Poverty And Unemployment Flashcards
Understanding poverty
The UNHRC defines poverty as a human condition characterised by sustained or chronic deprivation of the resources, capabilities, choices, security and power necessary for the enjoyment of an adequate standard of living and other civil, cultural, economic, political and social rights.
The evolution of the meaning of poverty when from a unidimensional traditionalist view to a multi dimensional present view.
This means that earlier poverty was viewed as a lack of financial resources and the inability to fulfill even the basic necessity of life. It emphasized on the minimum standard of living rather than a reasonable level of living.
However, currently, the concept of poverty goes beyond monetary deprivation by including access to social infrastructure, health, education, etc and basic essential services like sanitation, drinking water etc.
International poverty line: it is estimated by the World Bank, currently at $2.15/day, indicating that if a person is living below $2.15/day, they are considered to be a poor person. The World bank has this line based on the cost of living for food, clothing, shelter and does not take into account the access to sanitation, water and electricity and what affect that has on the quality of life.
Headcount ratio: it is the proportion of the population below the poverty line. It is also called the poverty ratio. It give the absolute number of poor people in the country, but ignores the depth or intensity of poverty.
Multi dimensional poverty index: the global MPI is a poverty measured that reflects the multiple deprivations poor people face in the areas of education, health and living standards. First launched in 2010 by the UNDP an Oxford poverty human development initiative. A person is multi-dimensionally poor if they are deprived in ⅓ or more of the weighted indicators. It reflex both the incidents of multi dimensional poverty and its intensity. In India there are two more indicators.
The Indian MPI indicators are: nutrition, child and adolescent mortality, maternal health, years of schooling, School attendance, cooking fuel, sanitation, drinking water, housing, electricity, assets, bank account.
The second edition of MP was published by NITI Aayog based on the national family health survey of 2019-20 in 2023. India’s population in multi dimensional poverty decreased to 14.96% from 2019-20. Rural poverty (19.28%) > urban poverty (5.27%). UP saw the largest decline in the number of poor individuals.
Types of poverty
A) Absolute poverty:
It refers to a condition when household income is below a necessary level to maintain basic living standards such as food, clothing or shelter
Measure using the poverty line
Does not include a broader quality of life issues
Poor quality of life
B) Relative poverty:
It is defined from social perspective, i.e. living standards compared to the economic standard of population living in surroundings
Measure using the gini coefficient, calculated through the Lorenz curve
Indicates income inequality in the country
Marginally better quality of life
Measurement of absolute poverty
Measurement of absolute poverty:
Poverty estimation in India is carried out by Niti Aayog’s task force through the calculation of the poverty line based on the data captured by the national statistics office under the ministry of statistics and program implementation
Poverty line estimation in India is based on the consumption expenditure and not on the income levels
Consumption expenditure is required on the basket of goods and services necessary to satisfy the basic human needs known as the poverty line basket
Price levels for consumption of goods and services in poverty line basket varies from state to state and therefore, official poverty lines are higher in some states than the other
Poverty line estimation:
Dada Bhai Naoroji (in Poverty and Unbritish Rule in India) make the earliest estimation of the poverty line. The poverty line proposed by him was based on the cost of subsistence or minimum basic diet.
National planning committee of 1938: it was based on a minimum standard of living perspective in which the nutritional requirements were implicit
Planning Commission working group of 1962: the poverty line in India was quantified for the first time in terms of minimum requirement of individuals but excluded the expenditure on health and education.
Dandekar and Rath in 1971: it made the first systematic assessment of poverty in India based on the National sample survey data. It was the first established the consumption levels required to meet a minimum calorie requirement, normally of an average 2250 calories per capita per day
Alagh committee of 1979: the official poverty counts begin for the first time in India based on the approach of this task force. This committee constructed a separate poverty line for rural and urban areas on the basis of nutritional requirement and consumption expenditure. Calorie requirements in rural areas were 2400 cals per day and in urban areas, it was 2100 cals per day.
