Introduction and objectives

UNEMPLOYMENT

Unemployment is said to exist when people who are willing to work at the going wages cannot find jobs. In case of India we have unemployment in rural and urban areas. However, the nature of unemployment differs in rural and urban areas. In case of rural areas, there is seasonal and disguised unemployment. Urban areas have mostly educated unemployment.

Seasonal unemployment happens when people are not able to find jobs during some months of the year. People dependent upon agriculture usually faces such kind of problem. There are certain busy seasons when sowing, harvesting, weeding and threshing is done. Certain months do not provide much work to the people dependant on agriculture. In case of disguised unemployment people appear to be employed. They have agricultural plot where they find work. This usually happens among family members engaged in agricultural activity. The work requires the service of five people but engages eight people. Three people are extra. These three people also work in the same plot as the others. The contribution made by the three extra people does not add to the contribution made by the five people. If three people are removed the productivity of the field will not decline. The field requires the service of five people and the three extra people are disguised unemployed. In case of urban areas educated unemployment has become a common phenomenon. Many youth with matriculation, graduation and post graduation degrees are not able to find job. A study showed that unemployment of graduate and post-graduate has increased faster than among matriculates. A paradoxical manpower situation is witnessed as surplus of manpower in certain categories coexist with shortage of manpower in others. There is unemployment among technically qualified person on one hand, while there is a dearth of technical skills required for economic growth. Unemployment leads to wastage of manpower resource. People who are an asset for the economy turn into a liability. There is a feeling of hopelessness and despair among the youth. People do not have enough money to support their family. Inability of educated people who are willing to work to find gainful employment implies a great social waste.

Unemployment tends to increase economic overload. The dependence of the unemployed on the working population increases. The quality of life of an individual as well as of society is adversely affected. When a family has to live on a bare subsistence level there is a general decline in its health status and rising withdrawal from the school system. Hence, unemployment has detrimental impact on the overall growth of an economy. Increase in unemployment is an indicator of a depressed economy. It also wastes the resource, which could have been gainfully employed. If people cannot be used as a resource they naturally appear as a liability to the economy. In case of India, statistically, the unemployment rate is low. A large number of people represented with low income and productivity are counted as employed. They appear to work throughout the year but in terms of their potential and income, it is not adequate for them. Moreover, the employment structure is characterised by

self-employment in the primary sector. The whole family contributes in the field even though not everybody is really needed. So there is disguised unemployment in the agriculture sector. But the entire family shares what has been produced. This concept of sharing of work in the field and the produce raised reduces the hardship of unemployment in the rural sector. But this does not reduce the poverty of the family; gradually surplus labour from every household tends to migrate from the village in search of jobs.

EMPLOYMENT

Let us discuss about the employment scenario in the three sectors mentioned earlier.

Agriculture is the most labour absorbing sector of the economy. In recent years, there has been a decline in the dependence of population on agriculture partly because of disguised unemployment discussed earlier. Some of the surplus labour in agriculture has moved to either the secondary or the tertiary sector. In the secondary sector, small scale manufacturing is the most labour absorbing. In case of the tertiary sector, various new services are now appearing like biotechnology, information technology and so on.

EMPLOYMENT TRENDS IN INDIA Structure of Employment

Any assessment of the employment performance of the Indian Economy is not meaningful without an analysis of the structural dimensions of employment. These dimensions define and determine the substantive meaning of employment in terms of its nature and quality. Only a small segment of the workforce is employed on a regular basis at reasonable levels of wages and salaries. A large part is self-employed in agriculture which continues to be the major source of employment and livelihood for majority of the Indian workers. And an overwhelming majority works in what is called the unorganized or the informal sector. These qualitative dimensions are, of course, interrelated and reinforce each other in the direction of keeping the quality of employment low. We look at these aspects of employment particularly focusing on the nature and extent of structural changes that have taken place in the recent decades, in this section.

