As per a research report by Motilal Oswal, India must create 10 million jobs annually by 2030 to reduce its underemployment and unemployment rate. This roughly translates to 0.83 million or 830,000 jobs every month for the next 12 years.
India is struggling with a burning challenge: rising unemployment. Despite being the world's fastest-growing economy, India's sluggish job market has led to many social and economic issues, including social unrest, crime, poverty, hunger, and poor health standards.
As the country is striving for greater economic growth and prosperity, addressing unemployment becomes paramount to avoid long-term adverse effects. The Indian government is actively pursuing economic policies to foster job creation and uplift industries that can generate employment.
This article focuses on the basics of unemployment, its causes, its societal and economic impacts, and how Indian government has proven to be a game changer in reducing unemployment by launching various employment schemes for all the sections of society.
According to the Government of India, unemployment is when a person actively searches for a job and cannot find work. The unemployment rate is the most widely used measure to determine the country’s unemployment rate.
Unemployment rate is the number of people unemployed divided by the working population or people working under labour force.
Unemployment rate = (Unemployed Workers / Total labour force) × 100
In order to understand how the unemployment rate is calculated, let us take an example. Suppose in Riverdale, there are 20 million people employed and 2 million unemployed.
To calculate the unemployment rate, we first need to determine the size of the labor force, which is the sum of the employed and unemployed individuals.
Labor Force = Employed + Unemployed
Labor Force = 20 million + 2 million
Labor Force = 22 million
Now, to calculate the unemployment rate, we use the formula:
Unemployment Rate = (Unemployed / Labor Force) * 100
Substituting the values from our example:
Unemployment Rate = (2 million / 22 million) * 100
Unemployment Rate ? (0.0909) * 100
Unemployment Rate ? 9.09%
Therefore, in this example, the unemployment rate is approximately 9.09%.
NSSO, an organization under MoSPI – Ministry of Statistics and Programme Implementation, measures India’s unemployment on three approaches:
A person's unemployment status under this approach is measured for each day in a reference week. A person having no gainful work even for one hour in a day is described as unemployed for that day.
For example, Shikha is actively looking for a job and is available for work every day. Here's how her week unfolds:
According to this approach, Shikha is considered unemployed for all five days in the reference week because she did not engage in any gainful work on those days.
This approach focuses on individuals without gainful work at any point during the week leading up to the survey date.
Raj is actively seeking employment, and let us say the survey will be conducted in the second week of February. He did not engage in gainful work or employment throughout the second week of February. Therefore, according to the weekly status approach, he would be classified as unemployed.
Usual status approach provides estimates for individuals who were unemployed or lacked gainful work for a significant portion of the 365 days.
Komal, who lost her job in January, remained unemployed for most of the year despite actively seeking employment. She finally secured a new job in November.
According to the annual status approach, Komal would be classified as unemployed or lacking gainful work for most of the 365 days, reflecting her jobless status throughout most of the year.
In India, there are seven types of unemployment as discussed below:
Disguised unemployment, also known as hidden unemployment, refers to a situation where individuals are employed, but their contribution to the overall output is less than their full potential.
Let's consider a manufacturing company that produces electronic gadgets. The company operates with a workforce of 100 employees on its assembly line, with each worker responsible for a specific task in the production process.
Now, imagine that the company's production needs decrease due to a decline in demand for their products. However, instead of adjusting the workforce accordingly, the company keeps all 100 workers employed to avoid layoffs or maintain a certain output level.
In this situation, the company's decision to retain all 100 workers despite reduced production needs leads to disguised unemployment.
The impact of disguised unemployment in individuals can cause inefficiencies and diminishing skills, wastage of resources, job risks as these individuals are most likely to get fired when layoffs happen. Their incomes get steady as they do not acquire new skills and are less likely to be competent with the current market trends, which ultimately impact the country's economic growth in the long run.
Structural unemployment occurs when there is a mismatch between the skills and qualifications of available workers and the requirements of available jobs.
