The many layers of an unemployment problem 

News: Recently, protests were held in several parts of north India by students who had appeared for the Non-Technical Popular Categories exam conducted by the Railway Recruitment Board. This has once again brought the issue of prevailing unemployment into the limelight.  

What is the unemployment situation in the country? 

According to Periodic Labour Force Surveys (PLFS) in the 18-25 age group, unemployment rate is 24.5% for 2019-20, which is among the highest in the world.

India has a labour force participation rate of around 40% which means that every tenth young person in the country is unemployed by the official definition. 

How even these figures are an underestimation? 

While these figures may appear too high, even this is a gross underestimate of joblessness in the country.  For instance, in the recent incident of protests against the Railway Recruitment Board (RRB), those protesting are unlikely to be captured as unemployed by our official statistics as they would be counted as students rather than as unemployed.  

Some fraction of those employed may be working for private establishment that hardly have any security of tenure, good wages and social protection. For instance: according to PLFS estimates, two-thirds of regular salaried workers in 2019-20 did not have a written job contract and most had no social security. 

According to official estimates, a third of our population is categorised as poor. For these households, It is a necessity to work whatever wages they can get.  

There is also a social stigma attached to being unemployed, which means that many would prefer the disguise of employment in agriculture and other enterprises, even though they might not be contributing to production.  

Are unemployment allowances a viable solution? 

India undergoes elections occasionally, and this leads to politicisation of the issue of unemployment. In this, many political parties promise unemployment allowances to woo the electorate.  

However, ideas like an unemployment allowance or an urban employment guarantee are unlikely to solve the problem in its entirety. Even as a temporary reprieve from the crisis, these are insufficient.  

What is the way forward?  

There should not be just creation of additional employment, but it is to be ensured that the jobs so created provide decent wages, security of tenure and social protection.  

Indian Economy is currently struggling with low demand and a crisis of income in the rural economy.  

Government may revive rural demand through public expenditure. This will also lead to an increase in employment.  

Source: This post is based on the article “The many layers of an unemployment problem” published in Live mint on 11^th Feb 2022.