Unemployment

Unemployment is defined as the condition of being without a job despite actively seeking employment and possessing the necessary qualifications, skills, and willingness to work.

Types of Unemployment

1. Frictional Unemployment: Temporary joblessness when individuals are between jobs or changing careers.
2. Structural Unemployment: Occurs due to a mismatch between job seekers’ skills and the available job opportunities, often because of technological advancements or economic shifts.
3. Cyclical Unemployment: Results from economic downturns, leading to reduced demand for goods and services and subsequent job losses.
4. Seasonal Unemployment: Happens in industries or occupations with demand fluctuations based on seasonal factors, such as agriculture or tourism.
5. Long-term Unemployment: Refers to individuals who have been jobless for an extended period, typically six months or longer.
6. Disguised Unemployment: Exists when individuals appear employed but make minimal contributions to production, often seen in informal sectors.

Underemployment: Refers to workers who are employed but working fewer hours than they desire or working in jobs below their skill level.

Unemployment in India

• According to the Centre for Monitoring Indian Economy (CMIE), India’s unemployment rate in June 2024 was 9.2%, up from 7% in May 2024.
• CMIE reported rural unemployment at 9.3% and urban unemployment at 8.9%.
• The Labour Force Participation Rate (LFPR) in India has been increasing, reaching 41.4% in June 2024 (Forbes India).

Centre for Monitoring Indian Economy (CMIE): A Mumbai-based independent think tank founded in 1976, which collects, analyzes, and disseminates economic and business data to provide insights into the Indian economy.

Labour Force Participation Rate (LFPR): Measures the proportion of people in the working-age population who are either employed or unemployed but actively seeking work.

Causes of Unemployment

1. Skill Mismatch: Graduates often lack the skills employers need, creating a gap in the job market. For example, only 52.5% of youth are deemed employable due to a lack of necessary skills (India Skills Report 2024).
2. Rapid Population Growth: Intensifies competition for limited jobs. An example is 1800 applicants for ten job openings in Gujarat.
3. Growing Informalization of the Formal Sector: Increasing reliance on informal employment.
4. Seasonal Nature of Agriculture: Agricultural workers face unemployment during non-harvest seasons. For instance, farmers are unemployed post-harvest, contributing to disguised unemployment.
5. Decline of Small and Medium Enterprises (SMEs): Challenges faced by SMEs reduce job creation opportunities. For example, the decline of the textile industry affects SMEs and leads to job losses.
6. Limited Labor Mobility: Reluctance to relocate restricts access to job opportunities. Cultural barriers often hinder job relocation between regions.
7. Impediments to Women’s Workforce Participation: Social norms or lack of support prevent qualified women from entering or staying in the workforce.
8. Automation and Technological Advancements: Automation and technology replace jobs, contributing to unemployment. For example, e-commerce reduces retail jobs due to automated processes.
9. Declining Wages: Lower wages discourage people from seeking jobs.

Way Forward

• Skill Development and Training Programs: Initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) provide training in relevant sectors like IT, manufacturing, and renewable energy.
• Apprenticeship Programs: Partnering with industries, such as the National Apprenticeship Promotion Scheme (NAPS), allows individuals to gain practical experience.
• Focus on Agriculture: Initiatives like the Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDUGKY) impart value-added agriculture, processing, and marketing skills.
• Promoting Rural Entrepreneurship: Programs like the Rural Self Employment Training Institutes (RSETIs) provide training and guidance for starting and running businesses in rural areas.
• Focus on Infrastructure Projects: Investing in infrastructure development, such as the Sagarmala project for port development, creates jobs in construction, logistics, and related sectors.
• Promoting Flexible Work Arrangements: Supporting part-time work and remote work options to cater to a wider range of job seekers.
• Implementing Proposed Programs: According to an RBI report, eight crore jobs have been created in the last 3-4 years, but the public remains uncertain about their implementation.