UNEMPLOYMENT

Unemployment occurs when people who are willing and capable to work are actively seeking
work but are unable to find the same.
Unemployment rate = Number of unemployed individuals * 100%
Labor force
Labor force is the total number of workers, including both employed and unemployed.
Types of unemployment:

Classical Unemployment
It occurs when the real wages for workers in an economy are too high, meaning that firms are
unwilling to employ every person looking for a job.

Cyclical Unemployment
It relates to the cyclical trends in growth and production that occur within the business
cycle.When business cycles are at their peak, cyclical unemployment will be low because
total economic output is being maximized.

Frictional Unemployment
It results from temporary transitions made by workers and employers or from workers and
employers having inconsistent or incomplete information.

Structural Unemployment
It is a form of unemployment caused by a mismatch between the skills that workers in the
economy can offer, and the skills demanded of workers by employers (also known as
the skills gap).

Effects (costs) of unemployment:

Individual

Unemployed individuals are unable to earn money to meet financial obligations.

Failure to pay mortgage payments or to pay rent may lead
to homelessness through foreclosure or eviction.
It increases chances of cardiovascular disease, anxiety, depression, and suicide.

Social

During a long period of unemployment, workers can lose their skills, causing a loss of human capital.
High unemployment can also cause social problems such as crime; if people have less disposable
income than before, it is very likely that crime levels within the economy will increase.

Socio-political

High levels of unemployment can be causes of civil unrest, in some cases leading to revolution.
Rising unemployment has traditionally been regarded by the public and media in any country as a key
guarantor of electoral defeat for any government which oversees it.

SWOT ANALYSIS
STRENGTHS

Higher unemployment would ensure a higher FDI in an economy (as the demand for
employees would be lesser than supply) as the result of cheap labor
Better planning from the view point of the unemployed. The unemployed would surely
monitor their savings and try to narrow them down.
Boost to Self Employment being a major strength, becoming a pathway to establishment
of new business.
Propensity to save, especially of the people unemployed in developing nations would
increase, eventually benefiting the economy.
WEAKNESS

Increase in government burden since the government would have to compensate the
unemployed.
Reduced spending power would have a direct impact on the production of goods and
commodities thus slowly reducing their demand.
Downfall in the standard of living.
Political distrust (the unemployed would blame the government for their prevailing
conditions).
Increase in the percentage of taxes in order to compensate the unemployed.

OPPORTUNITIES

Higher revenue generation through business.

Higher inflow of money through FDI.

Availability of skilled labor at cheaper rates.
The firms can thoroughly enjoy the opportunity of getting the best (efficiency) through
their labors as there would be no fear to go on a strike or cause any other sort of threat to
the firm.
Political parties may use it as an agenda to create instability
THREATS

Threat to the production sector. The lack of purchasing power would demotivate the
manufacturers and eventually force them to cut down their productions
Recession, which is a huge threat to the stability and functioning of the economy
affecting the income per person, health costs, quality of health-care, standard of living
and poverty.
Increase in government debt.
Mental tensions and lack of satisfaction on part of unemployed would result in suicides,
crimes, violence and breakdown of families.
Brain drain: as a consequence of lack of employment opportunities in India the intelligent
youth migrate to foreign countries.

CRITICAL ANALYSIS
Unemployment is a major problem in developing countries like India. India is the only country
with a total of 65% of youth population i.e. people below the age of 35 years. But in spite of such
a valuable resource it is not able to acquire the designated rate of growth and development due to
unemployment. The rate of unemployment in 2015 was 4.7% and even in the current year the
rate is expected to vary between 4.6% to 5% showing little scope for improvement.
The four main factors that have lead to an extensive growth of unemployment are-Firstly,
overpopulation is not only creating unemployment but also slowing down the effect of policies
taken up by the government in order to reduce this problem. Overpopulation leads to disguised
unemployment and underemployment. This happens due to an enormous number of educated
population which is not given appropriate jobs thus their potential is not fully utilized and their
salaries are not in accordance with their qualifications and capacity. The key role in solving this
problem can only be played by the government through rapid industrialization. Increased
investment in heavy and basic industries should be increased to provide more employment with
more production. Encouragement as well as revival of cottage and small scale industries through
subsidies and other incentives should be given to the private sector. Secondly, the seasonal
nature of some works/jobs like agriculture and tourism industry lead to unemployment. Typical
small scale farmers are unemployed for at least 5 months per year due to the seasonal nature of
crops. One of the ways to prevent seasonal unemployment is that such people should be
encouraged to take up jobs in off season. Modernization and mechanization of agriculture should

be done. Wastelands should be utilized. Thirdly, in economic fluctuations such as recession, job
freezing is a common practice adopted by hiring companies. This results in high degrees of
unemployment. Lastly, extensive automation and use of IT has replaced manpower to a great
extent resulting in large scale structural unemployment in urban areas. This can be reduced to a
great extent by providing retraining, on the job training and by making people occupationally
flexible.
Unless unemployment problem is solved, the future of India cannot be bright. There will be no
peace and prosperity in the country if jobless people do not get a proper channel. We should keep
in mind that self-help is the best help. We must admit the bitter fact that no government can
provide employment to all the unemployed youths. Mere government measures cannot solve
such an enormous problem. Still, the government should adopt measures to create opportunities
for self-employment.

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BY:
Shreya Gupta (1523161)
Sahil Agarwal (1523134)
Bhudita Saboo (1523151)