Lakadawala committee in 1993: the calorie intake based on consumption expenditure and the presumption of provision of health and education by the state only. Poverty line basket for rural and urban area was taken. Data was collected over a uniform reference period. The state specific poverty lines using consumer price index industrial worker in urban areas and consumer price index agriculture labour in rural areas.
Tendulkar committee of 2004-05: shifted from calorie consumption to nutritional outcome. Incorporation of private expenditure on health and education. It was an uniform all India poverty line basket across rural and urban India. It had a mixed reference period for data collection. The daily per capita expenditure of ₹27 in rural areas and ₹33 in urban areas was taken.
Rangarajan committee of 2012: consumption basket that includes food components such as calorie, protein and fat intake and essential non food item groups (like education, clothing, health, housing and transport). A separate consumption basket for rural and urban areas. They had a modified mixed reference period for data collection. The daily per capita expenditure of ₹32 for rural areas and ₹47 for urban areas was taken.
Hashim committee of 2012: the planning commission constituted an expert group under the chairmanship of Professor SR Hashim in 2012 to recommend The detailed methodology for the identification of families below the poverty line in urban areas
The NC Saxena committee of 2012: The ministry of rural development constituted the NC Saxena committee to advise a suitable methodology to conduct BPL census in rural areas.
Data collection method for NSSO expenditure survey:
Uniform resource period: till 1993-94, the poverty line was based on data which included asking people about their consumption expenditure in the last 30 days.
Mixed reference period: measures consumption of 5 low frequency items (like clothes and shoes) over the previous year and all other items over the previous 30 days.
Modified mixed reference period: reference period for different price items were taken as, 365 days for clothes, shoes, etc. 7 days for food items and 30 days for essentials like fuel, light, etc.
Poverty gap: it is the ratio that depicts the average population shortfall from the poverty line, does measuring the extent or depth of poverty. A larger poverty gap indicate a greater level of the deprivation and in effect, the government must transfer more income to them in order to lift them above the poverty line.
Measurement of Relative poverty
The concept of relative poverty is used to indicate the level of income inequality of a nation.
It is measured through Gini coefficient in mathematical terms and Lorenz Curve in graphical terms.
The Lorenz curve reflex inequality in income redistribution.
Gini coefficient: Area (ABD)/Area (ABC)
0= perfect equality, means everybody has the same income
1= perfect inequality, single individual receiving all the income
The World bank publishers the Gini coefficient
Kuznetz curve: income inequality tends to increase in the early stages of economic development but it begins to decrease when the country becomes more prosperous.
Unemployment
Working age population: People aged 15-64 years.
Labour force: represents section of the working age population, which involves the people who are employed and if not employed are actively seeking work. People who aren’t employed and not looking for work aren’t included. For example, housewives, students.
Labour force participation rate: it is defined as the percentage of persons in the labour force in the population.
LFPR= labour force/working population X 100%
Female LFPR = females in the labour force / working age female population X 100%
Unemployment rate: it is defined as a percentage of persons unemployed among the persons in the labour force.
UR= number of unemployed people / labour force X 100%
Worker population ratio: is defined as a percentage of employed people in the population.
WPR = number of employed persons / total population X 100%
Categorization of workforce
NSO classifies the worker on the basis of employment status into 3 categories:
{Self employed worker & casual/contract labour} these are informal workforce
{Regular/salaried labour} formal workforce
Based on the sector in which they are employed:
Informal or unorganised
Formal or organised.
Based on employment status
Self employed workers: people who operate their own farm or non farm enterprises with an essential feature of autonomy and economic independence for carrying out operation.
Casual labour: a person who is casually engaged in other’s farm or non farm enterprises and in return receives wages according to the terms of the daily or periodic work contract.
Regular wage or salaried employee: a person who works in others farm or non farm enterprises and in return receives salary or wages on a regular basis. This category includes not only people getting timed wage but also people receiving piece wages or salary and paid apprentice (full time and part time).
