Unemployment is described as "a situation where a person who is willing to work at the prevailing wage rate is unable to find a job" in India by the Ministry of Labour and Employment.

The number of people who are unemployed and actively looking for work as a percentage of the total labor force is used to calculate the unemployment rate in India. People over a certain age who are able and willing to work are considered to be in the labor force, whether they are employed or not. The government and other organizations closely monitor the unemployment rate in India as it is a key sign of the economy's health. High unemployment rates can contribute to social unrest and economic instability as well as negatively affect the nation's overall development.

The percentage of the labor force that is unemployed is known as the unemployment rate, which is calculated by adding the number of employed people to the number of unemployed people.

Since its founding in 1950, India's employment and unemployment rates have been measured by the National Sample Survey Organization (NSSO). 

  • A person's membership in the "Labour Force" must first be established before it can be determined whether they are employed or unemployed. This is done by looking at their Activity Status during the selected reference period, which in turn determines whether they were actively seeking employment or not.
  • In terms of his participation in economic or non-economic activities, the individual's activity status refers to the situation in which he was found during the reference period.
  • The NSSO defines the three broad Activity Statuses as follows:
    • Working (engaged in an economic activity) i.e. ‘Employed’
    • Seeking or available for work i.e. ‘Unemployed’
  • neither seeking nor being open to employment
  • All people who fall under broad activity status i) or ii) above are considered to be part of the labor force, while people who fall under broad activity status iii) are considered to be unemployed. Consequently, employed and unemployed people make up the labor force.

Types of Unemployment

  • Cyclical unemployment
      • When aggregate demand (AD) declines and people lose their jobs, there is cyclical unemployment. 
        • It is referred to as demand deficient, general, or Keynesian unemployment if the decline in aggregate demand persists. 
      • Companies respond to a decline in demand for their goods or services by reducing production, which necessitates a reduction in workforce within the company. Worker layoffs happen in reality.
        • Example: Unemployment brought on by the 2008–2010 recession
      • Cyclical unemployment is typically a shot-run phenomenon and is subject to trade cycles.
  • Structural unemployment
    • Structural unemployment happens when particular sectors suffer due to persistent shifts in market conditions. 
    • Significant adjustments to the economic structure have an impact on either the supply or demand for a production factor.
    • The rapid globalization of innovation and technological change in every sphere is inexorably leading to structural employment.
    • For instance, new industries have emerged in response to the decline of older ones, such as higher tech manufacturing, IT, computing, insurance, and web-based businesses. 
    • But the skill sets needed for these new industries might be distinct from those for earlier manufacturing jobs, and this is what might lead to structural unemployment.
  • Classical unemployment
      • When wages are 'too high,' it results in traditional unemployment.
      • Prior to the 1930s, this theory of unemployment was prevalent; it blamed workers for refusing to accept lower pay or for demanding wages that were too high.
      • Real wage unemployment and classical unemployment are synonyms.
  • Seasonal unemployment
    • Seasonal unemployment occurs because particular sectors only manufacture or sell their goods throughout the year.
    • Industries in which seasonal unemployment is prevalent are agriculture, tourism, Construction and agriculture.
  • Ex: Ski resort employees will lose their jobs once winter is over, whereas Indian hill station tour guides will likely lose their jobs once summer arrives and there are fewer visitors. 
  • Another example could be in the agricultural industry, where the need for workers is greater during harvest than it is throughout the rest of the year.
  • Frictional unemployment
      • When someone experiences frictional unemployment, also known as search unemployment, it means that they have lost their current job and are currently looking for a new one.
      • Other than providing better information to shorten the search period, there may not be much that can be done to reduce this type of unemployment.
      • This implies that there can never be a time with zero unemployment because there will always be some workers looking for new employment.
  • Voluntary unemployment
      • When employees decide not to work at the equilibrium wage rate, this is referred to as voluntary unemployment.
      • Employees may decide not to participate in the labor market for a variety of reasons.
        • A number of factors contribute to voluntary unemployment, such as overly generous welfare payouts and a high income tax.
  • Disguised Unemployment
      • There are more people working than is actually necessary in this situation.
      • Production is unaffected even if some are removed. In other words, it alludes to a circumstance in which there is a surplus of workers but some of them are at the zero-marginal-productivity level. 
      • The main causes of disguised unemployment in India may be attributed to overcrowding in agriculture brought on by the country's rapid population growth and a lack of alternative employment opportunities.
  • Educated Unemployment
    • In addition to open unemployment, many educated people are underemployed because their qualifications do not match the position.
    • In India, unemployment among educated youths is primarily caused by flaws in the educational system, mass production, a preference for white collar work, a lack of employable skills, and a decline in formal salaried employment.
  • Technological Unemployment
      • It is the outcome of a few adjustments to production methods, which might not require a lot of labor.
      • The capital-intensive nature of modern technology necessitates fewer to this unemployment.
  • Casual Unemployment
      • When a person is regularly employed, casual unemployment may happen because of short-term contracts, a lack of raw materials, a decline in demand, a change in ownership, etc.
  • Chronic Unemployment
    • Chronic unemployment is defined as persistent unemployment over an extended period of time. 
    • The main causes of long-term unemployment are the population explosion and the lack of economic growth as a result of the poverty-induced spiral of inequality. 

