Unemployment - An Overview
Unemployed people are more likely to face a variety of challenges, including difficulty finding future employment and lower income. Unemployment has an impact on the economy and society as a whole. The longer a person is unemployed, the more likely they are to suffer negative consequences and contribute to the multiplier effect that unemployment has on the community.
Unemployment
In this piece, we look at what it means to be unemployed and how it affects people, society, and the economy. Furthermore, even if they expect to be hired again for the same position, people who are temporarily laid off are still considered unemployed. Let us know more about it in this article.
Employment and Unemployment
When a person is actively engaged in a job, business, trade, or profession, they are considered to be employed. Unemployed people are those who are actively looking for work but are currently unemployed. Every government's macroeconomic goal is to keep the unemployment rate low and solve the problem of unemployment. Full employment occurs when every worker is employed. The unemployment rate is 0%, which means that everyone who is able and willing to work is working.
Effects of Unemployment
Effects of Unemployment
Unemployed people can face a variety of challenges. There has been a difference between everyone and everybody. The longer someone is out of work, the more difficult these issues become. Individual consequences of unemployment include the following:
1. Lower Earnings
Unemployed people's income is reduced as a direct result of their inability to find work. Because wages are earned through employment, losing one reduces a person's available income.
2. Health Issues
Given how stressful being unemployed is, it's possible that it will lead to stress-related health problems like headaches, high blood pressure, diabetes, heart disease, back pain, and sleeplessness. These health problems frequently lead to more frequent doctor visits and more frequent usage of medications to treat the underlying diseases.
3. Negative Effects on the Family
The family of an unemployed person is also vulnerable to the negative effects of unemployment. Unemployed people face more challenges in their families and are less satisfied with their marriages and families, according to the Society for the Psychological Study of Social Issues.
According to the study, the stress of unemployment may have a negative impact on the well-being of spouses. Furthermore, several studies have found that the average income of children of unemployed parents is lower than that of children of employed parents.
Reasons of Unemployment
Reasons of Unemployment
The current global economic crisis is the primary reason for unemployment. Among the many other factors that contribute to unemployment, one of the primary causes is the current and ongoing global economic crisis. The economic crisis has had a significant impact on international trade. The economic crisis has not been able to hold back previously wealthy nations.
A large number of technological advancements go without saying that we live in an extremely technologically advanced era. Previously, businesses required a large amount of labour to complete their tasks.
However, modern technology allows computers and other devices to complete even the most difficult tasks in a matter of minutes. Furthermore, only a few years ago, sending a single message or reply would take hours.
Jobs are becoming more specialised, and huge corporations offer their staff a wide range of facilities and advantages. This is the main reason why they have so many requirements when hiring personnel.
A person will not even be given consideration for the post at hand unless they meet all the prerequisites. People are having a very difficult time even getting an interview because job descriptions have grown so very detailed and specialised.
Issues Related to Unemployment
1. The Productivity-Wage Gap is Widening
In the country, inflation is still present, causing prices to rise. As a result, labourers demand higher pay and benefits, raising the cost and price of commodities while decreasing demand. This follows a period of declining output and, as a result, growing unemployment.
2. Uncertainty in Agriculture Sector
Despite scientific advances, agriculture in India is still depending on the whims of nature. Every year, millions of workers are forced to quit their jobs due to droughts, floods, and other natural disasters, causing agricultural uncertainty and unemployment.
3. Absence of a Comprehensive Employment Policy
There has never been a comprehensive or urgent employment programme in India. It is true that the problem of unemployment cannot be solved unless a strong employment-oriented development policy is formulated and implemented by the country's stable administration.
4. Improper Attitude Towards Employment
One of the key issues is the country’s educated population’s need for a job. They do not want to set up any startup or separate manufacturing facility. This negative attitude has increased unemployment as well.
Besides these, unemployment is worsening due to difficulties in the manufacturing process, the social environment, societal ills, religious superstitions, political uncertainty, and industrial unrest.
Types of Unemployment
The Indian subcontinent faces Unemployment, both involuntary and voluntary, which can be examined under two broad categories, in relation to one another.
Rural Unemployment
A majority of the Indian population resides in rural areas and thrive on agriculture as a primary means of livelihood. But this agrarian industry does not make up for adequate Employment for the entire population living in these areas. This leads to rural Unemployment which can be categorised into three major types, as have been discussed below.