Organised versus unorganised sector
Organised sector:
Employment terms are fixed, regular, work is assured, secure, entitlement of medical and other social benefits. For example Government employees, registered industrial workers, etc.
Unorganised sector:
Small and scattered units, outside the control of government, low paid jobs irregular, job insecurity, no additional benefits. For example, shopkeeping, farming etc.
The unorganised workers’ social security act of 2008 defines and unorganised worker as a home based worker, self employed worker or a veg worker in the unorganised sector. It also includes workers in the organised sector who are not covered by any of the acts mention in the 2nd schedule of the act, employment compensation act (1923), industrial disputes act of 1947, employees State insurance act of 1948, employees provident funds act of 1952, maternity benefit Act of 1961, payment of graduate act of 1972.
The ministry of labour has categorised unorganised labour force under 4 groups:
In terms of occupation: small and marginal farmers, landless agriculture labourers, share croppers, fishermen, those engaged in animal husbandry, etc.
In terms of nature of employment: attached agricultural labours, bonded labourers, migrant workers, contract and casual labourers.
In terms of specially distressed category: toddy tappers, scavengers, loaders and unloaders.
Service category: midwives, domestic workers, barbers, vegetable vendors.
Initiatives for unorganised sector
E-shram Portal: The ministry of labour and employment launched the portal with an aim of creating a national database of 38 crore unorganised workers such as construction labourers, migrant workforce, Street vendors and domestic workers among others. The workers will be issued an e-shram card containing a 12 digit unique number. If a worker is registered on the portal and meets with an accident he will be eligible for ₹2lakh on that or permanent disability and ₹1lakh on partial disability. The government in state and union territories will conduct registration of unorganised workers across the country.
Atal pension Yojana: this scheme was launched on 2015 with an objective of creating a universal social security system for all Indians, especially the poor, Andhra privileged and workers in the unorganised sector. It is administered by the pension fund regularity and development authority through the national pension system. Any citizen of India can join the APY scheme. The age of the subscriber should be 18 to 40 years. It provides a minimum guaranteed pension ranging from ₹1k to ₹5k on attaining 60 years of age. The amount of pension is guaranteed for lifetime to the spouse on death of the subscriber. Contributions to the atal pension Yojana are eligible for tax benefit similar to the national pension system.
Pradhan Mantri shram Yogi maan dhan:
It is a central sector scheme administered by the ministry of labour and employment and implemented through Life insurance corporation of India and community service centres. LIC is the pension fund manager and responsible for pension payout. It is for the unorganised workers whose monthly income is ₹15k or less per month. Entry age group is 18 to 40 years. It functions on a 50:50 basis where the prescribed age specific contribution shall be made by the beneficiary and the matching contribution by the central government.
Gig worker
It has been defined for the first time under the code on social security, 2020.
It is defined as the person who performs work or participate in work arrangements and earns from such activities outside of the traditional employer employee relationship
Broadly classified into platform and non platform based workers:
Platform workers are those whose work is based on online software apps or digital platforms like Ola, Zomato, etc.
Non platform workers are generally casual wage and own account workers in conventional sectors engaged part time or full time.
Labour Code provisions
Code on wages, 2019 provides for universal minimum wage and floor wage across organised and unorganised sectors, including gig workers
Social security code, 2020 mandates compulsory registration of both gig and platform workers on an online portal to avail benefits under the code which shall be specified by the central government.
Under the code, the central government has the power to frame welfare schemes for the workers in the unorganised sector for: accidental insurance, life and disability cover, old age protection, health and maternity benefits, creche, any other benefits that the central government made decide.
Types of unemployment
Cyclical unemployment: it is a result of the business cycle where unemployment rises during recession and declines with economic growth. For example, the layoffs by IT MNCs in 2022-23.
Structural unemployment: it is a category of unemployment arising from the mismatch between the jobs available in the market and the skill of available workers in the market. It mainly occurs because economy undergoes a structural change or technological change.
Frictional unemployment: also called search employment. It refers to the time lag between the jobs when an individual is searching for a new job or switching between jobs.
