Unemployment

What is unemployment?

– Total number of adults (aged 16 years or older) willing and able to work and who are actively looking for work and have not found a job

(in other way)– Unemployment refers to a situation in which the workers who are capable

of working and willing to work do not get employment

NEWS

• India's unemployment rate stood at 3.8% in July , 2012

• India is 96th position in world in 2011• Gujarat has least unemployment rate among

all states, by Government of India

Countries Unemployment rate

Rank Country Unemployment rate (%)

1 Zimbabwe 952 Nauru 903 Liberia 854 Burkina Faso 775 Turkmenistan 60

6 Cocos (Keeling) Islands

60

7 Djibouti 598 Namibia 51.29 Senegal 48

10 Nepal 46

Type of unemployment • Frictional Unemployment

Results from the fact that workers must search for appropriate job offers This takes time, so they remain temporarily unemployed

Example :- Students

• Structural Unemployment

Results from a poor match of workers’ abilities and skills with current requirements of employers

Example:- computers revolution

• Technological unemployment it is unemployment primarily caused by technological change

Example:- Printing industry

• Cyclical Unemployment

– Results from business recessions that occur when aggregate (total) demand is insufficient to create full employment

Example:- construction job

• Seasonal Unemployment

– Results from the seasonal pattern of work in specific industriesExamples

Tourism industry Farming

• Disguised unemployment

Unemployment that does not affect aggregate output

ex - fragmentation of land

Causes of unemployment

• Rapid changes in technology• Recessions• Inflation• Disability• Limited land• Seasonal Agriculture• Decline of Cottage Industries• Inadequate Employment Planning

– Population growth 1.5% on an avg– More labour force 2.5% increase p.a– Employment growth 2.3% p.a

• Over 70% of total labour force is illiterate or educated below primary level

• Agriculture – backward farming• 70 % population depend on it

Effects of unemployment

• At individual level– Mental stress– Loss of self esteem– Directly linked to poverty

• At social level– Civil unrest– Law and order problem ( naxalist , thefts etc)

• At economic levelWage inflationReduction in consumer expenditureUnder-utilization of resourcesIncrease in debtsDecrease in return on investment

Social impact

According to okun’s law when GDP decreases by2% unemployment increases by 1% .

According to philip’s there is an inverse relationship between unemployment and inflation .

Frictional and cyclical unemployment is not a threat to an economy whereas, structural unemployment is a serious issue as it is a consequence of recession.

Basic Eligibility for getting Benefits of Unemployment

• To be eligible for unemployment benefits, five requirements must be met: –

• Sufficient covered wages in the base period• Unemployed through no fault of own • Able to work • Available for work • Actively seeking work

Few Benefits of Unemployment

- Unemployment compensation for ex-service members- Trade readjustment allowances- Extended benefits- Self-Employment assistance- Disaster employment benefits

Unemployment benefits are calculated by:

- EI ( employment insurance ) benefits are calculated using the amount of money you earned in the base period, which is a specific 12 month period.

- Your weekly amount is calculated based on the three month base period in which you earned the most money.

How long can individuals receive unemployment benefits?

- The EI benefits are available for a period up to one year after the claim is filed.

- The number of weeks benefits will be received will vary between 12 to 26 weeks.

• Note: Unemployment benefits are taxable.

Measurement of unemployment

• Economists typically focus on the unemployment rate. The unemployment rate is expressed as a percentage, and is calculated as follows:

Unemployment rate = unemployed worker/total labor force *1oo

Steps taken by govt.

• Integrated Rural Development Programme (IRDP)• Drought Prone Area Programme (DPAP)• Training for Self-Employment• Jawahar Rozgar Yojana• Nehru Rozgar Yojana (NRY)• Small and Cottage Industries• Development of Organized Sector

Cont…..

• Prime Minister's Integrated Urban Poverty Eradication Program (PMIUPEP)

• The Swaran Jayanti Rozgar Yojana• Jawahar Gram Samridhi Yojana• Other Programmes

(i) Pradhan Mantri Gramodaya Yojana (PMGY) (ii) Pradhan Mantri Gramodaya Yojana (Gramin Awas) (iii) Pradhan Mantri Gramodaya Yojana-Rural Drinking water project. (iv) Pradhan Mantri Gram Sadak Yojana (PMGSY) (v) Autyodya Anna Yojana. (vi) Jai Prakash Rozgar Guarantee Yojana (JPRGY). (vii) Valmiki Ambedkar Awas Yojana (VAMBAY).

NAIRU

• (Non Accelerating inflation rate of unemployment)• Now economists prefer to talk about the NAIRU, the

lowest rate of unemployment at which inflation does not accelerate.

• The lowest rate of unemployment at which the jobs market can be in stable equilibrium.

• When unemployment is above this rate, demand can potentially be increased to bring it to the natural rate, but attempting to lower it even further will only cause inflation to accelerate.

Possible Solution of unemployment

• Frictional unemployment Solution If unemployment benefits were reduced unemployed workers might become more willing to work (shift the aggregate supply of labour to the right) Improve awareness of available jobs

Structural Unemployment solution Adult retraining programmesGovernment gives subsidies to firms that provide training for workersEnhance geographic mobility by building affordable housing or give subsidies/tax breaksSet up apprenticeship programmes to allow people to gain skills

• Seasonal unemployment solutionsEncourage people to take different jobs in their off seasonReduce unemployment benefitsGreater flow of information

• Technological unemployment Excess labour could be transferred to where it is actually

needed-for ex: overseas. awareness of technology within population educate people about technology increase number of technological institutes

• Cyclical Unemployment reduce in interest rates

• Disguised unemployment create employment opportunities in the urban areas and rural area