Unemployment is a common economic malady faced by each and every country of the world. irrespective of their economic system and the level of development achieved. But the nature of unemployment prevailing in underdeveloped or developing countries sharply differs to that of developed countries of the world.
Historical Background
- Unemployment at Independence: After independence, India faced multiple challenges, including poverty, illiteracy, and unemployment. While most of the population was dependent on agriculture, the educated workforce lacked suitable employment opportunities.
- 1970s Unemployment: During the 1970s, India witnessed chronic unemployment, with usual status unemployment rising from 1.4 million in 1961 to 7.1 million by 1978.
- Emergency Era (1973-74): Unemployment worsened during the emergency period, with rural unemployment reaching 6.8% and urban unemployment at 8%.
- Planning Commission Estimates (1980s): By the 1980s, the Planning Commission estimated that the usual status unemployment for people aged 5 and above had risen from 12.02 million in 1980 to 13.89 million in 1985.
- Fifth and Sixth Five Year Plans: By the end of the Fifth Five Year Plan, unemployment continued to grow. During the Sixth Plan, the number of unemployed reached 20.7 million in 1980, representing 7.74% of the labor force.
- Eighth and Ninth Five Year Plans: Unemployment continued into the late 1990s, with the Ninth Plan (1997-2002) estimating unemployment at 36.8 million by 1996. A large portion of resources was used for employment generation, but rising population pressures compounded the issue.
Current Government Era:
- NSSO Report: According to a recent NSSO report, India’s unemployment rate hit 6.1%, the highest in 45 years.
- February 2019: Unemployment in February 2019 rose to 7.2%, up from 5.9% in February 2018, marking the highest since September 2016.
- Urban Areas Hit Hard: Urban areas have been most affected by unemployment, with rates reaching 29.22% compared to 26.69% in rural areas due to the effects of the COVID-19 pandemic.
- September-December 2020: The unemployment rate fell to 7% in September 2020 but later spiked to 9.1% in December 2020 due to lockdown measures.
- January 2021: The unemployment rate decreased again to 6.5% by January 2021, while the employment rate surged to 37.9%.
- June 2021: As of June 2021, the unemployment rate was 12.81%, following the lockdown and restrictions on mobility.
Causes of Unemployment Problem After Independence
- After Independence:
- Population Explosion: The high rate of population growth since the early 1950s has led to a large increase in the labor force. For example, a 2.5% annual population growth rate results in nearly 4 million people entering the workforce each year, making it difficult to provide gainful employment.
- Underdevelopment: Despite abundant natural resources, India continues to remain underdeveloped, with limited economic activities. Industrial development has been slow both during and after independence. The performance of the industrial sector has not met expectations.
- Inadequate Employment Planning: Weak manpower planning has failed to adequately address the labor surplus, particularly in rural areas. This is compounded by a lack of balanced manpower allocation across various production sectors, leading to imbalances in job opportunities for skilled and educated individuals.
- Backwards Agriculture: Primitive agricultural methods and over-reliance on land have resulted in rural underemployment. India’s agriculture sector cannot provide sufficient employment for the population.
- Slow Rate of Growth: India’s overall economic growth rate has been consistently below targets, leading to large backlogs of unemployment at the end of each development plan.
- Insufficient Industrial Development: The country has not fully realized its industrial development potential, contributing to unemployment issues.
- Work of Trade Unions: Strikes, lockouts, and factory closures caused by trade union activities have also contributed to unemployment.
- After Economic Reforms (1991):
- Prevailing Education System: The Indian education system lacks a strong vocational and technical education focus. As a result, large numbers of graduates enter the job market each year, increasing the gap between job opportunities and job seekers.
- Slow Growth of Employment during Economic Reforms: The economic reforms introduced in 1991, while stimulating other sectors, have resulted in jobless growth to some extent, particularly affecting the educated middle class.
- Reforms and Retrenchment: Large-scale retrenchment of surplus workers occurred due to downsizing in industries and administrative departments.
