ECONOMIC AND SOCIAL ISSUES (ESI)

CHAPTER
EMPLOYMENT GENERATION

SUMMARY SHEET

FOR RBI GRADE B AND NABARD GRADE

A/B 2019

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Contents
1 Employment Generation in India: Why is it important? ...................................................................................... 3
2 Types of Unemployment in India: ........................................................................................................................ 3
2.1 Open Unemployment: .................................................................................................................................. 3
2.2 Structural Unemployment: ........................................................................................................................... 3
2.3 Frictional Unemployment: ............................................................................................................................ 4
2.4 Cyclical Unemployment: ............................................................................................................................... 4
2.5 Under-employment: ..................................................................................................................................... 4
2.6 Disguised Unemployment: ........................................................................................................................... 4
2.7 Seasonal Unemployment:............................................................................................................................. 4
2.8 Casual Unemployment: ................................................................................................................................ 4
2.9 Chronic Unemployment: .............................................................................................................................. 4
3 Measurement of Unemployment: ........................................................................................................................ 5
3.1 Usual Status Unemployment: ....................................................................................................................... 5
3.2 Weekly Status Unemployment: .................................................................................................................... 5
3.3 Current Daily Status Unemployment:........................................................................................................... 5
4 How is employment measured in India? .............................................................................................................. 5
4.1 Household Surveys: ...................................................................................................................................... 6
4.1.1 The Employment-Unemployment Survey of NSSO: ............................................................................. 6
4.1.2 The Periodic Labour Force Survey (PLFS): ............................................................................................ 6
4.1.3 Annual Labour Force Survey by Ministry of Labour and Employment: ................................................ 6
4.1.4 Population Census: ............................................................................................................................... 6
4.2 Enterprise Survey:......................................................................................................................................... 6
4.3 Administrative data-sets:.............................................................................................................................. 7
4.4 Government Schemes: ................................................................................................................................. 7
5 What is the status of employment in India? ........................................................................................................ 8
5.1 Data from the Census, 2011: ........................................................................................................................ 8
5.2 Unemployment grew faster for illiterates than for literates:....................................................................... 8
6 Share of Employment across Organized –Unorganized Sectors in 2011-12 and 2004-05 (in per cent): (Source:
NITI Aayog) ................................................................................................................................................................... 9
7 Key differences between the Organized and Unorganized sector: ...................................................................... 9

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1 Employment Generation in India: Why is it important?
To understand the importance of employment, we need to have an idea about the working age
population of India. India’s working age population (15-64 years) is now 63.4% of the total, as
against just short of 60% in 2001.

(Source: The office of the Registrar General of India and Census Commissioner had released ‘single
year age data’ for the 2011 Census, which refers to the number of people at each year of age in the
population).

Working Age Population:

The working age population is defined as those aged 15 to 64. The basic indicator for employment
is the proportion of the working age population aged 15-64 who are employed.

Now, when we compare this with the other countries we see that the average age of the population
in India by 2020 is estimated to be 29 as against 40 years in USA, 46 years in Europe and 47 years in
Japan. In fact, during the next 20 years the labor force in the industrialized world is expected to
decline by 4%, while in India it will increase by 32%.

This poses a formidable challenge and a huge opportunity. To reap this demographic dividend which
is expected to last for next 25 years, India needs to equip its workforce with employable skills and
knowledge so that they can contribute substantively to the economic growth of the country.

2 Types of Unemployment in India:

Unemployment:
Unemployment may be defined as “a situation in which the person is capable of working both
physically and mentally at the existing wage rate, but does not get a job to work”.
In other words unemployment means only involuntary unemployment wherein a person who is
willing to work at the existing wage rate does not get a job.

2.1 Open Unemployment:

• Open unemployment is a situation where in a large section of the labour force does not get a
job that may yield them regular income.
• They are able to work and are also willing to work but there is no work for them.
• This type of unemployment can be seen and counted in terms of the number of unemployed
persons. Hence it is called open unemployment.

2.2 Structural Unemployment:

• It occurs due to structural changes in the economy.
• Structural changes can be due to change in technology (from labour intensive technology to
capital intensive technology) or change in the pattern of demand.

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2.3 Frictional Unemployment:
• It occurs when a worker is shifting from one job to the other.
• During the mobility period, he may be unemployed for some time.
• It is a temporary phenomenon.

2.4 Cyclical Unemployment:

• It occurs because of cyclical fluctuations in the economy.
• Phases of boom, recession, depression and recovery are typical characteristics of a capitalist
economy.
• In boom phase, high level of economic activity results in high level of employment whereas
recession and depression phases marked with low demand results in more unemployment
and during the recovery phase unemployment is slowly reduced.

