for their livelihood. Land is very limited in comparison to population. It creates the unemployment situation for a large number of persons who depend on agriculture in rural areas.
3) Seasonal Agriculture: In Rural Society agriculture is the only means of employment. However, most of the rural people are engaged directly as well as indirectly in agricultural operation. But, agriculture in India is basically a seasonal affair. It provides employment facilities to the rural people only in a particular season of the year. For example, during the sowing and harvesting period, people are fully employed and the period between the post-harvest and before the next sowing they remain unemployed. It has adversely affected their standard of living.
4) Fragmentation of land: In India, due to the heavy pressure on land of large population results the fragmentation of land. It creates a great obstacle in the part of agriculture. As land is fragmented and agricultural work is being hindered the people who depend on agriculture remain unemployed. This has an adverse effect on the employment situation. It also leads to the poverty of villagers.
5) Backward Method of Agriculture: The method of agriculture in India is very backward. Till now, the rural farmers followed the old farming methods. As a result, the farmer cannot feed properly many people by the produce of his farm and he is unable to provide his children with proper education or to engage them in any profession. It leads to unemployment problem.
6) Decline of Cottage Industries: In Rural India, village or cottage industries are the only mans of employment particularly of the landless people. They depend directly on various cottage industries for their livelihood. But, now-a-days, these are adversely affected by the industrialisation process. Actually, it is found that they cannot compete with modern factories in matter or production. As a result of which the village industries suffer a serious loss and gradually closing down. Owing to this, the people who work in there remain unemployed and unable to maintain their livelihood.
7) Defective education: The day-to-day education is very defective and is confirmed within the class room only. Its main aim is to acquire certificated only. The present educational system is not job oriented, it is degree oriented. It is defective on the ground that is more general then the vocational. Thus, the people who have getting general education are unable to do any work. They are to be called as good for nothing in the ground that they cannot have any job here; they can find the ways of self-employment. It leads to unemployment as well as underemployment.
8) Lack of transport and communication: In India particularly in rural areas, there are no adequate facilities of transport and communication. Owing to this, the village people who are not engaged in agricultural work are remained unemployed. It is because they are unable to start any business for their livelihood and they are confined only within the limited boundary of the village. It is noted that the modern means of transport and communication are the only way to trade and commerce. Since there is lack of transport and communication in rural areas, therefore, it leads to unemployment problem among the villagers.
9) Inadequate Employment Planning: The employment planning of the government is not adequate in comparison to population growth. In India near about two lakh people are added yearly to our existing population. But the employment opportunities did not increase according to the proportionate rate of population growth. As a consequence, a great difference is visible between the job opportunities and population growth.
Effects of Unemployment
When there is high unemployment, the basic adverse effect could be the employed feel less secure; workers are less willing to leave unsatisfactory jobs, divisions in society increase, the prospect of equality of opportunity decreases. Some local areas can develop a culture of despair. Various attempts have been made to link unemployment to many social ills such as ill-health, premature death, attempted and actual suicide, marriage breakdown, child battering and racial conflicts. In general, the possible effect on the national stage could be:
1. Loss of Human Resources: The problem of unemployment causes loss of human resources. Labourers waste their maximum time in search of employment.
2. Increase in Poverty: Unemployment deprives a man of all sources of income. As a result he grows poor. Therefore, unemployment generates poverty.
3. Social Problems: Unemployment breeds many social problems comprising of dishonesty, gambling, bribery, theft etc. As a result of unemployment social security is jeopardized.
4. Political Instability: Unemployment gives birth to political instability in country. Unemployed persons can easily be enticed by antisocial elements. They lose all faith in democratic values and peaceful means. They consider that Government is worthless which fails to provide them work.
5. Exploitation of Labour: In the state of unemployment, labourers are exploited to the maximum possible extent. Those labourers who get work have to work under adverse condition of low wages. All this tells upon the efficiency of labourers greatly influence the pattern of employment opportunities in the country. Being poor, a person does not make any gainful use of existing resources.
6. More Emphasis on Capital Intensive Techniques: In India, capital is scarce and labour is available in surplus quantity. Under these circumstances, the country should adopt labour intensive techniques of production. But it has been observed that not in industrial sector, also in agriculture sector; there is substantial increase of capital than labour. In the case of Western countries, where capital is in abundant supply, use of automatic machines and other sophisticated equipment are justified while in our country abundant labour, results in large number of unemployment.