- For example, the annual employment growth rate was 2.40% between 1983-1994, but it declined to 0.98% between 1994-2000, with unemployment rising from 5.99% in 1993-1994 to 7.32% in 1999-2000.
- Informal Workforce: A large portion of the workforce operates in the informal sector, lacking proper education and skills, and is often not captured in employment data.
- For example: Domestic helpers, construction workers, etc.
- Jobless Economic Growth: Despite India’s GDP growing at 7-8% in the last decade, it has not translated into significant employment opportunities for the labor force.
- Decline of Small-Scale and Cottage Industries: Independent India’s focus on large-scale industries, combined with industrial policies of the 1990s, led to the decline of small-scale and cottage industries.
- Small Land Holdings: A large percentage of agricultural land in India is owned in small holdings (1-2 acres), which limits productivity and employment potential.
- Rigidity in Labour Laws: India’s labor laws are numerous and rigid, which creates compliance difficulties and hampers industrial development and job creation.
- Lack of Investment: Insufficient capital investment is another factor that has limited industrial growth, which is crucial for job creation.
After 2014 Elections
- Failure of Mudra Scheme: The effectiveness of the government’s self-employment initiatives, such as the Mudra Scheme, is questioned. Despite government efforts, the number of self-employed youth decreased from 81 million to 63 million between 2005 and 2012.
- Smallest Loans Bypassed: Despite 95% of Mudra loans falling into the smallest (Shishu) category, they have bypassed many potential beneficiaries.
- Impact of COVID-19: The pandemic led to a significant collapse in the economy, resulting in massive job losses.
- Poor Skilling of Youth: As per the Periodic Labour Force Survey (2018), only 7% of the youth were found to have formal or informal training, leading to widespread joblessness.
- Inappropriate Jobs: A large number of people are employed in jobs that are mismatched with their qualifications, status, and wages.
- Demonetization: The dominance of India’s informal economy means cash shortages can cause job losses when the cash flow is disrupted, as happened during demonetization.
- Unemployment in Professions: Many professionals like doctors, lawyers, and engineers remain unemployed due to a lack of financial capacity to start their practices.
- Use of Inappropriate Technology: India’s development plans have overly relied on capital-intensive technologies rather than labor-intensive ones, which could have generated more employment.
- Automation: Automation in manufacturing has created jobs that require high skills, which most of the Indian workforce lacks.
- Boost in Labour Supply: The growing size of the labor force is increasing due to the rapidly expanding working-age population, adding pressure on the job market.
Implications
- Social Implications:
- Poverty: Unemployment directly contributes to poverty, as people without jobs lack the income necessary to sustain their livelihoods.
- Increase in crime: Long-term unemployment can lead individuals, particularly the youth, to engage in illegal or anti-social activities as a means of survival.
- Health problems: Unemployment is highly stressful, potentially leading to both mental and physical health issues such as stress, headaches, high blood pressure, diabetes, and heart disease.
- Negative familial effects: Families of unemployed individuals often experience lower family satisfaction and marital harmony. According to the Society for the Psychological Study of Social Issues, unemployment can exacerbate familial challenges.
- Social division: Unemployment widens the gap between families with working parents and those without, creating a socioeconomic divide within society.
- Fall in standard of living: Youth and families affected by unemployment experience a significant decline in their standard of living, often prioritizing essentials over education and personal development.
- Trickle-down effect: Unemployment impacts the upbringing of children, especially when they rely on unemployed parents, leading to further negative consequences on future generations.
- Backwardness: Chronic unemployment fosters backwardness, leaving youth underdeveloped and limiting their potential.
- Economic Implications:
- Affects economic growth: Rising unemployment lowers GDP due to the imbalance between demand and supply in the market.
- For example: A 1% increase in unemployment reduces GDP by 2%.
- Increase in socio-economic costs: A large portion of the workforce that could be employed and generating resources becomes dependent on the remaining working population, increasing the socio-economic burden on the state.
- Waste of energy: The energies and capabilities of unemployed individuals are wasted as they are not contributing to economic productivity.