2.5 Under-employment:
• It is a situation under which employed people are contributing to production less than they
are capable of.
• It can be in terms of time (visible under-employment) or type of work (invisible under-
employment).
• Part-time workers come under this category.

2.6 Disguised Unemployment:

• A disguisedly unemployed person is the one who seems to be employed but actually he is
not.
• His contribution to the total output is zero or negligible.
• When more people are engaged in a job than actually required, a state of disguised
unemployment is created. It is mostly seen in rural areas.

2.7 Seasonal Unemployment:

• It occurs only during seasonal months of the year.
• In India, it is very common in agriculture sector. In certain type of industries also this type of
unemployment is found.
• Disguised unemployment and seasonal unemployment are two most common types of
unemployment found in rural India particularly in farm sector.

2.8 Casual Unemployment:

• In industries such as building construction, catering or agriculture, where workers are
employed on a day- to-day basis, there are chances of casual unemployment occurring due
to short-term contracts, which are terminable any time.

2.9 Chronic Unemployment:

• When unemployment tends to be a long-term feature of a country it is called “chronic
unemployment.”
• Underdeveloped countries suffer from chronic unemployment on account of the vicious
circle of poverty.

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3 Measurement of Unemployment:
There are three measures or estimates of unemployment. These are developed by National Sample
Survey Organization (NSSO).

3.1 Usual Status Unemployment:

• Also known as open unemployment or chronic unemployment. This measure estimates the
number of persons who remained unemployed for a major part of the year. This measure
gives the lowest estimates of unemployment.
• This concept used to determine the usual activity status of a person as employed or
unemployed or outside the labour force. The persons covered may be classified into those
working or available for work in their principal activity sector and subsidiary sector.

Labour force:
• Labor force (also called work force) is the total number of people employed or seeking
employment in a country or region. (Thus labour force constitutes of both employed and
unemployed).
• One is classified as ‘not in labour force’; if he or she was engaged in relatively longer period
in any one of the non-gainful activities or we can say those who are neither seeking nor
available for work.

3.2 Weekly Status Unemployment:

The estimate measures unemployment with respect to one week. In other words according to this
estimate a person is said to be employed for the week even if he/she is employed only for a day
during that week.

3.3 Current Daily Status Unemployment:

• It considers the activity status of a person for each day of the preceding seven days. The
reference period here is a day. If a person did not find work on a day or some days during the
survey week, he/she is regarded as unemployed.
• Normally if a person works for four hours or more during a day, he or she is considered as
employed for the whole day. The daily status unemployment is considered to be a
comprehensive measure of unemployment.

4 How is employment measured in India?

Note: The latest updates on any of the surveys shall be covered as part of the EduTap’s ESI and
Finance monthly current affairs magazine. If there is any data mentioned, kindly use it to get an
idea regarding the situation of unemployment in India.

On the broader level, there are two institutions measuring employment in India:

1. Labour Bureau (Ministry of Labour and Employment)

2. National Sample Survey Organization (NSSO) (Ministry of Statistics and Programme
Implementation)

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Sources of employment data in India:

There is a total of four potential sources:

✓ Household surveys
✓ Enterprise surveys
✓ Administrative data
✓ Data from Government schemes

4.1 Household Surveys:

Under the household surveys, the following are the datasets:

• Employment-Unemployment Survey of NSSO

• Annual Labour Force Survey by Ministry of Labour and Employment
• Population / Census Data from Office of the Registrar General & Census Commissioner

Now let us have a look at each of the above-mentioned surveys:

4.1.1 The Employment-Unemployment Survey of NSSO:

• The first survey was conducted in the year 1955 and since 1972-73, it is been conducted
every five years.
• The latest such survey was conducted in 2011-12.

Note: This survey has been discontinued.

4.1.2 The Periodic Labour Force Survey (PLFS):

• NSSO had launched a new employment-unemployment survey, namely, Periodic Labour
Force Survey (PLFS).
• It is a continuous/regular survey for generating estimates of various labour force indicators
on quarterly basis for urban areas and annual basis for both rural and urban areas, at
State/UT and all-India level.

4.1.3 Annual Labour Force Survey by Ministry of Labour and Employment:

• This survey was published since 2009-10. A total of six rounds of surveys has been held till
2016.
• The results of 5 rounds have been released till date. The report of the 5 th round of Annual
EUS was released in September 2016.

Note: This survey has been discontinued.

4.1.4 Population Census:

It collects data on main, marginal and non-workers. The Census comes once in 10 years. The latest
Census was conducted in 2011.

