Study sheet: Unemployment Economics

📋 Course Outline

1. Meaning and Scope of Unemployment
2. Measures and Types of Unemployment
3. Structural and Cyclical Patterns
4. Causes of Unemployment in India
5. Education, Labour and Infrastructure Causes
6. Measures to Reduce Unemployment
7. Agriculture and Employment Creation
8. State Employment Programmes

📅 Key Dates

1. 1929-30The Great Depression occurred and affected many countries.
2. 2 October 2009The National Rural Employment Guarantee Act was renamed MGNREGA.
3. 25 September 2014Deendayal Upadhyay Gramin Kaushalya Yojana started to provide employment to youth.
4. 16 October 2014Pandit Deendayal Upadhyay Shramev Jayate Yojana started to support unorganised-sector workers.
5. 1 July 2015The Prime Minister Agricultural Irrigation Programme started to improve field productivity and irrigation planning.

📖 1. Meaning and Scope of Unemployment

🔑 Key Concepts & Definitions

• Unemployment : Prof. Pigou — a situation in which a person is willing, capable and ready to work at the current wage rate but cannot obtain work.

★ Must-know

📌 Compulsory unemployment affects people who are willing and able to work but cannot find work, whereas voluntary unemployment concerns people who are unwilling to work and is not considered an economic problem.

Further detail

• The active labour force generally includes people aged 15 to 64 years who are capable, willing and ready to work at the current wage rate.

💡 Memory Hook

Compulsory unemployment means willing and able but without work; voluntary unemployment means not willing to work.

📖 2. Measures and Types of Unemployment

🔑 Key Concepts & Definitions

• Open Unemployment : occurs when qualified people are ready to work at the current wage rate but obtain no job at all.
• Underemployment : occurs when workers cannot fully use their capabilities or obtain work for all the hours or days they are willing to work.
• Disguised Unemployment : exists when too many people work with given technology and removing some workers does not reduce total production, so their marginal productivity is zero.

📝 Essential Points

• Raj Krishna's four measures are (Shri Raj Krishna committee Report, 2011-12):
  • time
  • income
  • willingness
  • productivity

💡 Memory Hook

T-I-W-P: Time, Income, Willingness, Productivity.

📖 3. Structural and Cyclical Patterns

🔑 Key Concepts & Definitions

• Cyclical Unemployment : results from reduced effective demand during depression, which lowers production and causes firms to retrench workers.
• Frictional Unemployment : short-term unemployment arising when changes in demand, consumer preferences, production methods or technology make workers learn new work before re-employment.

💡 Memory Hook

Developed economies mainly face short-term cyclical and frictional unemployment, whereas India faces long-term structural unemployment.

📖 4. Causes of Unemployment in India

★ Must-know

• India's unemployment is mainly structural and long term because labour supply rises rapidly while employment opportunities grow more slowly due to structural limitations.

• India's population increases by about 1.70 crore each year, adding rapidly to labour supply while employment opportunities rise more slowly.

• During planning, economic growth remained jobless: growth was 3.5 percent in the first three decades, 7.6 percent in the tenth Five Year Plan and 7.8 percent in the eleventh Five Year Plan, while unemployment continued to rise.

Further detail

📌 Low savings and investment restrict employment creation because low per capita income leaves little surplus for investment in industry, agriculture and other sectors.

💡 Memory Hook

Population growth plus insufficient job creation → rising unemployment and underemployment.

📖 5. Education, Labour and Infrastructure Causes

★ Must-know

📌 Capital-intensive production increases unemployment in India because it uses more capital and less labour despite India's scarcity of capital and abundance of labour.

• Lack of vocational education leaves workers without the technical skills required by changing technology and mechanisation, producing educational unemployment.

Further detail

• Lack of manpower planning produces graduates whose skills and numbers do not match labour demand, causing educated unemployment and sometimes a drain of brain to foreign countries.

• Low mobility of workers caused by family relations, language, religion, caste, culture, lack of information, transport and housing restricts movement to available jobs.

💡 Memory Hook

Skills → planning → sector efficiency → agriculture → mobility → infrastructure.

📖 6. Measures to Reduce Unemployment

★ Must-know

• Population control reduces the growth of labour supply, makes resources more available for investment and increases future employment opportunities for the productive age group.

• Employment-oriented planning promotes:

  • labour-intensive industries
  • consumer goods
  • small and medium enterprises
  • trade
  • animal husbandry
  • dairy development

• With the same capital investment, small industries can create 7.5 times more employment than big industries.

Further detail

📌 Employment-oriented education should combine vocational training with trade, commerce, agriculture and industry and should be aligned with human-resource planning and future labour demand.

💡 Memory Hook

Population control, investment and labour-intensive development → more employment opportunities.

📖 7. Agriculture and Employment Creation

★ Must-know

• Rural infrastructure includes:

  • education
  • health
  • housing
  • electricity
  • roads
  • business training centres

• According to P. C. Mahalnobis's estimate, investing ₹1 crore in agriculture can employ 40,000 people and increase production by 5.7 percent, whereas the same investment in big industries employs 500 people and increases production by 1.4 percent.

• Complementary agricultural measures include:

  • irrigation
  • soil conservation
  • mixed farming
  • forest development
  • multiple cropping
  • agro-based rural industries

Further detail

• According to Dr. M. S. Swaminathan, directing development toward agriculture can create many times more employment.

💡 Memory Hook

With the same ₹1 crore, agriculture employs 40,000 people, whereas big industry employs 500.

📖 8. State Employment Programmes

📝 Essential Points

📌 MGNREGA guarantees at least one person from each rural family employment for 100 days per year, reserves one-third of employment for females, provides work within 5 km of residence or 10 percent extra wages beyond that distance, and grants an employment allowance if work is not provided.

💡 Memory Hook

MGNREGA → Shramev Jayate → Gramjyoti → Gramin Kaushalya → Agricultural Irrigation.

📊 Synthesis Tables

Main Types of Unemployment

Type	Main condition	Key feature
Open	No job despite willingness and qualification	Visible unemployment
Underemployment	Work is below capacity or available time	Capabilities or hours are underused
Disguised	Removing workers does not reduce output	Zero marginal productivity
Cyclical	Effective demand falls during depression	Short-term trade-cycle unemployment
Frictional	Production, preferences or technology change	Temporary adjustment unemployment