In India, the downturn is systemic. To put it another way, economic output is insufficient to provide enough jobs. This has been going on for a while.
Open Unemployment
One of the most basic Unemployment situations is when an unemployed individual, seeking and available for work, is unable to get a job with a regular payment. This is termed open Unemployment. A major reason for this type of Unemployment is a rapidly expanding labour force in an economy with a slower growth rate. When it comes to open redundancy, identifying those who are unemployed is a simple task. Agriculture is a short-term occupation in India, and there is usually a high need for labour during sowing, weddings, and harvesting, but demand for labour drops significantly during the slack season.
The duration of periodic Unemployment in India varies by state, based on farming practices, soil type, and the potential of multiple cropping. Farmers in rainy agriculture are unemployed for four to six months per year. They are unable to find an alternative job at this time due to their illiteracy, poverty, and bad health.
Disguised Unemployment
This type of Unemployment is particularly rampant in the agricultural industry, contributing as the most common form of rural Unemployment in India. It presents a circumstance in which more individuals are engaged in a work than what is required due to lack of alternative job opportunities. This indicates that the removal of some of the workforce would not make a major difference in the production of a farm; that is, this surplus manpower has negligible to zero marginal productivity. The disguisedly impoverished are individuals who work for themselves and are overly numerous in relation to the resources with which they work, such that if a number of them were to be reassigned to other sectors of the country, the total output of the sector from which they were reassigned would not be affected, even if no significant reorganization took place. Another important cause of uncertainty is the high rate of Unemployment among educated rural youth. The growth of education has resulted in a large number of unemployed young people looking for work. However, they are unable to find work in the labour market. Unemployment of this nature has devastating implications. It causes some people to be frustrated and others to be dissatisfied.
Seasonal Unemployment
This type of Unemployment is seen with people working in industries with seasonal production. Industries like agriculture only need additional laborers for particular times of the year, for instance, harvest season. In such cases, these specific workers remain unemployed during the rest of the year, giving rise to Unemployment in rural areas.
Urban Unemployment
With rapid immigration and a population boom, India has seen remarkable growth in urban Unemployment in recent years. These can be further categorised into three types.
Industrial Unemployment
This is the most commonly observed type of urban Employment due to an increasing rate of migration of workers from rural to urban areas. Every year, thousands of illiterate individuals travel to more developed areas in search of jobs of menial labour in production units and factories. Due to high demand, most of them suffer from industrial Unemployment meaning their inability to secure such jobs.
Structural Unemployment
Referred to as educated Unemployment, this is probably the most disappointing type of Unemployment. Structural Unemployment arises when an educated individual fails to find a job matching their qualifications. This occurs due to a lack of adequate job opportunities in concerned fields compared to the number of learned individuals.
Technological Unemployment
Rapid advancement in technology is leading to Unemployment of individuals who fail to match or adapt to required skills and, thus, become obsolete for the industry. This is mostly seen in employees belonging to the retiring age group.
What Causes Unemployment?
Following is a list of some of the most common causes of Unemployment in India.
A rapidly growing rate of the population overruns available Employment opportunities.
A negligible growth rate of the economy failing to keep up with a growing labor force.
Lack of proper infrastructure and required investment in sectors lagging.
The advent of smart technology and AI reduces human resources previously employed for those tasks.
Lack of necessary field-specific skills, as a result of school and college education not relevant to concerned industries.
Physical unskilled labor is undervalued by today's educational system. Physical labor is disliked by educated people. As a result, after completing formal schooling, the rural teenager seeks sedentary Employment in a government agency or a private company. They are both unable and reluctant to work in agriculture. As a result, rural Unemployment is exacerbated by the current educational system.
Indeed, there is no genuine attempt in India to plan for personnel. Employment has not been given the attention it deserves in our development strategy. It is not related to the development process because it is assumed that economic progress will lead to the establishment of job possibilities. However, this has not resulted in the integration of jobs and growth. Poverty, in general, and rural poverty, in particular, are caused by all of these reasons.
In India, the caste system is a major contributor to underdevelopment. It is a system of occupational distribution that limits rural residents' occupational mobility. In rural India, occupations are inherited due to the caste system. When the number of members of a caste grows faster than the demand for services, the remaining populace becomes unemployed.
India's agriculture is chaotic and diverse. Because even though the Indian farmer must willfully invest more to receive less, it follows an inverted economics model. Regional insecurity is a result of this.