7. Defective Education System: The education system in our country too has failed to respond to the existing inter-generation gap. It simply imparts general and literary education devoid of any practical content. India's education policy merely produces clerks and lower cadre executives for the government and private concerns. The open door policy at the secondary and university level has increased manifold unemployment among the educated that are fit only for white collar jobs.
8. Slow Growth of Tertiary Sector: The expansion of tertiary sector comprising commerce, trade transportation etc. is limited which could not provide employment even to the existing labour force, what to think about new entrants. As a result of this, there is a wide scale of unemployment among engineers, doctors, technically trained persons and other technocrats.
9. Decay of Cottage and Small Scale Industries: The traditional handicraft has a glorious past and was the main source of employment especially to the village crafts-men, artisans as well as non-agricultural workers. Unfortunately, most of rural traditional crafts have been ruined or faded partly due to the unfavourable policy of the foreign rulers and partly due to tuff competition from the machine made goods. Consequently, these labourers were out of job. Most of them turned as landless labourers.
10. Lack of Vocational Guidance and Training Facilities: As, already discussed, our education system is defective as it provides purely academic and bookish knowledge which is not job oriented. The need of the hour is that there must be sufficient number of technical training institutions and other job oriented courses at village level. Most of the students in rural areas remain ignorant of possible venues of employment and choice of occupation.
11. Less Means for Self-Employment: Another hurdle in generation of more employment opportunities is that there are inappropriate means for self-employment in rural and semi-urban areas of the country. Like other developed countries, most of our engineers, technocrats and other well qualified persons do not possess ample means for self-employment. They go about in search of paid jobs.
Various Schemes to Reduce Unemployment
Following the publication of the Bhagwati Committee report in 1973,[6] the Government took the following measures to provide employment and alleviate under-employment.
Rural Works Programme: This programme emphasised on the construction of civil works of a permanent nature as would contribute to the mitigation, if not the total eradication.
Marginal Farmers and Agricultural Labourers: Under the scheme, families were to be assisted with subsidised credit support for agricultural and subsidiary occupations like dairy, poultry, fishery, piggery-rearing, horticultural operations, etc.
Small Farmers Development Agency: This emphasised to small farmers’ credit to enable them to make use of the latest technology to practice intensive agriculture and diversify their activities.
Integrated Dry Land Agricultural Development: Under the scheme, permanent works like soil conservation, land development and water harnessing were undertaken. These programs were labour intensive and were expected to generate considerable employment opportunities.
Agro-service Centres: The schemes provided for assistance for self-employment to the unemployed graduates and diploma holders in mechanical, agricultural and electrical engineering and allied fields.
Initiated Employment Guarantee Programmes of GoI
National Rural Employment Programme
The NREP was launched in October, 1980 and became a regular Plan programme from April, 1981. The programme was expected to generate additional gainful employment in the rural areas, to the extent of 300-400 million man-days per annum, create durable community assets, and improve nutritional status and living standards of the poor. An outlay of Rs. 1620 crores was provided under this Programme, out of which the outlay from 1980-81 onwards (Rs. 1280 crores) was to be shared equally between the Centre and the States. A major step was taken in 1983-84 when it was decided to subsidise the cost of the food grains to be distributed under this Programme. A subsidy to the extent of 37 Paise to 40 Paise per kg was provided for wheat and rice to be distributed under the Programme. According to the guidelines, food grains were to be provided at the rate of 1 kg per man day.[7]
Rural Landless Employment Guarantee Programme (RLEGP)
RLEGP was introduced from 15th August, 1983 with the objective of (a) improving and expanding employment opportunities for the rural landless with a view to providing guarantee of employment to at least one member of every landless household up to 100 days in a year and (b) creating durable assets for strengthening the infrastructure so as to meet the growing requirements of the rural economy. An outlay of Rs. 500 crores to be fully financed by the Central Government was provided under this programme in the Sixth Plan. The implementation of the programme was entrusted to the States/UTs, but they were required to prepare specific projects for approval by a Central Committee. During (1985) the Central Committee approved 320 projects with an estimated cost of Rs. 906.59 crores. The target for employment generation in 1983-84 and 1984-85 was fixed at 360 million man-days against which 260.18 million man-days of employment was actually generated.[8]
This programme is expected to have resulted in the creation of a large number of durable community assets and economic infrastructure in the rural areas. However, a tendency to concentrate on assets creation on the basis of departmental plans rather than on the basis of the requirements determined locally and of the need to provide the requisite quantum of employment to the landless labourers has been noticed. Concentration on road projects was also initially observed which was later sought to be restricted to not more than 50 per cent of the total outlays and also confined to the priorities arising out of the Minimum Needs Programme.
