Subject: Economic & Social Development
Topic: Unemployment

An important objective of development planning in India has been to provide for gainflul employment opportunities. The level, quality and growth of wages, incomes and employment in the economy is affected by the overall growth in the economy as measured by GDP, as also growth in population and consequent additions to the labour force. Thus, growth is the primary driver of employment. The employment created is none if growth is planned in labour intensive way. A number of specifically designed poverty alleviation programmes are in operation in rural and urban areas in order to encourage self and wage employment.

Ques. 1 : Give an account of Types of Unemployment.

Ans.

• Demand-deficient or Cyclical unemployment
• Seasonal unemployment
• Frictional or Search unemployment
• Structural unemployment

Demand-Deficient or Cyclical Unemployment

Demand-deficient unemployment occurs when there is not enough demand to employ all those who want to work. It is also often known as cyclical unemployment because it will vary with the trade cycle. When the economy is booming, there will be much demand and so firms will be employing large numbers of workers. Demand-deficient unemployment will at this stage of the cycle be fairly low. If the economy slows down, then demand will begin to fall. When this happens firms will begin to lay workers off as they do not need to produce so much. Demand-deficient unemployment rises. The behaviour of demand-deficient unemployment will exactly mirror the trade cycle. The joblosses reported in the after math of the global recession since 2008 in India and elsewhere is an example.

Seasonal unemployment

Seasonal unemployment is fairly self explanatory. In India agricultural employment is linked to monsoon and its behaviour. If there is a monsoon failure, unemployment results. The effects of seasonal unemployment are often highly regionalised.

Frictional or Search Unemployment

When a person loses his job or chooses to leave it, he/she will have to look for another one. On average it will take everybody a reasonable period of time as they search for the right job. This creates unemployment while they search. The more efficiently the job market is matching people to jobs, the lower this form of unemployment will be. However, if there is imperfect information frictional unemployment will be higher.

The better the economy is doing, the lower this type of unemployment is likely to be. This is because people will usually be able to find jobs that suit them more quickly when the economy is doing well.