Unemployment

Unemployment refers to the condition of a person who is willing to engage in paid employment, but unable to find any paid employment.

Definitions:

• The unemployment rate is the proportion of the labour force that is not currently employed but could be.
• The labour force participation rate (LFPR) isthe percentage of a country’s working-age population that is actively involved in the labour market. This includes people who are employed or looking for work. The LFPR is calculated by dividing the total labour force by the total working-age population, which is defined as people aged 15 to 64.
• The labour force participation rate is an estimate of an economy’s active workforce.
• The formula is the number of people ages 16 and older who are employed or actively seeking employment, divided by the total non-institutionalized, civilian working-age population.

Reasons for Low LFPR in India

1. Higher education.
2. Women do not participate in the economy.

Unemployment conditions:

Natural Rate of Unemployment

Naturally, a rate of unemployment exists in any economy.

When the economy is functioning normally and is not under any kind of a recession two types of unemployment situations can occur:

1. Frictional Unemployment: Between two jobs.
2. Structural Unemployment: Paradoxical manpower situation: Surplus of manpower in certain categories coexists with a shortage of manpower in others. For example, there is unemployment among technically qualified people on one hand and a dearth of technical skills required for economic growth.

Cyclical Unemployment

Due to cyclic recession in a business cycle often cyclic unemployment can occur.

In the Indian context, two other kinds of situations occur.

1. Seasonal unemployment: mostly in rural areas due to agricultural labourers.

Under-employment

Employment not to the fullest productive capacity (by nature) of an employee. For example, an MBA graduate is employed as a clerk; an Employee works only 4 hours a day.

Disguised Unemployment:

Appears to be employed but the employment is redundant.

• The marginal productivity of the Employee is zero.
• People engage in work even when not required. Generally in rural areas, all families work in the field, even when not required.

Employment Situation in India:

• The primary sector continues to be the largest employer. More than half of workers work in the primary sector, mainly agriculture.
• Industrial output was up by 8 times but employment went up only by 2.5 times.
• In the tertiary sector, output increased by 11 times but employment only by 3 times.

Measuring unemployment:

Annual household survey on employment

It is conducted by the Labour Bureau (M/o Labour and Employment).

Labour Bureau has been entrusted with the undertaking of the following All India Surveys, under this component:

1. All-India Survey on Migrant Workers.
2. All-India Survey on Domestic Workers.

In addition, the Government can assign other surveys to the Bureau too.

It takes Formal Sector Data from the EPFO and ESIC.

Latest unemployment Data:

Unemployment rate	The unemployment rate in rural areas decreased from 5.3% in 2017-18 to 2.5% in 2023-24.
Employment status	The majority of people employed in the 15–29 age group are self-employed or casual workers.
Education and unemployment	The unemployment rate increases with education level for all age groups.
Unemployment rate for graduates	The unemployment rate for graduates and above in rural areas is 36.6%, compared to 26.5% in urban areas.
Unemployment rate for illiterates	The unemployment rate for people who are not literate is 3.7%.
Labour force participation rate (LFPR)	The LFPR is 50.9% at the all-India level.
LFPR by gender	The LFPR for females is 22.6%, compared to 76.6% for males. (World 37% and 78.5%)

Periodic Labour Force Survey (PLFS):

A regular survey of NSSO for generating estimates of Labour force indicators  for both formal and informal sectors on:

1. The quarterly basis for urban areas and
2. Annual basis for both rural and urban areas, at State/UT and all-India level.

Update in 2019: It replaced the earlier Employment-Unemployment Survey where data was available only every 5 years. The PLFS is designed to generate the indicators of labour market operations using two approaches:

1. Usual Status (US) approach: It records only those persons as unemployed who had no gainful work for a major time during the 365 days and are seeking or are available for work. Thus, it captures long-term open unemployment.
2. Current Weekly Status (CWS) approach: It captures those persons who are classified as unemployed who did not have gainful work for even an hour on any day in the preceding week and who were seeking or were available for work. It captures open chronic unemployment + seasonal unemployment.

Computer Assisted Personal Interviewing (CAPI) Method has been adopted to record data.

