UNEMPLOYMENT IN INDIAN STATES
1.Context
A recent report released by the International Labour Organization (ILO) and the Institute for Human Development (IHD) revealed that two out of every three unemployed individuals was a young graduate, highlighting the need for urgent policy intervention. Little is understood about the causes of unemployment in India, a knowledge gap that requires urgent redressal.
2. What is Unemployment?
Unemployment refers to a situation where individuals who are willing and able to work at prevailing wage rates are unable to find jobs.
In other words, it represents a condition where people are actively seeking employment but are currently without work.
Unemployment can occur due to various reasons, including economic downturns, technological changes, mismatch of skills between job seekers and available jobs, and structural issues within the labour market.
Unemployment is typically measured by the unemployment rate, which is the percentage of the labour force that is unemployed and actively seeking employment
3. An analysis of unemployment
- Goa's unemployment rate stands at nearly 10%, surpassing the national average of 3.17% by more than threefold. It's notable that four of the top five states with high unemployment rates—Goa, Kerala, Haryana, and Punjab—are relatively affluent. In contrast, Maharashtra and Gujarat in western India, both prosperous states, report unemployment rates considerably below the national average.
- Across northern states like Jammu and Kashmir, Punjab, Haryana, Uttarakhand, and Himachal Pradesh, unemployment rates exceed the national average. Similarly, most southern states, except Karnataka, also have higher than average unemployment rates.
- Among the 27 states examined, 12 have unemployment rates lower than the national average. Notably, the low rates in significant states such as Maharashtra, Uttar Pradesh, and Madhya Pradesh contribute to this national average decline.
- However, it's puzzling that except for Maharashtra and Gujarat, states with below-average unemployment rates generally exhibit lower per capita incomes compared to the national average
4.The determinants of unemployment
- The data reveals a downward-sloping trend line, suggesting a negative correlation between the two factors: in states where a significant portion of the workforce is involved in self-employment, the unemployment rate tends to be lower.
- Given that much of self-employment in India is informal, states with a higher prevalence of informal work may find it easier to accommodate job seekers.
- However, it remains uncertain whether this relationship is causal. Does a lack of opportunities in self-employment lead to higher unemployment, or do individuals in states with high unemployment rates simply prefer not to pursue self-employment?
- A considerable portion of informal self-employment stems from agriculture and rural economies.
- Hence, a relevant measure is to analyze the proportion of the workforce engaged in urban sectors.
- A clear positive correlation emerges, indicating that unemployment rates rise in states with higher urbanization levels.
- This elucidates the elevated unemployment levels in highly urbanized states like Goa and Kerala, juxtaposed with lower rates in states such as Uttar Pradesh, Jharkhand, and Madhya Pradesh. Urbanized states typically possess smaller agrarian sectors, leading to fewer informal job opportunities compared to rural areas.
- Although informal sectors persist in urban settings, their capacity to absorb job seekers is relatively limited compared to rural agriculture, which often serves as a reserve by absorbing surplus labour
5. Education and employment
- However, there are exceptions to this pattern. Gujarat and Maharashtra, despite being highly urbanized—where the urban workforce comprises 37% in both states, significantly higher than in states like Uttar Pradesh (17%) and Madhya Pradesh (20%)—exhibit lower unemployment rates.
- Following the release of the ILO-IHD report, much discourse has revolved around the correlation between education levels and unemployment.
- A previous article in this publication dated December 26, 2023, titled 'Are graduates facing unemployment?', also delved into the prevalent issue of unemployment among graduates.
- For instance, Kerala boasts a highly educated workforce, with graduates constituting 30% of the labor force, yet it contends with high unemployment.
- Conversely, Gujarat and Maharashtra have a relatively smaller proportion of graduates in their workforce—approximately 14% and 20% respectively—and consequently experience lower unemployment rates despite their affluence and urbanization.
- Numerous factors may account for this phenomenon.
- It's plausible that graduates lack the necessary skills demanded by the burgeoning modern sector, underscoring the need to enhance educational infrastructure and standards.
- However, this doesn't fully elucidate why graduates have historically grappled with unemployment, even during the nascent stages of the modern sector.
- Another potential explanation lies in aspirational factors. Graduates aspire to secure high-paying jobs commensurate with their skills, rather than settling for informal employment.
- If the modern sector fails to expand adequately to absorb new graduates, it could precipitate unemployment.
- Nonetheless, these aren't the sole drivers of unemployment; state policies also wield significant influence. Nevertheless, this analysis underscores the interconnectedness between structural shifts and unemployment.
- As burgeoning economies evolve, there's a diminishing reliance on agriculture, accompanied by heightened urbanization and educational attainment.
- As India progresses, these factors are anticipated to exert upward pressure on the unemployment rate. Thus, it's imperative for policy initiatives to prioritize employment generation to counteract these trends
6. Way Forward
Additionally, states with significant rural populations, such as Uttar Pradesh, Bihar, and Madhya Pradesh, may experience higher unemployment rates due to limited job opportunities outside of agriculture and a lack of sufficient infrastructure for industrial development
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For Prelims: Labor Force Participation Rate (LFPR), Employment Rate (ER), Centre for Monitoring Indian Economy (CMIE), and Labour Force.
For Mains: 1. Discuss the significance of the Labor Force Participation Rate (LFPR) as a critical labor market indicator in the context of economic development and policy formulation. (250 words).
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Previous year Question1. In India, which one of the following compiles information on industrial disputes, closures, retrenchments, and lay-offs in factories employing workers? (UPSC 2022)
A. Central Statistics Office
B. Department for Promotion of Industry and Internal Trade
C. Labour Bureau
D. National Technical Manpower Information System
Answer: C
2. Which of the following brings out the 'Consumer Price Index Number for Industrial Workers'? (UPSC 2015)
A. The Reserve Bank of India
B. The Department of Economic Affairs
C. The Labour Bureau
D. The Department of Personnel and Training
Answer: C
3. International Labour Organization's Conventions 138 and 182 are related to (UPSC 2018)
A. Child labour
B. Adaptation of agricultural practices to global climate change
C. Regulation of food prices and food
D. Security
Answer: A
4. Which of the following statements about the employment situation in India according to the periodic Labour Force Survey 2017-18 is/are correct? (UPSC CAPF 2020)
1. Construction sector gave employment to nearly one-tenth of the urban male workforce in India.
2. Nearly one-fourth of urban female workers in India were working in the manufacturing sector.
3. One-fourth of rural female workers in India were engaged in the agriculture sector.
Select the correct answer using the code given below:
A. 2 only
B. 1 and 2 only
C. 1 and 3 only
D. 1, 2 and 3
Answer: B
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Source: The Hindu
