UNIT 6
Unemployment and full employment
Unemployment refers to situation in which workers who are capable of working and willing to work do not get employment. India unemployment rate is increased to 8.5% in 2019.
Unemployment rate = unemployed person*100
Unemployed +employed person
Definition
“A man is unemployed only when he is both without a job or not employed and also desires to be employed”
Types of unemployment in India
Frictional unemployment: Frictional unemployment occurs when a worker moves from one job to another. It is a result of imperfection in the labour market, because if job seekers knew that they would be employed for a particular job vacancy, almost no time would be lost in getting a new job, eliminating this form of unemployment.
Structural unemployment: Structural unemployment arises when a concerned person qualification does not meet the job requirement. Jobs are available, but there is a mismatch between companies’ requirement and worker skills.
Cyclical unemployment: This occurs when the economy is in need of low workforce. In the growth phase of economy, demand of labour increases. While at the time of depression, demand for labour decreases.
Seasonal unemployment: seasonal unemployment happens when an occupation is not in demand at certain season.
Causes of unemployment in India
High population: India’s biggest problem is constant increase in Population. It is one of the main causes of unemployment. The rate of unemployment is 11.1% in 10th Plan.
Caste system: caste system is largely prevalent in India. In some areas, work is prohibited for specific castes. Due to this caste system, work is not given to the deserving candidates. This leads to rise in unemployment.
Slow economic growth: The economic growth is slow in India. Thus slow economic growth results in unemployment to the increasing population.
Agriculture is a seasonal occupation: large population in India depends on agriculture. But agriculture is a seasonal occupation, provides work for few months. So this leads to rise in population.
Joint family system: in big families having business, many people will not work and depends on the income of joint family. Many who are working do not add anything to the production. They encourage disguised unemployment.
Fall of small industries: The rise in industrial sector, leads to fall of cottage and small industries. The production of small scale industries fall any many worker become unemployed.
Less savings and capital: there is inadequate capital in India. Savings are inadequate in India, which affect the investment. Due to shortage of investment and savings, opportunity of employment reduces.
Increase in universities: Numbers of universities are increasing every year in India. There are 385 universities in India. As a result white collar unemployment has increased.
Immobility of labour: due to attachment with family, labour do not want to go far off areas for jobs. Low mobility also depends on language, religion and climate. This factor also leads to rise in unemployment.
Defective planning: lack of planning is one of the causes of unemployment. There is wide gap between supply and demand for labour. No Plan had formulated any long term scheme for removal of unemployment.
Cost of unemployment
Individual cost:
Unemployed individual are unable to meet their financial requirements. Economically, unemployed people suffer from reduction in their standards of living. Unemployed people default I paying financial obligations such as mortgage, loans, credit cards. Many unemployed people have less savings. Unemployment increases the chances of stress, illness, loss of self esteem, leads to depression.
Social cost:
Longer period of unemployment have adverse effect in the society. Unemployment may lead to increase in crime. Fear of unemployment leads to less contribution to charities. An economy with higher unemployment is not using all of the labour resources which lead to low production capability. If more people are efficiently used leads to higher output.
Business cost
Unemployment cost business as well. If more people are unemployed, then the demand for goods and services decreases. Thus the profitability of a business is affected. A decrease in demand means company is not making money and lay off the employee. The laid off employee do not have money to buy goods and services resulting in further reduction in demand and the cycle may continue.
Government cost
Unemployment imposes tangible cost on government. The income of government goes on unemployment insurance benefit, medicine, food stamps, and other programs. Due to unemployment the government reduces the investment in defense, infrastructure, and research. Moreover, if the people are not earning, they don’t have income to pay tax.
It is the situation in which all the workers who are capable and willing to working and get employment at reasonable wages.
Types of employment in India
Permanent:
Permanent employees are regular employees or full time employees. They work for an employee and directly paid by that employee. These employees do not have predetermined end date to employment. In addition to wages, they received benefits like subsidized health care, paid vacations, holidays, sick time, or contributions to a 401(k) retirement plan. Permanent employment means employment guaranteed throughout the employees working life.
Casual employment:
Casual employees do not have regular working hours. When need arises, a casual workers are hired. There is no exception that there will be more work in future. Casual employees are paid for time actually worked. During the time when employee is not working for employer, then neither one do not have any obligations towards each other.
Apprentices or trainees
Apprenticeships are on the job training given to new generation instead of in school. Apprentice receives stipend for their services given to the employers. People who successfully come their apprentice are given permanent job by the employer. Apprentice learns their profession for a particular period.
Employment agency staff – also called labour hire
Employment staff agency is a firm hired by the company to fulfill their staffing needs. They provide employees for all kinds of jobs, full time, part time, contractual. Staffing companies make their money by charging a percentage of employees’ salary.
Contractors and sub-contractors – hired staff
A contractor and subcontractor is a person that performs work on contractual basis. A subcontractor works under a contractor. A contractor with mutually agreed upon price, will finish the work within a specific time frame.
Sources
1. Public finance in theory Baltic - Musgrave
2. Public Finance Department and Developing countries - Dr. S.K. SINGH