Drought-Prone Area Programme (DPAP)
A Rural Works Programmes was started in 1970-71 in areas chronically affected by drought with the principal objective of organising permanent works to obviate scarcity relief and to generate adequate employment through labour-intensive schemes such as major, medium, and minor irrigation works, soil conservation, afforestation, and village and district roads necessary to open up the area for agricultural production. In the Fourth Plan, after the mid-term appraisal, this programme was re-designated as Drought Prone Area Programme (DPAP) and reoriented as an integrated area development programme with the objective of developing the land, water, livestock and human resources of these areas. The programme has been in operation in 511 blocks of 70 districts in 13 States. A Task Force was constituted in 1980 to review the on-going special programme and development schemes taken up under DPAP, to study the existing coverage of the DPAP; to lay down objective criteria.[9]
Jawahar Rozgar Yojana
The then Prime Minister of India Rajiv Gandhi announced on 28th April, 1989 the launching of the Jawahar Rozgar Yojana (JRY). All the existing rural wage employment programmes were merged into JRY. This implies that National Rural Employment Programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) have been merged so as to bring under this umbrella programme referred to as Jawahar Rozgar Yojana.
The primary objective of JRY is generation of gainful employment for the unemployed and under-employed, men and women in rural areas. On the other hand, JRY had several secondary objectives too, like creation of sustained employment by strengthening the rural infrastructure; creating community and social assets; creating assets in favour of the poor for their direct and continuing benefits; to produce positive impact on wage levels; and to bring about over-all improvement in quality of life in rural areas.
National Rural Employment Guarantee Act, 2005
The National Rural Employment Guarantee Act, 2005 which was adopted by the UPA Government in September 2001 is a revolutionary step in the direction of eradicating poverty and unemployment in rural areas. The UPA Government feel that effective execution of this Programme would mitigate the need to seek employment in the urban areas. Accordingly, the Government had identified 200 districts on a rational basis and without discrimination where the implementation of this Programme would be commenced and would, progressively, cover all the districts of the country. Shri Rahul Gandhi had taken the initiative to take up with the Government the issue of extending the Coverage of this programme to all the districts of the country. He had led a delegation to the Prime Minister in this regard and had achieved success for his demand. Thus the programme is now being extended from 01.04.2008 to all the districts of the country.
The Act made supplementary livelihood in rural areas through unskilled manual work a legal right. Any rural household seeking unskilled manual work could register its family in the Gram Panchayat and obtain a job card. With the possession of a job card, the registered rural household could apply for work for at least 100 days in the Gram Panchayat. Gram Panchayat was entrusted with the legal duty of providing work to such applicant within 15 days of the receipt of the application, failing which unemployment allowance would become payable to the rural household. The law prescribes payment of wages every week and not later than a fortnight of the work done. In the event of delay in payment of wages, workers were entitled to compensation under Payment of Wages Act, 1938. The regime of right to livelihood was to be financially supported by the Central and State Governments. State Governments were made responsible for ensuring the guarantee of livelihood and timely payment of wages. State would provide the necessary technical and administrative support through the Districts and the Blocks to ensure proper implementation of the Act. Separate provisions have been made for incurring administrative expenses by empowering the Central Government to fix a proportion of total cost of the scheme to be used for administration of the Act.
Conclusion
Unemployment rates are traditionally higher in urban areas than in rural areas, partly because the greater dominance of the organized sector in urban areas forces people to be either employed or unemployed, with fewer opportunities to engage in low productivity subsidiary employment which can disguise an effective state of unemployment. This pattern is evident from Table 0.1 up to 1993-94. It is interesting to note however that the difference in unemployment rates between rural and urban areas narrowed considerably in 1999-2000, because of a sharp increase in rural unemployment rates for both rural males and rural females.
(Table 0.1) Unemployment* among Males and Females
(per cent of labour force)
------------------------------------------------------------------------
Survey Period Rural Areas Urban Areas
------------------------------------ -----------------------------------
Male Female Persons Male Female Person
------------------------------------------------------------------------
Male Female Persons Male Female Person
------------------------------------------------------------------------
1977-78 7.1 9.2 7.7 9.4 14.5 10.3
1983 7.5 9.0 7.9 9.2 11.0 9.5
1987-88 4.6 6.7 5.3 8.8 12.0 9.4
1993-94 5.6 5.6 5.6 6.7 10.5 7.4
1999-2000 7.2 7.3 7.2 7.2 9.8 7.7
------------------------------------------------------------------------
* Unemployment rate on current daily status basis
Source: NSSO Surveys
Economic reforms may have given a boost to industrial productivity and brought in foreign investment in capital intensive areas. But the boom has not created jobs. This was not unexpected. According to a report by the Washington-based Institute of Policy Studies (IPS), the combined sales of the world's top 200 MNCs is now greater than the combined GDP of all but the world's nine largest national economies. Yet, the total direct employment generated by these multinationals is a mere 18.8 million -one-hundredth of one per cent of the global workforce.