Sectoral Employment Shares

As is well know, majority of Indian workers are engaged in agriculture and allied activities. With economic development, agriculture is expected to decline in importance in terms of its share in employment and output. Proportion of agriculture in total employment has declined over the years: from 74 per cent in 1972-73 to 68 per cent in 1983, 60 per cent in 1993-94 and to 57 per cent in 2004- 05. It has declined further to 51 per cent in 2009-11 (Table 16). It is particularly important to note that the decline in the employment share of agriculture has been much slower than the share of gross domestic product (GDP) from agriculture. Thus, while share of agriculture in GDP declined from 41 per cent in 1972-73 to 15 per cent in 2009-10 (Table 17), that in employment declined from 74 per cent to 51 per cent. And rate of decline in GDP share

has been faster during 1993-94 to 2009-10, from 30 to 15 per cent; while the rate of decline in employment share has been relatively slow, from 64 per cent to 51per cent.

In the recent past, there has been deceleration in the growth of employment in India in spite of the accelerated economic growth. This can be explained in terms of steady decline in employment elasticity in all the major sector of economic activity except in construction.

Overall employment elasticity declined in India from 0.52 during 1983 to 1993-94 to 0.16 during 1993-94 to 1999-2000. The decline was quite fast in agriculture as it declined from 0.70 during 1983 to 1993-94 to 0.01 during 1993-94 to 1999-2000.

Details on employment trends are available from various Rounds of the NSSO Before presenting an analysis of this information, it is necessary to understand the difference between labour force and workforce as defind by the NSSO. The Survey The first category consists of those who are seeking work. This is essentially the category that either finds employment or remains unemployed. Those who find employment are designated as the 'work force' by the NSSO and those who are unable to find employment are designated as ‘unemployed’. "Since the 'labour force' is the total of which the 'workforce' is a part, any changes in the former are bound to have an impact on the latter."! The second category, i.e., 'not in the labour force' consists of persons who are not seeking work. This withdrawal from the labour force could be on account of pursuit of education, sickness, domestic work, disability, etc.

1. While labour force increased by 25 million over the period 1993-94 to 1999-2000 and by 63 million over the period 1999-2000 to 2004-05, it declined marginally (by 0.3 million) over the period 2004-05 to 2009-10.

2. The segment-wise disaggregation of the labour force reveals that in the period 2004-05 to 2009-10, both rural and urban males experienced deceleration in growth rates as compared to the previous period. Nevertheless there was an addition of22 million men into the labour force in the five year period as compared to the 36 million in the previous periods On the other hand, 22 million women withdrew from the labour force in the period 2004-05 to 2009-10

3. During the period 1993-94 to 1999-2000, 23 million jobs were created' and over the next five years as many as 61 million jobs were created, only 1 million jobs could be created over the period 2004-05 to 2009-10. This is a dismal performance on the employment front particularly in view of the fact that the country registered a robust economic growth during this period. The CAGR of the work force declined from 2.9 per cent during the period 1999-2000 to 2004-05 to just 0.05 per cent during the period 2004-05 to 2009-10. Thus, one can say without hesitation that the country has witnessed the phenomenon of jobless growth in recent times.

4. The segment-wise disaggregation of the workforce shows that in the period 2004-05 to 2009-10, there was an addition of 22 million males to the workforce while 21 million females opted out of the workforce. While the male addition to the workforce was evenly distributed between rural and urban areas, the decline in the female workforce was mainly concentrated in rural areas.

Why Did People Withdraw from the Labour Force?: The largest share of 44 per cent was that of people who opted out of the labour force to pursue education, 31 per cent opted out for attending to domestic duties, 15 per cent were in the 0-4 age group and the remaining categories (disabled, pensioners, etc.), added up to a 10 per cent share. The fact that a major part of the withdrawal of people from the labour force is due to education is an encouraging trend as it shows that 'India is studying'.

The second largest category is of those who opted out of the labour force to attend to domestic duties including activities like weaving, tailoring and gathering firewood for free for the households. These withdrawals are almost completely by females - particularly rural females.

LABOUR FORCE, WORKFORCE AND UNEMPLOYMENT (UPSS)

1993-94 1999—2000 2004-05 2009-10

in million

Labour force 381.94 406.84 470.14 469.87

Workforce 374.47 397.88 458.99 460.17

Unemloyed 7.49 8.96 11.15 9.70

ESTIMATED NUMBERS OF UPSS WORKERS ACROSS BROAD INDUSTRIAL CATEGORIES

Industry Percentage

1993-94 1999-2000

2004-05 2007-08 2009-10

1 .

