Macro economics, Unemployment, Disguised unemployment, Voluntary and involuntary unemployment

1. Prof. Prabha Panth
Osmania University,
Hyderabad
UNEMPLOYMENT
21-May-16

2. Unemployment
• Unemployment (or joblessness) – when
people want to work, but are without jobs.
• Rate of Unemployment :
= Number of unemployed x 100%
Labour force
• Labour force: all those in the working age
category (18 -65 years old), who are
actively employed or seeking employment.
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3. Types of Unemployment
1) Voluntary Unemployment.
2) Involuntary Unemployment.
1) Voluntary unemployment:
• Unemployed due to his/her own desire.
• Either wants higher wages or does not want to
work at all.
• Self-imposed situation.
• Due to personal reasons, family problems,
illness, or no inclination to work.
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4. 2) Involuntary unemployment:
• Persons want to work, but do not get a job.
• Willing and Capable of working
• Number of jobs < number of willing workers.
• Or, types of jobs  skills of workers.
• Here government policy is required:
o To create the required kinds of jobs,
o To hire workers to reduce unemployment
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5. Types of Involuntary Unemployment
1. Structural Unemployment:
• Due to change in technology,
• Mismatch between skills of workers and job
requirement . E.g. computers ~ typewriters, or
autos ~ rickshaws.
• Time required to learn new skills.
• Older employees may be removed to give
chance to more skilled workers.
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6. Types of Involuntary Unemployment
2. Cyclical unemployment:
• Recession: slowing down or negative growth,
leads to retrenchment of workers.
• Factories and businesses close down due to
lack of demand.
• Wages and incomes fall, aggregate D falls,
• Further retrenchment.
• Leads to Economic Depression (2008, 1929)
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7. Types of Involuntary Unemployment
3. Frictional unemployment:
• Temporary unemployment.
• Between shift from current job to a new job,
• Workers seek higher wages, working and living
conditions.
4. Seasonal unemployment:
• Type of frictional unemployment --- work
available in only specific seasons.
• Agriculture: more employment during sowing
and harvesting seasons, unemployment
between seasons.
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8. Types of Involuntary Unemployment
5. Underemployment (Educated
unemployment):
• People with high qualifications, working in
jobs requiring lower qualifications.
• Due to lack of job opportunities.
• E.g. Ph. D working as primary school teachers.
6. Chronic unemployment:
• Continuously unemployed for at least two
years, due to any of above reasons.
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9. Types of Involuntary Unemployment
7. Disguised
Unemployment:
• In underdeveloped
countries – more labour
employed in agriculture
than needed.
• Extra labour’s MP  0
• If removed TP will
actually increase.
• Extra L can be used
more productively
elsewhere – for capital
formation.
9
Q
0
L
MPL
MP =0
A
Disguised
unempt
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10. • Unemployment and Non-employment:
Prof. Gautam Mathur definition:
• Unemployed – those previously employed,
• But lost their jobs. During recession.
• Mostly in developed countries.
• Non-employment:
• Who were never employed.
• Mostly in less developed countries.
Types of Involuntary Unemployment
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11. Measurement and
Policies to reduce Unemployment
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12. Measurement of Unemployment
• National Sample Survey Organisation (NSSO)
estimates unemployment. 5 yearly survey.
• Three measures to estimate unemployment.
1. Usual Status (US) basis, unemployed for the major
part of the reference year.
Shows Long term and Open unemployment.
2. Current Weekly Status (CWS),
• persons who have not worked during an entire
week.
• Ignores those unemployed for less than a week.
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13. Measurement of Unemployment
3. Current Daily Status (CDS):
• Proportion of labour force that is unemployed per
day.
• Measured in terms of number of hours worked per
day.
• 4 hours or < is half day employment.
• More than 4 hours a day = full day employment.
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14. Unemployment in India
• Unemployment rates in India
o 1983 to 2009: average 7.6%
o 2009 : 9.4% (Maximum)
o 2011: 3.8%.
• Higher rates of unemployment in:
o Urban areas than in rural areas
o Women than for men
o Educated than uneducated
o Youth than older persons
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15. Unemployment in India
(% of total labour force)
1994 2000 2004 2005
Youth (15-
24 yrs) 8.2 10 10.53 10.5
Primary
education 34.7 29.5 30 29
Secondary
education 38.1 40.4 38.3 37.7
Tertiary
education 27.3 30.1 31.6 33.3
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16. Measures to increase Employment
1. Mahatma Gandhi National Rural
Employment Guarantee Act MGNREGA
(2005-6):
o To provide at least 100 days guaranteed wage
employment in a year @ Rs.130/day
o adult members in a household
o Unskilled manual work.
o Panchayat Raj Institutions monitor NREGA,
o 33 percent participation for women.
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17. • Aim: To prevent chronic poverty from drought,
deforestation and soil erosion, encourage sustainable
development.
• 90% of cost borne by Centre
• 10% by State Government.
MGNREGA
No. of
households
Employment
(Person days in
lakhs)year
2006-07 21,016,099 9,050.5
2007-08 33,909,132 14,368.0
2008-09 45,115,358 21,632.9
2009-10 52,585,999 28,359.6 17
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18. 2. Prime Minister’s Employment Generation
Programme (PMEGP) 2008
• credit linked subsidy programme of
Government of India.
• By merging Prime Minister’s Rojgar Yojana
(PMRY) and Rural Employment Generation
Programme (REGP).
• To Individual Entrepreneurs, Institutions, Co-
operative Societies, Self Help Groups, Trusts.
• Rs. 10-25 lakhs credit, payback from 3rd year.
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19. 3. Rajiv Yuva Kiranalu (Govt. of AP) to
build job specific skills among
unemployed and place them in
appropriate private jobs.
• The mission proposes to employ 15
lakh youth in jobs in the private
industry by 2014.
o Employment given to Youth: 2,18,008
o Under Training Youth: 33,348
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