Question – The factors of unemployment in India are not merely the result of structural issues related to the Indian economy. Discuss. Also, throw light on the measures taken in recent times to solve the problem of unemployment. – 11 March 2022
Answer – According to the recently published International Labor Organization (ILO), the number of unemployed people in the world is estimated to be 207 million during 2022. It is noteworthy that in 2019 this figure was 18.6 crores. That is, the number of unemployed people has increased by more than 11 percent during this period, which is 21 million.
The problem of unemployment is aggravated by the unequal distribution of population growth, lack of practical skills, industrialization, etc. According to CMIE, India’s unemployment rate in October, 2021 was 7.75%. There are many reasons behind the high unemployment rate in India.
Structural unemployment is caused by inconsistencies between workers’ needs, skills and job requirements. For example some people may not be able to learn new technologies used in expanding new economic sectors, and they may be unemployed. For example in contemporary times, industrial institutions are facing shortage of skilled professionals. A recent survey has revealed that 67 percent of India’s employment industries are not able to find resources relevant to their needs. Lack of business acumen is a serious constraint in this regard.
Issues in the Indian economy that contribute to unemployment are as follows:
- Skewed distribution of workforce: Agriculture that engages around 40% of the workforce, contributes a meager 18.8 (according to the Economic Survey 2020-2021) to the country’s GDP. Other sectors like industry and services have seen only a marginal increase in labour participation.
- Rapid Growth of Population: A growing population has resulted in an increase in the labor supply without increasing employment opportunities for the growing labor force, thereby increasing the problem of unemployment. In the decade to 2030 India needs to create at least 90 million new non-farm jobs to absorb the 60 million new workers who will enter the workforce based on current demographics. Along with is an additional 30 million workers, who can shift to more than agricultural work productive non-agricultural sector.
- Rural-Urban Migration: Rural areas have failed to provide subsistence in agriculture and allied activities, and hence migration to cities is taking place on a large scale. However, economic growth in cities has failed to generate enough additional jobs for new urban entrants to the labor market. Thus only some migrants engage in productive activities, and the rest join the reserve labor force of unemployed workers.
- Inappropriate technology: In India, though capital is a scarce factor, labor is available in abundant quantity; yet producers are increasingly substituting capital for labor. This policy results in higher unemployment. Despite the abundance of labor, capital intensive technology is adopted in India mainly because of rigid labor laws. It is quite difficult to follow easy hire and fire policy and so right sizing of manpower is difficult for the enterprises. Further, factors like labor-unrest and lack of work-culture leads to the increased inefficiency of labor and thus provide incentives to follow labor-saving technology by organizations.
- Social Factors: Education among women has changed their attitude towards employment in the last few decades. However, the economy has failed to respond to this change and the result is a continued increase in the unemployment backlog.
- Lack of infrastructure development: The lack of investment and infrastructure development limits the growth and productive capacity of various sectors, leading to inadequate creation of employment opportunities in the economy.
Measures taken to address unemployment:
- Atmanirbhar Bharat Rozgar Yojana (ABRY): ABRY was launched to incentivize employers for creation of new employment along with social security benefits and restoration of loss of employment during the COVID-19 pandemic.
- Simplification of Labour Laws: Parliament has passed the three Labour Code bills – the Occupational Safety, Health and Working Conditions Code, 2020; the Industrial Relations Code, 2020; and the Code on Social Security, 2020 in a major boost to labour reforms.
- Protection of labour interests: These have been envisaged through provisions like Fixed Term Employment in the Draft Model Standing Orders, 2020 by the Ministry of Labour and Employment for manufacturing, mining, and services sector.
- Digi Saksham: It is a digital skilling program to enhance employability of youth by providing them with essential digital skills in an increasingly technology driven era.
- E-Shram Portal: It has been created for Registration of Unorganized workers. All registered workers shall be issued an e-Shram card with Universal Account Number (UAN) to avail benefits of various social security schemes of the government.
In addition, the government needs to address declining demand, and speed up the recovery through comprehensive employment policy including a National Employment Policy. The focus must be on skilling, and reskilling people based on the demands of changing times.