Agriculture 63.8 59.9 56.5 55.4 53.1

2 .

Mining and Quarrying 0.7 0.6 0.6 0.5 0.7

3

The decline in employment share of agriculture was mostly being compensated by an increase in the share of secondary sector in the pre-reform period, but since the economic reforms the tertiary sector has been the main gainer of the shift in employment. Yet increase in its employment share has not been commensurate with the increase in its share of GDP during 1993-4/2009-10. The share of secondary sector in employment has increased at a relatively faster rate while its share in GDP has remained constant at about one-fourth of the total.

Within the secondary sector construction has sharply increased its share in employment particularly since 1999-2000, but its share in GDP has stagnated throughout the period under-reference, pre- and post-reform. Manufacturing increased its share both in employment and GDP, but rather slowly. In the tertiary sector, trade experienced a fast increase in its share in employment, and a significant though somewhat smaller increases in its share in GDP in the post-reform period but saw only a small increase in its employment share. Financial services registered a fast increase both in its employment and GDP share, though its share in employment is small (2.25) about one-seventh of its share in GDP (15.64%). Community social and personal services which used to be the largest activity in the tertiary sector, both in terms of employment and GDP, in the pre-reform period, saw a marginal decline in their share both in employment and GDP and is now the smallest in regard to GDP, though it continues to be the second largest, after trade, in terms of employment. The asymmetry in the rate of change in employment and GDP shares of different sectors and divisions, particularly between decline inP

and employment shares of agriculture and correspondingly between rate of increase in GDP and employment in non-agricultural part of the economy, has serious implications in terms of differences in earnings and income between different sectors. Let us first look at the changes in the shares of agriculture and non-agricultural sectors in GDP and employment. In 1972-73, agriculture employed 74 per cent workers, but it also produced 41per cent of GDP. Per worker productivity and income in agriculture was significantly lower than in non-agricultural activities even then; the ratio being 1:3.6. In 2004-05 the share of agriculture was much lower at 20.2 per cent, but it was still employing 56.5 per cent of workers. The ratio between agricultural and non-agricultural productivity in that year works out to 1:5.9. In 2009-10 the ratio has gone up to 1:6. Thus there has been a large decline in the relative earnings of agricultural workers. That is partly because agricultural growth has been consistently much lower than that in the non-agricultural sectors, but, mainly, because a shift of workers from non-agricultural to non-non-agricultural activities as expected in the process of economic development has not taken place. Agriculture has grown at an average rate of 2 to 3 per cent per annum as against 5 to 6.5 per cent growth in the nonagricultural sector during the period under consideration. It is not generally realistic to expect a much higher growth rate in agriculture. But even if it grew at a rate of about 4 per cent per annum, as envisaged in the Eleventh Plan, it cannot employ many more persons productively. In fact, productivity per worker in agriculture is so low that even with a higher growth rate, it would need to reduce its workforce so as to provide a reasonable level of income to those engaged in it

EMPLOYMENT IN ORGANISED SECTOR

The Indian economy is divided into organised and unorganised sectors. The unorganised sector in the economy is very large. Whole of agriculture is in unorganised sector. Besides agriculture, most of mining, manufacturing, construction, trade, transport and communications, social and personal services are in the unorganised sector. By and large, organised sector is restricted to manufacturing, electricity, transport and financial services. The relatively much larger size of the unorganised sector vis-a-vis the organised sector would be clear from the fact that the latter provides employment to only about 6 to 8 per cent of the workers and the remaining 92 to 94 per cent are employed in the unorganised sector.

The organised sector is divided into the public sector and the private sector. The public sector had accounted for 67.7 per cent of the employment in the organised sector in 1981. Its share in employment in the organised sector rose to 71.3 per cent in 1991 but fell thereafter. This was a result of a conscious policy decision by the government to reduce employment in the public sector. As a result, of this policy, the share of public sector in employment in the organised sector fell to 68.9 per cent in 2001, 68.1 per cent in 2005 and further to 62.2 per cent in 2010.

