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Unemployment, Concept Causes and Measurement

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.
Causes of Unemployment in India:
The important causes of Unemployment in India are as follows:

1. Rapid growth of population and increase in labour force.

2. Underdevelopment of the economy.

3. Slow growth in the agricultural sector.

4. Defective system of education.

5. Absence of manpower planning.

6. Degeneration of village industries.

7. Inappropriate technology.

8. Slow growth of industrial sector.

9. Immobility of labour.

10. Jobless growth.

 Inflation
 Recessions
 Rapid changes in technology
 Attitude towards employers
 Perception of employees
 Employee values

Causes of Unemployment

Unemployment is a reason for alarming concern in India today. The root of the problem can
be traced to a host of reasons that contributes collectively towards this problem.

1. Economic Growth without adequate employment opportunities: India’s GDP

projections for year 2017 is 7.5% but that growth does not currently translate into creating
more employment opportunities for the labour force of the country. In a survey conducted
among a sample of 1072 companies across the nation and across various sectors, during the
financial year of 2014-2015 only 12,760 jobs were created compared to 188,371 jobs in the
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year 2013-2014. In the year 2016, India’s rural unemployment rate stands at 7.15% whereas
unemployment rate in urban areas stand at 9.62%.

2. Education: Although literacy rates have risen in the last few decades, there still remains a
fundamental flaw in the education system in India. The curriculum is mostly theory-oriented
and fails to provide vocational training required to match up with current economic
environment. The degree-oriented system renders itself redundant when it comes to
producing human resources adept at fitting into specific profiles within the economy.

3. Population growth: Rapid growth of population has often been labeled as the major
reason for increasing unemployment in the country. In the last ten years (2006-2016), India’s
population has increased by 136.28 million and unemployment is at a 5 year high in the
financial year of 2015-2016. Current survey data revealed that at the all-India level, 77% of
families do not have a regular salaried person.

4. Faulty Employment planning: The five-year plans implemented by the government have
not contributed proportionately towards generation of employment. The assumption was that
growth in economy will automatically generate enough employment. But in reality the
scenario doesn’t quite match up to the assumption and there have remained gaps between the
required number of jobs and the actual numbers generated.

5. Drawback of Agriculture Infrastructure: According current statistics, agriculture

remains the biggest employer in the country contributing to 51% employment. But ironically
the sector contributes a meager 12-13% to the country’s GDP. The problem of disguised
unemployment has turned out the biggest contributor behind this deficit. Also the seasonal
nature of employment in this sector builds up recurring cycles of unemployment for the rural
population. Lack of proper irrigation infrastructures and outdated cultivation methods still
used renders most of the agriculture land in India usable for cultivating just one crop a year.
This is another contributing factor towards seasonal nature of unemployment in the sector.

6. Alternative opportunities: There has been a definite push towards providing the people
employment by the agriculture-based industries with alternate methods of employment during
the lull seasons. Skill-based trainings for their employment in other sectors are lacking till
date.

7. Slow Industrialization: The industrial scenario in India is still slow to flourish.

Agriculture still remains as the biggest employer in the country. People are not yet keen
towards self-employment, especially in the rural sector, depending on existing employment
opportunities.

8. Neglect of cottage industries: For landless people in rural areas of India, one of the major
means of livelihood is the cottage industries like fabric and handicrafts. But these small-scale
industries are adversely affected by larger more mechanized industries which out-competes
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them in productivity. As a consequence, it is becoming more and more difficult to sustain the
cottage industries inciting loss of employment for many.

Measurement of Unemployment in India

Measurement of Unemployment in India: Dantwala Committee Approach:

Let us now first discuss the approaches to measure open unemployment and
underemployment in India.

On the basis of time and willingness criteria open unemployment and underemployment
have been estimated using the following three approaches which were recommended by
an expert committee headed by Prof. M L. Dantwala:
. (i) Usual Status Approach:
This approach records only those persons as unemployed who had no gainful work for a
major time during the 365 days preceding the date of survey and are seeking or are available
for work. Thus, the estimates of unemployment obtained on the basis of usual status approach
are expected to capture long-term open unemployment

(ii) Weekly Status Approach:

In this approach current activity status relating to the week preceding the date of survey is
recorded and those persons are classified as unemployed who did not have gainful work even
for an hour on any day in the preceding week and were seeking or were available for work.

The persons who may be employed on usual status approach may however become
intermittently unemployed during some seasons or parts of the year. Thus, unlike the usual
status approach, weekly status approach would capture not only open chronic unemployment
but also seasonal unemployment. Besides, this approach provides weekly average rate of
unemployment.

(iii) Daily Status Approach:

The weekly status approach records a person employed even if he works only for an hour on
any day of the whole week. It is thus clear that the weekly status approach would tend to
underestimate unemployment in the economy because it does not appear to be proper to treat
all those who have been unemployed for the whole week except an hour as employed.
Indeed, the demand for labour in farming and non-fanning households often fluctuates over a
small period within a week. Hence the need for the use of daily status approaches to measure
the magnitude of unemployment and underemployment in India.

In the daily status approach current activity status of a person with regard to whether
employed or unemployed or outside labour force is recorded for each day in reference week.
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Further, for estimating employment and unemployment, half-day has been adopted as a unit
of measurement.

A person who works for 4 hours or more up to 8 hours on a day is recorded as employed for
the full day and one who works for an hour or more but less than 4 hours on a day is recorded
as employed for half-day. Accordingly, persons having no gainful work even for one hour on
a day are described as unemployed for full day provided that they are either seeking or are
available for work.

Thus, the daily status approach would capture not only the unemployed days of those persons
who are usually unemployed but also the unemployed days of those who are recorded as
employed on weekly status basis.

Hence daily status concept of unemployment is more inclusive than those of usual status and
weekly status approaches and would yield an average number of unemployed person-days per
day in the year indicating the magnitude of both open unemployment and underemployment.
They are also referred to as person-years unemployed so as to distinguish them from persons
unemployed.