Employment generation:

• A study conducted by the planning commission that nearly 20L jobs can be created in the education sector alone.
• Poverty elevation programmes: see poverty.

Self-Employment strategies

Schemes for Financing Small Businesses

1. PM Rozgar Yojana (PMRY), a 1993 scheme launched for educated unemployed youth.  It provides a loan of up to ₹10 Lakh to help in setting up small businesses and industries.
2. PM Employment Generation Programme (PREGP), a 1995 scheme launched for setting up new self-employment ventures/projects/micro enterprises every year.
3. Swarnajayanti Gram Swarozgar Yojana (SGSY), a 1999 scheme, launched in rural areas, brings poor families above the poverty line by organising them into SHGs through a mix of bank credit and government subsidy.

Schemes for the development of businesses

Start-up India –

Under the Startup India initiative, eligible companies can get recognised as Start-ups by DPIIT, in order to access a host of tax benefits, easier compliance, IPR fast-tracking & more.

• Tax Rebates: Tax-free profits of these fledging units for 3 years and Tax exemption on Capital Gains: Sale of property to invest in own business.
• Easy Governance: Apart from easy entry and easy exits, the government ensures that there is no labour inspection for 3 years and instead Self–certification-based compliance system for start-ups is to be introduced for 9 labour and environmental laws.
• Easy Funding: A Credit Guarantee Fund is formed through the National Credit Guarantee Trustee Company (NCGTC) and SIDBI with a Corpus ₹500Cr/year for the next 4 years.
• Better IPR Policy: Quicker and more subsidised patent clearances – 80% exemption in patent fee for start-up business. Whereas, for the Trademark or design, only a statutory fee is payable.

Mudra Scheme –

Under PM MUDRA Yojana, three categories of loans are disbursed which include:

1. Shishu :– Loan up to ₹50,000.
2. Kishore:- Loan ranging from ₹50,000 to ₹5 lakh.

• Tarun :– Loan above ₹5 lakh and below ₹10 lakh.

Micro-enterprises such as shopowners, street Vendors and artisans can avail of these loans. However, no subsidy is provided unless the loans are linked with some other scheme.

PM SVANidhi –

PM SVANidhi – Pradhan Mantri Street Vendor’s Atmanirbhar Nidhi is a special micro-credit facility scheme for providing affordable loans to street vendors.

• It enables the street vendors to resume their livelihoods that have been adversely affected by to COVID-19 lockdown.
• It is a Central Sector Scheme, launched by M/o Housing and Urban Affairs.
• Duration of the scheme: Extended till December 2024.
• Beneficiary: Those street vendors who had been vending on or before 24th March 2020, in urban areas or surrounding peri-urban or rural areas. It will benefit over 50 lakh vendors. Urban Local Bodies will play a pivotal role in the implementation of the scheme.
• Mechanism: The vendors can avail of a working capital loan of up to  Rs. 10,000 of 1-year tenure repayable in monthly instalments.
  • On timely and early repayment of the loan, an interest subsidy at the rate of 7%/annum up to Rs 100 per month will be credited to the bank accounts of beneficiaries through DBT on a six-monthly basis.
  • If the vendor will repay the instalments in time or earlier, they will develop his credible credit score that makes him eligible for a higher amount of term loan to ₹20,000 and so on.

Deen Dayal Upadhyaya Antyodaya Yojana (DDUAY)

DDUAY is an umbrella scheme of the Indian government focused on eradicating poverty by improving the livelihoods of the poor, especially in rural and urban areas. It encompasses various sub-schemes, emphasizing skill development, self–employment, and social mobilization.

National Rural Livelihoods Mission (NRLM):

1. Focuses on empowering rural poor households by organizing them into self-help groups (SHGs).
2. It offers skill training, financial inclusion, and support for income-generating activities.

National Urban Livelihoods Mission (NULM):

1. Aims to enhance the skills of the urban poor, enabling access to sustainable livelihoods.
2. It includes components like self-employment, capacity building, and shelters for the homeless.

Skill Development Programs:

Skill India Mission

It is an umbrella scheme under which several initiatives have been taken. It aims to Train 40 Crore more people by 2022.