- Fall in family income: The loss of a job leads to decreased family income, reducing overall household welfare.
- For example: CMIE (Centre for Monitoring Indian Economy) reports that around 97% of Indian households have seen a decline in income due to job losses since the second wave of the pandemic.
- Loss of human resources: Unemployment often drives people towards substance abuse, mental health issues, or even suicide, resulting in the loss of valuable human resources for the country.
- Political Implications:
- Youth antisocial transformation: Unemployment can push the youth towards antisocial or disruptive behavior, eroding faith in democratic values and making them susceptible to anti-state elements.
- Affects democratic values: When a section of the population is left behind, it negatively affects the overall balance and functioning of democratic systems.
Government Measures
- Employment Generation Schemes:
- Integrated Rural Development Programme (IRDP): Launched in 1980 to provide full employment opportunities, especially in rural areas.
- MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act): Initiated in 2005, MNREGA guarantees a minimum of 100 days of paid work annually to every rural household’s adult members who opt for unskilled labor-intensive work.
- Make in India Initiative: Launched to transform India into a global manufacturing hub, boosting employment opportunities in multiple sectors across the country.
- Start-Up India Scheme: Designed to promote innovation and entrepreneurship by supporting startups, which in turn generates large-scale employment.
- Stand-Up India: Launched in 2016, this initiative supports entrepreneurship, specifically targeting women, and SC/ST communities.
- Ease of Doing Business Initiative: This initiative simplifies the process of business registration, compliance with labor laws, and inspections to foster entrepreneurship and quality employment opportunities.
- National Career Service: This project connects employers, trainers, and job-seekers on a unified platform to streamline employment processes.
- Shram Suvidha Portal: Launched by the Ministry of Labour and Employment, it aims to improve transparency in the enforcement of labor laws by easing the compliance process.
- Skill Development Schemes:
- Training of Rural Youth for Self-Employment (TRYSEM): Targeted at rural youth between 18 and 35 years of age, TRYSEM provides training to develop skills for self-employment.
- Pradhan Mantri Kaushal Vikas Yojana (PMKVY): This scheme focuses on enabling Indian youth to develop industry-relevant skills, making them more employable.
- National Apprenticeship Promotion Scheme: Offers financial support by reimbursing 25% of the prescribed stipend for apprentices, subject to a maximum of Rs. 1,500 per month per apprentice.
- Social Security Schemes:
- Rashtriya Swasthya Bima Yojana: Launched in 2008 to cover the healthcare expenses of unorganized sector workers.
- Atal Pension Yojana: Guarantees a minimum pension for individuals between the ages of 18 and 40 upon reaching the age of 60, with monthly contributions as low as Rs. 1,000.
- Pradhan Mantri Suraksha Bima Yojana: Provides accidental death and disability insurance coverage of up to Rs. 2 lakh with an annual premium of Rs. 12.
- Pradhan Mantri Jeevan Jyoti Bima Yojana: Provides life insurance coverage of Rs. 2 lakh at an annual premium of Rs. 330.
- Employment Survey:
- Quarterly Employment Surveys (QES): Conducted by the Labour Bureau to track changes in employment across sectors over successive quarters. The survey has been expanded in scope and coverage to provide a more comprehensive view of employment trends.
- Survey on Pradhan Mantri Mudra Yojana (PMMY): The Labour Bureau has been entrusted with conducting surveys to estimate the employment generated under the Pradhan Mantri Mudra Yojana (PMMY). This scheme was launched to provide micro-financing for small enterprises, indirectly generating employment.
Conclusion
After independence, India faced numerous inherited challenges, including poor planning and economic realization, worsened by the aftermath of wars. Additionally, a lack of necessary skills continues to create a mismatch between job seekers and available job opportunities, making it hard for employers to fill vacancies. MGNREGA and rural job schemes have helped bridge some of the unemployment gap, but they cannot accommodate the entire workforce. The conclusion calls for a structural overhaul in the economy, suggesting that significant reforms are necessary to revamp the employment sector for the long term.