Causes of Unemployment in India:

There are many factors that contribute to India's high rate of unemployment, which makes it a complicated problem. 

The following are some of the primary causes of unemployment in India:

  • Population growth: India's large and expanding population has led to a labor shortage. Unemployment results from the fact that more people are looking for work than there are open positions.
  • Lack of skills: In India, a large number of job seekers lack the qualifications or education needed for the open positions. This leads to a shortage of skills, in which companies are unable to locate employees with appropriate credentials.
  • Structural issues: Certain structural problems in the Indian economy make it challenging for some industries to generate employment. For instance, the agricultural industry is extremely dispersed and there is little opportunity for job creation.
  • Slower economic expansion: The creation of jobs has decreased as a result of the Indian economy's slower recent growth. The COVID-19 pandemic and its economic repercussions have made this worse.
  • Dominance of the informal sector: The informal sector, which is characterized by low wages, subpar working conditions, and a lack of job security, employs a sizable portion of the workforce in India.
  • Lack of entrepreneurship: Due to India's low rate of entrepreneurship, fewer new businesses are forming and offering employment opportunities.  
  • Government regulations: A few regulations, such as labor laws, can make it challenging for companies to hire and fire employees, which can inhibit the creation of new jobs.

In conclusion, combating unemployment in India necessitates a multifaceted strategy that takes into account these various factors. This could involve initiatives to support entrepreneurship and economic expansion, labor law changes, and investments in education and skill development.

Programs, policies, and actions taken since Independence to address unemployment in India.

In order to combat unemployment, India has put in place a number of policies, projects, and programs since gaining its independence. Some of the notable ones are listed below:

  • The National Rural Employment Guarantee Act (NREGA), which was introduced by the Indian government in 2005, ensures that every rural household will have access to at least 100 days of wage employment. In rural areas, the program has been effective in eradicating poverty and generating employment opportunities. 
  • In order to train 40 crore people in skills by 2022, the Skill India Mission was established in 2015. The initiative seeks to close the skills gap between the workforce's skill set and what industry demands. 
  • Make in India: In order to entice domestic and international businesses to invest and manufacture in India, the Make in India program was introduced in 2014. By encouraging manufacturing and entrepreneurship, the program seeks to increase job creation. 
  • Start-up India: Start-up India is a 2016 programme that promotes entrepreneurship and job creation. The programme offers tax breaks and financial assistance to new businesses.
  • Pradhan Mantri Rozgar Yojana (PMRY): In order to offer employment opportunities to the educated unemployed youth in India, PMRY was established in 1993. For the launch of new small businesses, the program offers loans and subsidies.
  • National Urban Livelihood Mission (NULM): To combat urban poverty and unemployment, NULM was established in 2013. The program offers the urban poor financial support and skill development to launch their own businesses. 
  • Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY): In order to give rural youth job opportunities and skill training, DDU-GKY was established in 2014. By fostering employment opportunities in rural areas, the program seeks to reduce migration from rural to urban areas. 
  • The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) was established in 2015 to offer skill development to young people all over India. A workforce with skills applicable to industry is the program's end goal.
  • Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): In order to give rural households employment opportunities, MGNREGA—a continuation of NREGA—was introduced in 2005. In rural areas, the program has been effective in eradicating poverty and generating employment opportunities. 

These are a few of the notable policies, initiatives, and programs that India has put into place to combat unemployment since gaining independence.

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