EMPLOYMENT IN THE ORGANISED SECTOR

Sectors 1981 2010 Rate of growth of

employment (% per annum)

1994 to 2008

Public Sector 154.84 178.62 -0.65

Private Sector 73.95 108.46 1.75

Total 228.79 287.08 0.05

NATURE AND ESTIMATES OF UNEMPLOYMENT IN INDIA

Unemployment in underdeveloped countries is both open and disguised. Like all other underdeveloped countries, India presently suffers mainly from structural unemployment which exists in open and disguised forms.

NATURE OF UNEMPLOYMENT

Most of the unemployment in India is definitely structural. During the 1951-2011 periods, population in this country increased at an alarming rate of around 2.1 per cent per annum and with it the number of people coming to the labour market in search of jobs also rose rapidly, whereas employment opportunities did not increase most of the time correspondingly due to slow economic growth. Hence there has been "an increase in the volume of unemployment from one plan period to another. This unemployment, on account of its very nature, can be eliminated only by introducing certain radical reforms in the structure of the economy. Apart from structural unemployment, there is Keynesian involuntary unemployment which can be eliminated by increasing effective demand, as is done in developed countries. Though presently it would be wrong to ignore the Keynesian involuntary unemployment, yet the structural unemployment remains a greater cause of anxiety.

CONCEPTS OF UNEMPLOYMENT

Keeping in view the recommendations of the Committee of Experts on Unemployment, the National Sample Survey Organisation (NSSO) has developed and standardised concepts and definitions of labour force, employment and unemployment suitable to Indian conditions.

The three concepts of unemployment developed by the NSSO are: (i) Usual Status Unemployment, (ii) Current Weekly Status Unemployment, and (iii) Current Daily Status Unemployment.

i. The Usual Status concept is meant to determine the Usual Activity Status - employed, or unemployed or outside the labour force The Usual Status unemployment rate is a person rate and indicates chronic unemployment because all those who are found

"usually" unemployed in the reference year are counted as unemployed.

ii. The Current Weekly Status concept A person having worked for an hour or more on anyone or more days during the reference period gets the employed status. The Current Weekly Status unemployment rate, like the Usual Status unemployment rate, is also a person rate.

iii. The Current Daily Status A person who works for one hour but less than four hours is considered having worked for half a day. If he works for four hours or more during a day, he is considered as employed for the whole day. The Current Daily Status unemployment rate is a time rate.

The daily status flow rate is evidently the most inclusive, covering open as well as partial unemployment. It is therefore the rate which is most relevant for policy-making.

ESTIMATES OF UNEMPLOYMENT (1972-73 TO 1993-94)

The unemployment rates by the three alternative concepts of the Usual Status, the Current Weekly Status and the Current Daily Status have become available from the various Rounds of NSSO.

The rates of unemployment do not indicate any clear trends over the 21 years period, that is, from 1972-73 to 1993-94. However, if we compare unemployment position in 1993-94 with that in 1983 and 1972-73, we observe that there has been marginal decline in unemployment rates.

UNEMPLOYMENT IN POST REFORM PERIOD

Estimates of current daily status unemployment indicate a worsening of the unemployment situation during the period of economic reform in all the four population segments, viz., rural males, rural females, urban males and urban females.

Eleventh Five Year Plan identified the following weaknesses on the employment front during the period of economic reforms:"¹⁸

1. The rate of unemployment has increased from 6.1 per cent in 1993-94 to 7.3 per cent in 1999-2000 and further to 8.3 per cent in 2004-05.

2. Unemployment among agricultural labour households has risen from 9.5 per cent in 1993-94 to 15.3 per cent in 2004-05.

3. While non-agricultural employment expanded at a robust annual rate of 4.7 per cent during the period 1999-2000 to 2004-05, this growth was largely in the unorganized sector.

4. Despite fairly healthy GDP growth, employment in the organised sector actually

4. Despite fairly healthy GDP growth, employment in the organised sector actually