This type of unemployment typically arises due to long-term changes in the economy, such as technological advancements, shifts in consumer preferences, or changes in industry structure. Here's an example of structural unemployment:
Imagine a big railway system that has decided to stop selling paper tickets and instead switch to self-paying machines. The government wants the employees to focus on learning other skills or advance to other positions in the company. This creates structural employment in the company as their positions are being replaced by changes in industry structure as per new technological trends..
Seasonal unemployment occurs when individuals are temporarily unemployed due to fluctuations in demand for certain goods or services during specific times of the year.
This type of unemployment is typically associated with industries that experience regular, predictable patterns of demand tied to seasons or specific events. Here's an example to illustrate seasonal unemployment:
Consider a road side vendor selling fire crackers before Diwali. As the festival is about to begin, his stall is filled with people waiting to buy crackers but as soon as Diwali has gone by, he is out of business.
Vulnerable unemployment refers to a situation where workers are employed in jobs that offer low wages, minimal job security, and little to no access to benefits or social protections.
These workers are often in risky employment, making them vulnerable to economic shocks, exploitation, and poverty. Here's an example to illustrate vulnerable unemployment:
Let's consider a street vendor in a crowded urban area. This individual sells various items, such as snacks or clothing, from a stall on the footpath. They work long hours, sometimes in harsh conditions, to earn a meager income.
Vulnerable unemployment is a widespread issue, particularly in informal economies where large segments of the workforce are excluded from formal employment arrangements and left to fend for themselves in the face of economic uncertainty.
Technological unemployment refers to the displacement of workers by technological advancements that automate tasks previously performed by humans.
Artificial intelligence (AI) significantly generates technological unemployment across various industries by automating repetitive tasks, increasing efficiency, and reducing the need for human labor.
Let's consider the retail industry, specifically the rise of E-commerce platforms and the implementation of AI-powered online shopping. AI-powered recommendation systems analyze customer behavior and preferences to provide personalized product recommendations, reducing the need for human sales assistants.
As AI technologies become more sophisticated and widely adopted in the retail industry, there is a corresponding reduction in the need for human workers in various roles.
This kind of unemployment occurs due to fluctuations in the business cycle, particularly during periods of economic recession or downturn when overall demand for goods and services decreases.
Let's consider a fictional country called Econovia that experiences a severe economic recession due to a global financial crisis. As a result, aggregate demand for goods and services declines sharply as consumers and businesses reduce spending in response to economic uncertainty.
Many businesses begin to experience declining sales, leading to reduced production and layoffs as they seek to cut costs to remain solvent.
In this scenario, workers who are laid off due to the economic downturn experience cyclical unemployment.
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Frictional unemployment occurs when individuals are temporarily unemployed as they transition between jobs or enter the workforce for the first time. It can arise due to factors such as voluntary job quits, geographic mobility, or the time it takes for job seekers to find suitable employment.
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Various economic, social, and structural factors influence unemployment in India. Some of the key causes of unemployment in India include:
According to a report by Equal Times, a growth rate of 7.2 per cent (the rate recorded for the 2022-2023 fiscal year) is required to give rise to six million jobs, while the working population is growing by 10 million a year, and only four out of ten Indians of working age are in employment or seeking employment.
India has a rapidly growing population, resulting in a large pool of labor force entrants each year. The rate of job creation often struggles to keep pace with the expanding labor force, leading to unemployment.
Unemployment rate at 42% for young graduates aged under 25, report by Business Today published on 20th September, 2023.
The Education system of India often fails to equip students with the skills and knowledge needed for the modern workforce. There is a mismatch between the curriculum taught in schools and colleges and the skills demanded by employers, resulting in a disconnect between education and employment.
Lockdown measures and reduced consumer demand led to closures of non-essential businesses and a sharp decline in orders, forcing many companies to lay off blue collar workers. Supply chain disruptions further compounded the challenges, causing delays and increased costs.
Additionally, the accelerated adoption of automation and digital technologies and a mismatch between labor market skills and employer demands intensify job losses among blue collar workers.
Women in India face significant challenges in accessing formal employment opportunities due to cultural norms, limited access to education and training, and gender discrimination in the workforce. Gender disparities contribute to higher unemployment rates among women compared to men.