The Indian farmer's traditional farming approach is outdated and unscientific. Agricultural productivity is hampered by a lack of improved farming technologies and a shortage of skilled labour. Fertilizer aversion, a lack of proper irrigation facilities, and insufficient funding to purchase sophisticated agricultural instruments, seeds, and vermicompost all have an impact on agricultural output. As a result, rural agriculture reduces its potential for Employment.
Agriculture does not keep the farmland busy all year. The rural population is frequently fully engaged throughout the sowing and harvesting seasons, and economically inactive during the post-harvest and before the following sowing season. Farmers in South India are only busy for five months of last year, and the other seven months are spent doing nothing financially productive. Peasants all over India are in a similar situation. As a result, rural communities experience high levels of seasonal Unemployment.
Employment and unemployment are a not only crucial topic for CBSE Class 12 Commerce but is also a necessary concept for students to understand the working of a real economy. Vedantu comes with additional detailed explanations and examples to help you prepare Class 12 Economics projects on employment and unemployment. For step-by-step answers to questions like what is rural unemployment and what is industrial unemployment, visit our website or install the app today!
The Employment Generation
Elevated enterprises account for a considerable amount of new jobs created, as measured by Employment expansion rates, and are important contributors to the country's economic growth. Small and medium-sized businesses (SMEs) create more net jobs than larger corporations. SMEs are key Employment producers, according to much research. According to these findings, job creation and job contraction occur hand in hand in all countries. It is common to see some companies shed employees while others gain, and some of them exhibit a considerable increase in the labour force, even in the same industry or market.
The World Bank Group's commitment to entrepreneurship development as a major aspect of its tool for enhancing economic growth, Employment, and poverty alleviation in various countries is established in the World Bank Group's evaluation on small company activities (World Bank Review, 2001). The importance of SMEs in long-term global and regional economic recovery is increasingly becoming more widely recognised.
However, due to a lack of data, very little research has been done in this area. Small and medium-sized enterprises (SMEs) play a vital role in a country's industrial growth since they create more gainful Employment, utilise fewer resources, generate more money, and reduce poverty. It's plausible to assume that if SMEs had been given more weight in industrial development, prior patterns of disastrous economic development may have been averted. However, the significant role in a country's economic progress is seldom fully appreciated. As a result of the relevance and contribution of SMEs to economic activity, there is a substantial opportunity to boost their growth by increasing their operational efficiency.
Case Study
Discuss in detail the case of how has the covid-19 Pandemic affected employment in our country where a lot of its population is already unemployed.
Ans: The pandemic has significantly worsened India's jobless situation, which is not surprising. The Indian economy has struggled to escape the grip of unemployment since all economic activity ceased in March 2020.
According to the Center for Monitoring Indian Economy (CMIE), 12.8 percent of Indians will be unemployed by June 2021. In March 2021, the unemployment rate was 6.5 per cent; by April 2021, it had risen to 8 per cent.
To understand how serious the situation is, consider that India's unemployment rate in 2018 was only 6.1 per cent. Before the pandemic, India's economy was already contracting; the lockdown exacerbated the situation.
Conclusion
It is unfortunate that so many intelligent, qualified people are unable to find work due to a lack of job opportunities. Today's large, prosperous corporations simply want to hire the best of the best.
A large corporation will not hire people who are unsure of what to do in a professional setting. Unemployed people frequently experience sadness and depression, so if you have a family member or friend who is unemployed, make sure you are available to them during their time of need and self-doubt.
FAQs on Unemployment: Causes and Effects
1. What is meant by unemployment, and what are its main causes and effects in an economy?
Unemployment refers to a situation where a person who is actively searching for employment is unable to find work. It is a key indicator of economic health. The primary causes include economic slowdowns, technological advancements replacing labour, and a mismatch between the skills of the workforce and the jobs available. The main effects are a loss of income for individuals, reduced national output, and significant social issues like increased stress and poverty.
2. What are the major types of unemployment typically found in the rural areas of India?
In India's rural areas, two main types of unemployment are prevalent:
- Seasonal Unemployment: This occurs because agriculture, the primary occupation, offers work only during specific seasons like sowing and harvesting. During the off-season, many agricultural labourers become unemployed.
- Disguised Unemployment: This is a situation where more people are engaged in a job than are actually required. For instance, if a family farm needs only three people to operate efficiently but has five family members working on it, the two extra workers are considered disguisedly unemployed. Their removal would not affect the farm's total output.