USTAAD scheme

• Launched by the Ministry of Minority Affairs
• Beneficiary communities: Muslims, Christians, Sikhs, Buddhists, Parsis, and Jains.
• It preserves and promotes traditional arts and crafts of India’s minority communities through Skill development, capacity building, and technical support for artisans.
• It offers financial aid, and market linkages to boost productivity while maintaining authenticity.
• It conducts workshops, exhibitions, and collaborations with NGOs and educational institutions.

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY)

Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) aims to skill rural youth who are poor and provide them with jobs having regular monthly wages or above the minimum wage.

• Beneficiaries: Rural youth aged 15 and 35 years from poor families and SC/ST/ Women/ PVTGs/PWDs/transgenders, etc. up to 45 Years.
• Placement-Linked Training: DDU-GKY focuses on job-oriented training, ensuring that at least 70% of trainees secure jobs with minimum wage requirements after completing their courses.

PM Kaushal Vikas Yojana (PMKVY)

Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is the flagship scheme of the Ministry of Skill Development & Entrepreneurship (MSDE). It aims to bridge the skills gap in India, enabling a large number of youth to find better employment opportunities.

• Short-Term Training (STT): To school/college dropouts or unemployed and placement assistance by Training Partners.
• Focus on New-Age and Industry 4.0 Skills: PMKVY 4.0 emphasizes advanced skills required for Industry 4.0, including artificial intelligence, machine learning, robotics, blockchain, and data analytics, alongside traditional skill areas.

PM Employment Generation Programme (PMEGP)

It is a credit-linked subsidy scheme that was launched in August 2008.  It is administered by the Ministry of MSME. The scheme has been approved for continuation over the 15th Finance Commission cycle i.e., for the period of five years from 2021-22 to 2025-26. It is a Central Sector Scheme.

• Available to only new units.
• Applicable to all viable (technically and economically) micro-enterprises in rural as well as urban areas.
• No income ceiling is there for assistance in setting up projects.
• Only one person from a family is eligible for obtaining financial assistance.

Pradhan Mantri Shram Yogi Maan-dhan (PM-SYM)

It is a pension scheme for unorganized workers to ensure old age protection for them. It was launched in 2019 as a central sector scheme and administered by the Ministry of Labour and Employment.

Eligibility Criteria: a person should be:

• An unorganised worker
• Entry age between 18 and 40 years
• Monthly Income Rs 15000 or below

Pradhan Mantri Rojgar Protsahan Yojana (PMRPY)

It is implemented by the Ministry of Labour and Employment and has been operational since August 2016.

• It aims to incentivise employers registered with the Employees’ Provident Fund Organisation (EPFO) for job creation. In this government pays the full 12% contribution that employers are normally required to make to the Employees’ Provident Fund (EPF) and Employee Pension Scheme (EPS) for new employees having a new Universal Account Number (UAN).
• Eligibility: Newly hired workers earning up to ₹15,000 per month.

Garib Kalyan Anna Yojana (PMGKAY)

Under this scheme, the centre provides 5kg of free food grains per month to the poor. This is in addition to the subsidized (Rs 2-3 per kg) ration provided under the National Food Security Act (NFSA) to families.

Eligibility: Families belonging to Antyodaya Anna Yojana (AAY) and Priority Households (PHH) categories will be eligible for the scheme.

Wage employment

NREGA:

It was launched in 2005, and stated to provide a “Right to work”. It provides 100 days of assured employment every year to rural households; It is the largest and most ambitious social security and public works programme in the world”. The World Development Report 2014, termed it as a “stellar example of rural development”.

• One-third of jobs are reserved for women.
• Funds: 90:10

Central govt. Establish National Employment Guarantee Funds.

The state Govt. established State Employment Guarantee funds.

• Employment is provided within 5km of an applicant’s residence. If he is not provided employment in 15 days s/he will be entitled to a daily unemployment allowance.

National Food for work Programme(NFWP), 2004:

It was launched in the 150 most backward districts. Open to all rural poor who needed wage employment and desire for manual skilled work. 100% Centrally sponsored scheme and food grains are provided free of cost to the states. Once NREGA was in force NFWP was subsumed within the programme.

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