According to the Periodic Labour Force Survey (PLFS) conducted by the National Sample Survey Office (NSSO), Ministry of Statistics and Programme Implementation (MoSPI), about 45.76% of the total workforce is engaged in agriculture and allied sector during 2022-23.
However, the agricultural sector suffers from low productivity, seasonal employment, and limited opportunities for income growth, contributing to underemployment and disguised unemployment.
The fall of small-scale and cottage industries due to the high demand for mass-produced and cost-effective goods has indeed contributed to unemployment in various regions. This trend is particularly evident in developing countries where cheap imports from industrialized nations flood the market, undercutting local producers.
For instance, let's consider a hypothetical scenario in which a small-scale textile manufacturing unit in a rural area produces handmade garments. Despite the quality of their products, the business struggles to compete with cheaper mass-produced clothing imported from abroad.
As consumers prioritize affordability over craftsmanship, demand for locally-made goods declines, leading to reduced orders and the textile unit's closure.
The impact of unemployment on an individual can be profound, impacting various aspects of their life such as:
Unemployment deprives individuals of a regular source of income, leaving them financially vulnerable. Without a job, individuals struggle to meet their basic needs such as food, shelter and healthcare. Dependence on savings or borrowed money becomes inevitable, leading to increased stress and anxiety about financial stability.
Those who are the sole breadwinners in their families face even greater challenges as they bear the responsibility of providing for their loved ones without a steady income stream.
Familial relationships get strained and can lead to negative impacts on marital satisfaction and overall family well-being. The inability to fulfill financial obligations can also create a sense of inadequacy and guilt in individuals, further increasing family challenges. Children may be affected by the emotional distress experienced by unemployed parents, potentially impacting their academic performance and emotional well-being.
The stress and uncertainty associated with job loss can contribute to an increased risk of developing mental health disorders such as depression, anxiety, and chronic stress.
Additionally, unemployed individuals may experience physical health problems such as headaches, insomnia, and hypertension due to heightened stress levels.
Financial constraints may also lead to reduced access to healthcare services, resulting in delayed medical treatment of existing health conditions.
The effects of joblessness on society are multi-faceted and complex such as -
When a large portion of the population is unemployed, it leads to decreased consumer spending, which in turn affects businesses and industries. This can result in decreased tax revenue for governments, limiting their ability to provide essential services and support social programs.
Unemployment has diverse impact on economy affecting consumer behavior, business operations, government finances, and long-term economic prospects.
When people are out of work, they prioritize essential expenses, reducing their discretionary spending on non-essential items. This reduction in consumer spending directly impacts businesses across various sectors, leading to decreased sales and revenue.
With lower demand for goods and services, businesses may scale back production and investment. Lower production levels result in decreased output and potentially job losses within industries.
Additionally, businesses may delay or cancel planned investments in new projects, equipment, or expansion due to uncertain economic conditions caused by high unemployment rates.
The government has implemented various schemes to control the rising unemployment such as -
This initiative aims to provide a fiscal stimulus to businesses and mitigate the adverse impact of the COVID-19 pandemic on the economy.
With a total outlay of over ?27 lakh crore, this package comprises various long-term schemes, programs, and policies designed to make the country self-reliant and create employment opportunities. Through initiatives such as Production Linked Incentive (PLI) schemes, which have an outlay of Rs. 1.97 lakh crore over five years, the government aims to stimulate job creation and economic growth.
PM GatiShakti is driven by seven engines, including Roads, Railways, Airports, Ports, Mass Transport, Waterways, and Logistics Infrastructure, with a focus on clean energy and inclusive development.
By promoting infrastructure development and investment in key sectors, PM GatiShakti aims to generate significant job and entrepreneurial opportunities across the country.
The Government of India has implemented various schemes to promote employment generation, including the Prime Minister’s Employment Generation Programme (PMEGP), Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), Pt. Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY), and Deen Dayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM).
These initiatives focus on providing skill training, financial assistance, and support for entrepreneurship to empower individuals and create sustainable livelihoods.