4.2 Enterprise Survey:

The following are the datasets released for the enterprises:

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Survey/Report Remarks
The Economic Census by MOSPI Covers all the non-agricultural economic activities,
thus both industries and service sectors are covered.
The First one was conducted in 1977.
The latest one was held in 2013-14.
Annual Survey of Industries by MOSPI It covers the industrial units registered under the
Factories Act, 1948 and only those industrial units
which employ 10 or more workers (if using power) or
20 or more workers (if not using power).
Unorganized Sector Surveys of Industries Conducted occasionally by NSSO taking Economic
and Services by NSSO Census as the time frame.
Quarterly Employment Survey (QES) by the It measures employment in 8 broad sectors of
Labour Bureau industry and services. The survey covers enterprises
with more than 10 workers in both urban and rural
areas.
MSME (Ministry of Micro, Small and This collects data on Small Scale Industries (SSI) and
Medium Enterprises) the MSME sector through the MSME Census. Till
date, it has conducted four such censuses, in 1973-
74, 1990-91, 2001-02 and 2006-07.

4.3 Administrative data-sets:

• The key sources of administrative data include the Employees’ Provident Fund Organization
(EPFO), the Employees’ State Insurance Corporation (ESIC), the National Pension Scheme
(NPS) and other similar sources relating to large private organizations.
• These surveys have their own limitations. Like in case of EPFO, firms with more than 20
workers are only required to contribute to EPFO.

4.4 Government Schemes:

There are various government schemes giving employment to crores of people in India. So, the data
collected as part of these schemes also acts an important source of employment data generation.

Note: All the above-mentioned sources are government conducted ones. There is one privately
held survey on employment by the Centre for Monitoring Indian Economy (CMIE).

The following section gives us an idea regarding the situation of employment in India:

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5 What is the status of employment in India?

5.1 Data from the Census, 2011:

5.2 Unemployment grew faster for illiterates than for literates:

Based on the data of the Census, 2011, the following observations can be made:

• Of the 116 million Indians who were either seeking or available for work, 32 million were
illiterates and 84 literates.
• Among literates, unemployment rates were higher among the better qualified, highest of
all among the 7.2 million people with a technical diploma or certificate other than a degree.
• At all levels of education, unemployment rates were higher in rural than in urban areas.
• At every level of education, especially at the higher levels, female unemployment exceeded
male unemployment.
• The ‘unemployed’ included those who were not currently working but were seeking or
available for work, as well as those in marginal employment — meaning that they worked for
fewer than six months in the year preceding the Census — who were seeking or available for
work.
• Overall, India’s unemployment rate grew from 6.8 p.c. in 2001 to 9.6 p.c. in 2011, based on
official Census data.
• Unemployment grew faster for illiterates than for literates.
• In all, India had just 56 million graduates and post-graduates in 2011 and 12 million with a
technical certificate or diploma equivalent to a graduate or post-graduate degree.
• Half of these with the highest level of education were classified as “main workers”, meaning
that they worked for at least six months in the year preceding the Census.

Unemployment rate:
It is the percent of the labor force that is without work.
Unemployment rate = (Unemployed workers / Total Labour Force) * 100

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Kindly make a note of the following terms as well:

Labour Force Participation Rate (LFPR):

Labour Force Participation Rate (LFPR) is defined as the number of persons in the labour force per
1000 persons.

Worker Population Ratio (WPR):

Worker Population Ratio (WPR) is defined as the number of persons employed per 1000 persons.

Indian economy is such that a major portion of the population comes under the unorganized
sector. The data given below emphasizes this fact:

6 Share of Employment across Organized –Unorganized Sectors in 2011-12 and 2004-

05 (in per cent): (Source: NITI Aayog)
Year Organized (in %) Unorganized (in %)
2004-05 13 87
2011-12 17.3 82.7

To understand what organized and unorganized sector is, we can study the key differences
between the two:

7 Key differences between the Organized and Unorganized sector:

Basis for comparison Organized sector Unorganized sector
Meaning The sector in which the employment The sector that comprises of
terms are fixed and employees have small scale enterprises or units
assured work is organized sector and are not registered with the
government
Governed by Various acts like factories act, Bonus Not governed by any act.
act, PF act, Minimum wages act etc.
Government rules Strictly followed Not followed
Remuneration Regular monthly salary Daily wages

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Job security Yes No
Working hours Fixed Not fixed
Overtime Workers are paid remuneration for No provision for overtime
overtime
Salary of workers As prescribed by the government Less than the salary prescribed
by the government.
Contribution to provident Yes No
fund by employer
Increment in salary Once in a while Rarely

Benefits and perquisites Employees get add on benefits like Not provided.
medical facilities, pension, leave
travel compensation, etc.

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