In the fiscal year 2021-22, India recorded an unemployment rate of 4.1%, a drop compared to previous years, according to the Periodic Labour Force Survey (PLFS). However, this rate was still higher than that of the United States, which fluctuated between 3.5% and 3.7%. This discrepancy serves to highlight the contrasting economic landscapes of India and the US as well as the different methodologies used to measure unemployment in each country.
What Does Unemployment Mean?
The International Labour Organization (ILO) defines unemployment as a state where a person does not have a job, is actively looking for work, and is available to start work. It’s important to note that people who are not actively searching for work do not qualify as unemployed. As per this definition, the population can be divided into three segments – employed, unemployed and those outside the labor force. The unemployment rate is then calculated by dividing the number of unemployed individuals by the total labor force.
There are several types of unemployment that exist within a country’s workforce. For instance, disguised unemployment refers to a scenario where more people are employed than necessary. Seasonal unemployment is joblessness that occurs during certain times of the year. Structural unemployment arises when there is a mismatch between available jobs and the skills or qualifications of job seekers. Cyclical unemployment corresponds to economic recessions and expansions, technological unemployment is loss of jobs due to advances in technology, and frictional unemployment is temporary joblessness experienced by individuals changing jobs or looking for new ones.
Measuring Unemployment in India
Unemployment is measured in India using two methods: the Usual Principal and Subsidiary Status (UPSS) and Current Weekly Status (CWS). The UPSS method takes into account the primary activity an individual engaged in during the past year. The CWS method uses a reference period of one week, counting individuals as employed if they have worked for at least one hour on one day in the preceding seven days.
Challenges in Measuring Unemployment in India
Several complexities arise when measuring unemployment in India. Firstly, social norms greatly influence whether or not individuals actively seek work. A 2009-10 survey by the National Sample Survey Office (NSSO) revealed that many women are willing to work if opportunities were available within their homes but are not counted as unemployed because they aren’t actively seeking employment outside the home.
Secondly, the nature of jobs in India is largely informal, which affects how unemployment is measured. People often engage in multiple economic activities throughout the year, making it difficult to categorize them as employed or unemployed at specific points in time.
Lastly, differences in employment rates between rural and urban areas add another layer of complexity. Unemployment rates are typically lower in rural areas due to easier access to casual agriculture work, whereas in urban areas, more formal and consistent employment is often required.
Causes of Unemployment in India
Numerous factors contribute to the rate of unemployment in India. Social factors, such as caste-based work restrictions and dependence on joint family income, limit work opportunities for certain segments of the population. Rapid population growth also creates an excess supply of labor that the economy cannot absorb.
Agriculture, being the primary source of livelihood for nearly half of India’s workforce, is significantly underdeveloped and provides only seasonal employment. Other issues include the decline of cottage and small industries, low labor mobility due to familial and cultural ties, and an education system that does not adequately equip students with the skills needed in the modern job market.
Navigating the Way Forward
Understanding the complexities of measuring unemployment in developing economies like India is crucial for effective policy-making. These complexities arise from the informal job market, variance in labor force participation, and the criteria used to measure unemployment. With this understanding, tailored solutions can be developed to address the multifaceted issue of unemployment in India. Furthermore, comprehensive and accurate data on the subject can aid in making informed decisions that will alleviate India’s unemployment issues.