The government organizes Rozgar Melas to facilitate the filling of vacancies in various central government ministries, departments, public sector undertakings, autonomous bodies, and educational institutions.
These Melas serve as catalysts for employment generation, providing meaningful opportunities for youth empowerment and participation in national development initiatives.
Initiatives such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and the Skill India Mission aim to enhance the employability of the Indian workforce through training and skill development programs. These initiatives focus on bridging the skill gap and equipping individuals with the necessary skills to meet the demands of the job market.
The Swachh Bharat Abhiyan, launched by the government, has led to increased demand for sanitation workers, waste management staff, and urban cleaning crews. By promoting cleanliness and hygiene, this initiative creates employment opportunities for blue collar workers in the sanitation sector, contributing to job creation and economic growth.
The Transgender Persons (Protection of Rights) Bill prohibits discrimination against transgender individuals in various aspects, including employment, education, healthcare, and access to public goods and facilities.
By ensuring equal opportunities and rights for transgender individuals, this legislation promotes inclusivity and diversity in the workforce, thereby contributing to employment generation and social cohesion.
The PM Daksh-DEPwD Portal, introduced by the Department of Empowerment of Persons with Disabilities (DEPwD), aims to empower persons with disabilities (PwDs) by providing them with skill training and employment opportunities.
Through seamless registration, access to skill training options, and job listings from esteemed companies, the portal facilitates the integration of PwDs into the workforce, promoting inclusivity and diversity in employment.
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Facing unemployment can be a challenging but by taking proactive steps and adopting a positive mindset, individuals can navigate this period with resilience and determination.
When you are jobless, you feel a range of emotions such as sadness, frustration, and anxiety. You must acknowledge and accept your feelings without judgment and allow yourself to grieve the loss of your job and recognize that it's okay not to be okay. You can begin to process emotions healthily and move forward by acknowledging your them.
Prioritize self-care during this challenging time. Maintain a regular routine, eat nutritious meals, exercise regularly, and get plenty of rest. In order to adopt a positive mindset and view unemployment as a temporary setback taking care of your physical and mental well-being is essential. Remind yourself that setbacks are a part of life and that this period of unemployment does not define your worth or capabilities.
Lean on your support network for emotional support and encouragement. Open up to friends and family members about your feelings and experiences with unemployment. It can provide valuable perspective and reassurance during difficult times.
Use this time to invest in your personal and professional development. Identify areas for skill improvement or pursue certifications that can enhance your qualifications and make you more competitive in the job market.
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Networking is a valuable tool for uncovering job opportunities and building professional connections. Reach out to former colleagues, mentors, and industry contacts to inform them of your job search and inquire about potential leads or referrals.
Transitioning from unemployment to employment is not only a personal victory but also a significant contributor to the overall well-being of individuals and the economy.
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Moreover, as individuals secure employment, they contribute to increased consumer spending, economic growth, and social stability, benefiting communities and society at large.
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The unemployment rate in India has witnessed a sharp dip in January 2024. According to the latest data from the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India stood at 6.8 percent in January 2024.
The unemployment rate in India saw a decrease of 1.9 percent in a month, as it stood at 8.7 percent in December last year.
The agriculture sector of India saw nearly 148 million employees in financial year 2023 and that results in disguised and seasonal unemployment in India. Hence, it can be said that these two types of unemployment are highest in India.
As of December 2022, Haryana had the highest unemployment rate in India, at 37.4 percent.
Reducing unemployment is a joint effort of government, businesses and other stakeholders. The measures that are used to eradicate unemployment are: vocational skills and training, labor market refortms, public works and infrastructure projects, encouraging public-private partnerships, harnessing the power of job sites like JobTatkal etc.
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Social Disintegration
Areas with high unemployment rates often experience increased poverty, homelessness, and crime. It can also lead to feelings of hopelessness and despair among individuals, which may manifest in antisocial behaviors and criminal activities.
According to a report published by Times of India on Feb 16, 2022 mentioned that, “the western and northern suburbs of Mumbai city, which cover areas between Bandra and Dahisar, have earned the dubious distinction of being ‘most unsafe’ for women and children in 2021 .”