India's Ninth Five-Year Plan projects generation of 54 million new jobs during the Plan period (1997-2002). But performance has always fallen short of target in the past, and few believe that the current Plan will be able to meet its target. India's labour force is growing at a rate of 2.5 per cent annually, but employment is growing at only 2.3 per cent. Thus, the country is faced with the challenge of not only absorbing new entrants to the job market (estimated at seven million people every year), but also clearing the backlog.
Sixty per cent of India's workforce is self-employed, many of whom remain very poor. Nearly 30 per cent are casual workers (i.e. they work only when they are able to get jobs and remain unpaid for the rest of the days). Only about 10 per cent are regular employees, of which two-fifths are employed by the public sector. More than 90 per cent of the labour force is employed in the "unorganised sector", i.e. sectors which don't provide with the social security and other benefits of employment in the "organised sector." In the rural areas, agricultural workers form the bulk of the unorganised sector. In urban India, contract and sub-contract as well as migratory agricultural labourers make up most of the unorganised labour force.
Unorganised sector is made up of jobs in which the Minimum Wage Act is either not, or only marginally, implemented. The absence of unions in the unorganised sector does not provide any opportunity for collective bargaining. Over 70 per cent of the labour force in all sector combined (organised and unorganised) is either illiterate or educated below the primary level. The Ninth Plan projects a decline in the population growth rate to 1.59 per cent per annum by the end of the Ninth Plan, from over 2 per cent in the last three decades. However, it expects the growth rate of the labour force to reach a peak level of 2.54 per cent per annum over this period; the highest it has ever been and is ever likely to attain. This is because of the change in age structure, with the highest growth occurring in the 15-19 years age group in the Ninth Plan period. The addition to the labour force during the Plan period is estimated to be 53 million on the "usual status" concept. The acceleration in the economy's growth rate to 7 per cent per annum, with special emphasis on the agriculture sector, is expected to help in creating 54 million work opportunities over the period. This would lead to a reduction in the open unemployment rate from 1.9 per cent in 1996-97 to 1.47 per cent in the Plan's terminal year, that is, by about a million persons - from 7.5 million to 6.63 million. In other words, if the economy maintains an annual growth of 7 per cent, it would be just sufficient to absorb the new additions to the labour force. If the economy could grow at around 8 per cent per annum during the Plan period, the incidence of open unemployment could be brought down by two million persons, thus attaining near full employment by the end of the Plan period, according to the Plan.
However, there appears to be some confusion about the figure of open unemployment. The unemployment figure given in the executive summary of the Ninth Plan, gives the figure of open unemployment at 7.5 million while the annual report of the Labour Ministry, for 1995-96, puts the figure for 1995 at 18.7 million. An internal government paper prepared in 1997 put the unemployment figure at the beginning of the Eighth Plan at 17 million and at 18.7 million at the end of 1994-95. Perhaps the Planning Commission referred to the current figure while the Labour Ministry figure referred to the accumulated unemployment backlog.
References
"The World Factbook".
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2129rank.html.
1919. The Economic Consequences of the Peace. Reprinted in Keynes, Collected Writings. Vol. 2.
1919. The Economic Consequences of the Peace. Reprinted in Keynes, Collected Writings. Vol. 2.
http://www.indianmoney.com/article-display.php?cat_id=1
Report of the Committee on Unemployment, May 1973
"Nature and Magnitude of Rural Unemployment", The Indian Journal of Industrial Relations, Vol. 10, No. 2, Oct., 1974
Report of the Committee on Unemployment, May 1973
"Nature and Magnitude of Rural Unemployment", The Indian Journal of Industrial Relations, Vol. 10, No. 2, Oct., 1974
http://www.financialexpress.com/news/bhagwati-committee-report-proposed-amendments-to-takeover-code/46933/0
Planning Commission, Sixth Five Year Plan – Mid-term Appraisal (1983)
Ibid
Planning Commission, Sixth Five Year Plan – Mid-term Appraisal (1983)
Ibid
(Written as apart of assignment in MSW 1st Semester at Martin Luther Christian University, Shillong | 2011)
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