UNEMPLOYMENT

INTRODUCTION
Economic growth of a country basically depends upon
the active labour force engaged in the process of
production. It has been seen in almost all the
economies of the world the whole of the population is
not contributing in the economic prosperity of the
country. Such persons are technically known as
UNEMPLOYED persons.

WHAT IS UNEMPLOYMENT?

General Sense - Unemployment means lack of

jobs even for those who are able and willing to
work at the prevailing wage.
Measurement point of view the unemployment
may be defined as the gap between the potential
full employment and number of employed
persons.

TYPES OF UNEMPLOYMENT
Cyclical Unemployment
Seasonal Unemployment
Technical Employment
Frictional Unemployment
Structural Unemployment

MEASURING UNEMPLOYMENT

In India NSSO(National sample survey organization),

uses three concepts of unemployment:
Usual status of unemployment
Current weekly status of unemployment
Current daily status of unemployment

USUAL STATUS OF
UNEMPLOYMENT

Usual Status relates to the activity status of a

person during the reference period of last 365 days
preceding the date of survey.
The detailed activity status is determined
depending on the relatively longer time spent in the
activities.
A person could have pursued some economic
activity for a smaller period, not less than 30 days.

CURRENT WEEKLY STATUS

Current Weekly Status (CWS) of a person is the
activity status obtained for a person during a
reference period of 7 days preceding the date of
survey.
A person is considered as a worker if he/she has
performed any economic activity at least for one
hour on any day of the reference week.

CURRENT DAILY
STATUS

Current Daily Status (CDS) of a person is

determined on the basis of his/her activity
status on each day of the reference week.
A person is considered working (employed) for
the full day if he/she worked for 4 hours or more
during the day.

INDIA UNEMPLOYMENT RATE

CAUSES OF UNEMPLOYMENT
1

Limited Land

Seasonal Agriculture

Fragmentation of Land

Backward Method of Agriculture

Defective education

Decline of Cottage Industries

Lack of transport and communication

Inadequate Employment Planning

COST OF UNEMPLOYMENT TO
ECONOMY
Cost to
individual

Cost to
society

Cost to
country

COST TO INDIVIDUAL

Impact on persons standard of living

Prolonged unemployment leads to an erosion of
skills robbing economy of otherwise useful
talents.
Faith in education and training may be lost (due
to prolonged unemployment)
Harm to mental and physical health of workers.

COST TO SOCIETY
Longer unemployment period leads
volunteerism and higher crime.
Increase in poverty
Exploitation of labour

COST TO COUNTRY
Political unemployment
Decay of cottage and small scale
industries
Brain Drain

to less

SOLUTIONS TO UNEMPLOYMENT
1. PHILIPS CURVE

The Phillips Curve shows an

inverse relationship between
inflation and unemployment. It
suggested that if governments
wanted
to
reduce
unemployment it had to
accept higher inflation as a
trade-off.

 This involves increasing inflation to reduce

unemployment by fooling workers into accepting
jobs at a lower rate than they would otherwise have
done, due to the declining value of money.
The concave shape implies that lower the level of
unemployment higher the rate of inflation.
In order to achieve full employment, some inflation
is unavoidable.
You cannot achieve a lowering of the unemployment
rate in the long run, and attempts to do so will only
cause inflation.

2. DEMAND SIDE POLICIES

The demand for labour in an economy is derived

from the demand for goods and services.
If the demand for goods and services in the
economy increases, the demand for labour will
increase, increasing employment and wages.
Monetary policy and fiscal policy can both be
used to increase short-term growth in the
economy.
Thus increasing the demand for labour and
decreasing unemployment.

3. SUPPLY SIDE POLICIES

Minimum wages and union activity keep wages

from falling, thus making the labour market quite
rigid.
Supply-side policies can solve this by making
the labour market more flexible.
These include removing the minimum wage and
reducing the power of unions, which act as a
labour cartel.
Other supply side policies include education to
make workers more attractive to employers.

4. SHIFTING TAX BURDEN

This method will shift tax burden to
capital intensive firms and away from
labour intensive firms.
This will make firms shift operations
to a more politically desired balance
between labour intensive and capital
intensive production.
The excess tax revenue from the jobs
levy would finance labour intensive
public projects.