3. How is urban unemployment different from rural unemployment? Explain with examples.
Urban unemployment differs from rural unemployment mainly in its nature and causes. Key types of urban unemployment include:
- Industrial Unemployment: This affects a wide range of workers, from illiterate migrants seeking manual labour to skilled factory workers, due to slow industrial growth, economic downturns, or high competition for jobs in cities.
- Educated Unemployment: This is a significant issue in urban areas where individuals with formal degrees (graduates, post-graduates) are unable to find jobs that match their qualifications. This often happens due to a gap between the skills provided by the education system and the skills demanded by the industry.
4. Why is structural unemployment considered a major challenge for a developing economy like India?
Structural unemployment is a major challenge because it arises from a fundamental mismatch between the jobs available in the market and the skills of the available workforce. In a developing economy like India, this is particularly concerning because rapid technological changes and economic shifts can make entire job sectors obsolete. Unlike temporary unemployment, it requires long-term solutions like large-scale reskilling and educational reforms, making it difficult and costly to resolve.
5. What are five significant social and economic effects of high unemployment?
High unemployment has far-reaching consequences for both society and the economy. Five major effects include:
- Loss of Income and Output: Unemployed individuals lose their income, leading to a fall in their standard of living. At a national level, it means the economy is producing below its potential, resulting in a lower Gross Domestic Product (GDP).
- Erosion of Human Capital: When people are unemployed for long periods, their skills can become outdated or deteriorate, making it harder for them to re-enter the workforce.
- Increased Poverty and Inequality: Unemployment is a direct cause of poverty and widens the gap between the rich and the poor.
- Social Problems: High unemployment is often linked to increased stress, anxiety, health issues, and a rise in crime rates within a community.
- Strain on Government Finances: The government has to spend more on unemployment benefits and other social welfare schemes, while simultaneously losing out on income tax revenue from the unemployed.
6. How is it possible for a person to be working yet still be considered part of disguised unemployment?
A person can be working yet be part of disguised unemployment if their contribution to the total output is zero or negligible. This concept is explained by zero marginal productivity. For example, if a small shop is run by three brothers, but the work can be efficiently managed by just two, the third brother is disguisedly unemployed. Although he appears to be working, his presence does not add any extra revenue or output. If he were to leave, the shop's total sales would remain the same.
7. What is the key difference between frictional and structural unemployment?
The key difference lies in their cause and duration. Frictional unemployment is a short-term and natural part of a dynamic economy. It occurs when people are temporarily between jobs, such as a person who has quit one job to search for a better one. In contrast, structural unemployment is a long-term issue caused by a fundamental mismatch between worker skills and industry needs, often due to technological advancements or changes in the economy's structure.
8. What is the 'unemployment trap' and how does it impact an individual's decision to work?
The unemployment trap is a situation where unemployment benefits provided by the government are high enough to disincentivise an unemployed person from joining the workforce. An individual may feel that the income from a low-paying job, after deducting taxes and work-related costs (like transport), is not significantly higher than the benefits they receive while being unemployed. This creates a trap where remaining unemployed seems like a more financially logical choice, thus affecting their willingness to seek work.
9. What are some of the major causes of unemployment that are particularly relevant to the Indian economy?
In the context of the Indian economy, some of the major causes of unemployment are:
- Rapid Population Growth: A continuously expanding population adds a large number of people to the labour force each year, but job creation does not keep pace.
- Dependence on Agriculture: A large portion of the population depends on agriculture, which is often seasonal and prone to disguised unemployment.
- Slow Industrialisation: The slow growth of labour-intensive manufacturing and industrial sectors fails to absorb the surplus labour from the agricultural sector.
- Inappropriate Education System: The education system is often criticised for being too theoretical and not providing the vocational skills required by modern industries.
10. Why might rapid economic growth not automatically solve the problem of unemployment?
Rapid economic growth might not solve unemployment due to a phenomenon known as jobless growth. This occurs when an economy's output (GDP) increases, but the level of employment does not, or grows very slowly. This can happen if the growth is concentrated in capital-intensive sectors (like automated manufacturing or high-tech services) that do not require a large workforce. To solve unemployment, growth must be inclusive and accompanied by policies that promote labour-intensive industries and skill development aligned with new job opportunities.
