Chp-15 ~ Unemployment In India - Problems and Policies Flashcards
What does the term unemployment mean in the ordinary or common sense?
In ordinary or common sense, the term unemployment denotes a situation when a person is not gainfully employed in a productive activity and therefore does not work or earn.
Explain voluntary unemployment.
Voluntary unemployment refers to those persons who are voluntarily unemployed, i.e., unemployed by their choice.
They may not work due to laziness or otherwise they are not interested in any gainful job.
In this category, we may include both the ‘idle rich’ and the ‘idle poor’.
They are not considered unemployed.
What is unemployment?
Unemployment is a situation when there are some able-bodied persons who have the ability to work and are willing to work at the prevailing wage rate, but are not able to find work which may yield them some regular income.
Unemployment therefore, is a situation when the person is without work involuntarily.
What is UR?
The unemployment rate (UR) is defined as the percentage of unemployed persons in the total labour force.
It refers to percentage of the labour force that is without work or is jobless.
What is cyclical unemployment?
Cyclical unemployment is associated with the downswing and depression phases of business cycle.
It occurs due to cyclical fluctuations in the economy.
It is associated with simultaneous unemployment of all the resources such as labour and capital.
It is an inherent feature of a developed capitalist economy.
In less developed countries like India, there can be such an unemployment only when there is a recession in the economy.
What is the cause of cyclical unemployment?
Cyclical unemployment is caused by deficiency in aggregate demand.
During depression, income falls and this lowers the demand for goods and services.
As a result, aggregate demand is not sufficient to purchase the entire output that can be produced with full employment of the labour force.
Therefore, production will be less than full employment output.
Consequently, a large number of labour force will remain unemployed.
How can cyclical unemployment be eliminated?
Since cyclical unemployment arises due to deficiency of aggregate spending, it can be eliminated by raising aggregate demand sufficiently so as to increase output to the level which can be produced with full utilisation of labour.
What is a business cycle?
A business cycle consists of alternating periods of prosperity (boom) and depression.
During the phase of prosperity, the level of economic activity rises; income, output and employment tend to increase.
The period of depression is characterised by low level of economic activity; low income, low output, and low level of employment.
During the downswing and depression phases of business cycle, income and output fall going rise to widespread cyclical unemployment.
What is frictional unemployment?
Frictional unemployment exists when there is lack of adjustment between demand for and supply of labour force.
Even when the level of aggregate demand is high, a country may experience unemployment because of the presence of certain economic frictions or lack of adjustment between demands for and supply of labour.
It arises when the existing workers change jobs.
It is a temporary phenomenon.
What causes frictional unemployment?
Frictional unemployment may take place due to several reasons:
It may occur due to change in demand.
It may also occur due to economic progress when old industries contract and new industries come up.
Since labour cannot be immediately shifted from the ‘declining’ to the ‘expanding’ industries, frictional unemployment may occur.
How can frictional unemployment be reduced?
Frictional unemployment may be reduced by improving the organisation of the employment market so as to adjust the supply of workers to their demand.
In particular, there is the need of increasing the mobility of labour - occupational and geographical - to reduce frictional unemployment.
