What is Unemployment and How is it Measured?

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What is Unemployment?

Unemployment, as per the International Labour Organization (ILO), involves being out of a job, being available for work, and actively seeking employment.
A crucial aspect is that those not actively searching for work are not considered unemployed.

How Unemployment is Measured?

Unemployment rate = (Unemployed Workers / Total labour force) × 100

There are three measures or estimates of unemployment. These are developed by National Sample Survey Organisation (NSSO).
NSSO, an organization under MoSPI – Ministry of Statistics and Programme Implementation
Three approaches for measurement:

Daily Status Approach: The unemployment status of a person 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.
Weekly Status Approach: This approach highlights the record of those persons who did not have gainful work or were unemployed even for an hour on any day of the week preceding the date of the survey.
Usual Status Approach: This gives the estimates of those persons who were unemployed or had no gainful work for a major time during the 365 days.

Types of Unemployment:

Disguised Unemployment: It is a phenomenon wherein more people are employed than needed. It is primarily traced to the agricultural and unorganized sectors of India.

Seasonal Unemployment: It is unemployment that occurs during certain seasons of the year. Agricultural laborers in India rarely have worked throughout the year.

Structural Unemployment: It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market. Many people in India do not get jobs due to lack of requisite skills and due to poor education level, it becomes difficult to train them

Cyclical Unemployment: It is a result of the business cycle, where unemployment rises during recessions and declines with economic growth. Cyclical unemployment figures in India are negligible. It is a phenomenon that is mostly found in capitalist economies.

Technological Unemployment: It is the loss of jobs due to changes in technology. In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India is 69% year-on-year.

Frictional Unemployment: Frictional Unemployment also called Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs.

Vulnerable Employment: This means, people working informally, without proper job contracts, and thus sans any legal protection. These persons are deemed ‘unemployed’ since records of their work are never maintained. It is one of the main types of unemployment in India.

Reason for high unemployment:

Education and Skills Reasons

Failure of Indian Education system – Although literacy rates have risen in the last few decades, there remains a fundamental flaw in the education system in India. The degree-oriented system fails when it comes to producing skilled human resources for specific job profiles in the economy.

Higher educational level among youth – Youth unemployment has increased significantly from 2011-12 to 2021-22, nearly doubling during this period. As educational attainment improves, more educated individuals are less inclined to accept unskilled and informal jobs. This is the reason behind high unemployment among graduate youth.

Social Reasons

Joint Family System – It has encouraged disguised unemployment. In big families having large business establishments, many people don’t do any work and are dependent on the joint income of the family. The joint family system is more prevalent in rural areas, with families employed in the agricultural sector.

Rush for government jobs for social prestige and security – Many educated youth are running behind in government jobs due to social pressure, socially respected job profiles, and social security. This has to a situation where many students choose to remain unemployed during preparation for government jobs.

Low mobility of Labour due to social reasons – People generally avoid migrating to far-off areas of work due to factors like diversity of language, religion, customs, and family loyalty. This low labor mobility has contributed to the high unemployment in India.

Expansion of social security measures

The government has increased the distribution of food under the National Food Security Act. This has reduced the pressure on individuals to immediately seek employment. It allows them more time to “search for work,” which has also contributed to the increase in the unemployment rate.