GS Paper 3
Syllabus: Unemployment
Source: TH
Context: India is facing a jobs crisis, marked by low labour demand for regular wage work.
Status of High unemployment rate in India:
- The unemployment rate in the country has consistently increased over the last two decades – from 2% in 2010 to 5% in 2015 and 6.1% in 2018.
- According to the Center for Monitoring Indian Economy, it was over 7% for most of 2021 and 2022
- Over 42% of India’s graduates under 25 were unemployed in 2021-22 as per the State of Working India 2023.
- Despite a rise in GDP growth during the 2000s, the employment growth rate remained unresponsive, indicating a phenomenon of jobless growth
Types of Employment in India:
| Types | Description |
| Wage Employment | Regular Wage Jobs: Formal, structured positions with fixed salaries, found in government organizations, private companies, and multinational corporations. |
| Casual or Daily Wage Labor: Involves daily wage labour, prevalent in sectors like construction, agriculture, and unorganized labour markets. | |
| Self-Employment | Entrepreneurship: Individuals engaged in entrepreneurial activities, running small businesses or enterprises such as shops, local services, or manufacturing units. |
| Farmers: Agriculture serves as a significant source of self-employment, with individuals owning and operating farms independently or as part of a family-run enterprise. | |
| Freelancing and Informal Work: Reflects the gig economy trend, with individuals working as freelancers, consultants, or in part-time roles. |
Causes for high unemployment rate:
- Structural shortfalls:
- In the past 40 years, economic growth in India has aided a structural shift away from agricultural jobs.
- However, this has mainly moved to construction and not to high-value sectors such as manufacturing or services.
- In the non-farm sector, the link between GDP growth and the pace of job creation has weakened over time, leading to rising unemployment.
- Shortfalls with social infrastructure:
- While India has made huge progress in improving its physical infrastructure, it has fallen behind on human infrastructure like education and skills.
- Urban-rural disparity:
- Physical infrastructure investments are focused more on urban areas, which benefited in the 1990s.
- However, from 2000 onwards, with the pace of de-urbanisation of manufacturing gathering momentum, the manufacturing sector is migrating away from urban to rural areas to remain cost-competitive.
- However, poor physical and human infrastructure in rural areas has constrained the growth drivers and limited the size of the manufacturing sector in India.
- Education-skills mismatch:
- Jobs catering to the qualifications of graduates who have studied subjects like agriculture, history, English, philosophy and communication are difficult, and increasingly impossible, to come by.
- On the one hand, the young find themselves overqualified for manual labour jobs. On the other, they lack the technical skills required for high-paying jobs in IT and professional services.
- In the absence of suitable employment in the private sector for this section, many turn to government jobs.
- However, a rapid increase in the supply of educated youth, coupled with a gradual reduction of public-sector vacancies has resulted in stiff competition for even the most junior positions in government offices.
Jobless Growth in India:
- Two types of jobless growth in India:
- Weak Responsiveness: Automation and tech introduction lead to jobless growth, but increasing GDP can still boost employment.
- High Responsiveness: In India, labour productivity growth is strongly linked to output growth. So even though GDP increases, output will increase only if labour productivity increases.
Social Impact of Unemployment in India:
| Social Impact | Details |
| Marginalisation of People | Prolonged unemployment leads to the erosion of skills, reducing employability even when jobs become available. Perpetuates a cycle of joblessness as skills diminish over time. |
| Social Unrest | High unemployment can result in dissatisfaction, social unrest, and various forms of manifestation such as protests, crime rates, and civil unrest. |
| Migration | High unemployment often drives rural-to-urban migration in search of better opportunities. This migration can strain urban infrastructure, leading to the development of slums and inadequate living conditions. |
| Impact on Education | Financial struggles due to high unemployment may deter families from investing in education. Immediate earning potential may take precedence over education, perpetuating a cycle of limited opportunities for future generations. |
| Disproportionate Impact on Social Groups | Disadvantaged groups like youth, women, rural labourers, minorities, and scheduled castes are disproportionately affected by unemployment. – Exacerbates existing inequalities in society. |
| Increased Crime | Lack of lawful income sources due to unemployment can drive individuals toward illegal activities. Unemployment is linked to higher crime rates in affected areas. |
Various Approaches to growth and employment:
| Aspect | Details |
| Keynesian Theory | Emphasizes aggregate demand as the key factor influencing employment. Fiscal policy is seen as a tool to boost labour demand by stimulating output. |
| Mahalanobis Strategy | Identifies availability of capital goods as the primary constraint on output and employment. Advocates for policies promoting heavy industrialization. |
| Structuralist Theories | Based on experiences of developing countries, highlights agrarian and balance of payment constraints on output. This led to significant policy debates in India during the 1970s and early 1990s. |
| Common Presumption | Across these frameworks, increasing the output growth rate in the non-agricultural sector was believed to be sufficient for boosting employment growth in the formal sector. |
| Contemporary Challenge | Recognition that addressing the employment challenge requires a separate policy focus on employment, not just relying on more rapid GDP growth. |
Measures to address unemployment:
- India needs good infrastructure, both physical and human, to create more jobs.
- There has to be a convergence in the paths of urbanisation and industrialisation to streamline job creation.
- Tier II cities should be focused as these new cities have the potential to generate 70% of the country’s new jobs and GDP over the next 20 years.
- National Employment Policy (NEP): Implement a focused policy considering both the demand and supply sides. Enhance workforce quality, bridge skills gaps, and create public jobs.
- Urban MGNREGA: Introduce an urban version to provide income security for informal jobs and create public assets in urban areas.
- Industrialization and Agricultural Investment: Rapid industrialization and increased investment in agriculture create more jobs and boost productivity.
- Diversify Agriculture and Promote Agro-Processing: Shift to labour-intensive crops, promote agro-processing for export, reduce wastage, and increase value addition.
- Expand Education and Healthcare: Enhance human capital through education and healthcare expansion, providing employment in the social sector.
- Reform Education, Provide Vocational Training: Improve skills and employability through education system reforms and vocational/technical training.
Conclusion
More than 50% of India’s population is below the age of 25 and more than 65% Is below the age of 35. India’s young demographic is an asset in an ageing world. This clearly presents the case for India to address the jobless growth scenario.
Mains Links:
Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (UPSC 2023)
Prelims Links:
- Disguised unemployment generally means (UPSC 2013)
(a) a large number of people remain unemployed
(b) alternative employment is not available
(c) the marginal productivity of labour is zero
(d) productivity of workers is low
Ans: C