Disguised unemployment: this occurs when the net marginal productivity is zero. Generally happens when more people are employed than actually needed. For example, in the agricultural sector.
Seasonal unemployment: persons are employed during particular seasons in some sectors. For example, the agriculture sector which employs farmers only for certain months and in the remaining months, the farmers are unemployed.
Chronic unemployment: refers to prolonged unemployment in an economy or long term unemployment persisting in an economy. It is due to the vicious cycle of poverty, under utilization of resources, use of traditional techniques or technology etc.
Casual unemployment: it can happen when a person is not regularly employed because of short term contracts, lack of raw material, decline in demand, etc.
Under employment: it occurs when individuals are employed in jobs that do not fully utilise their talents and qualifications, resulting in sub-optimal income and productivity. For example, doctorate holders applying for peon jobs.
Approaches to measure unemployment
Usual status approach:
Records only those persons as unemployed who had no gainful work for a major time during the 365 days preceding the date of survey and are seeking or are available for work.
Captures long term unemployment in an economy.
Weekly status approach:
Records only those persons as unemployed who had no gainful work for a major time during the seven days preceding the date of survey. A person is considered to be employed if they pursue any one or more gainful activities for at least one hour on any day of the reference week.
It captures post the long term chronic unemployment and the seasonal unemployment.
Daily status approach:
Under this, the current activities status of the person is recorded for each day in the reference week
The measure adopts half day as a unit of measurement for estimating employment or unemployment
Works for 4 hours or more = employed for the full day
Works for 1-4 hours = employed for the half day
No gainful work even for 1 hour = unemployed for the full day.
Estimates of unemployment
Household surveys: these are the primary method for generating employment and unemployment data. There are three types of surveys:
Employment unemployment survey by the NSO. It was replaced with the periodic labour force survey in 2017, paste on the recommendations of a committee headed by Amitabh Pundu
Annual labour force survey by labour bureau
Decennial population census by the office of registrar general of India and census commissioner
Enterprise surveys:
Economic census: this census covers the entire Universe of non agricultural establishments regardless of size or sector. It extends to both industrial and service establishments. The 7th economics census was launched in 2019 and was conducted by the ministry of statistics and program implementation
Annual survey of industries: conducted by NSO. It uses the enterprises registerd under the factories Act of 1948 and takes into account only organised sector establishments (≥10 workers)
Quarterly employment survey:
Conducted by the labour bureau that would provide the employment estimates employing 10 or more workers in the organised segment of 9 sectors (manufacturing, construction, trade, transport, education, health, IT/BPO, accommodation & restaurant and financial services)
MSME Census: it captures the employment in all the MSMEs.
Related concepts
Types of wages:
1) Minimum wages: the ILO defines it as the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement as an individual contract. It includes the bear needs of life like food, shelter and clothing. It is regulated under Code on wages, 2019. The minimum wages are decided by the central or state governments. It must be higher than the floor wages. Minimum wages will be revised and reviewed by the central or state governments at an interval of not more than 5 years. Government can take into account factors like the skill of workers and the difficulty of work for fixing minimum wages. The code on wages, 2019 universalises the provision of minimum wages by removing the distinction between scheduled and non scheduled employment. Earlier, the minimum wages act of 1948 allowed the central and state governments to fix and revise the minimum wage rates for workers in scheduled employment industries that are listed in the schedule of the minimum wages act of 1948.
2) Floor wage: code on wages, 2020 mention the concept of floor wage, which empowers the central government to fix floor wages taking into account the minimum living standards of workers. It is a baseline wage below which minimum wages cannot be fixed. There can be different floor level wages for different geographical areas.
3) Living wages: it is the wage needed to provide the minimum income necessary to pay for basic needs based on the cost of living in a specific community. In addition to bare needs, a living wage includes education, health, insurance etc. the article 43 of the Indian constitution mentions the living wage.
The unemployment trap: it is a situation when unemployment benefits discourage the unemployed to go to work. People find the opportunity cost of going to work too high when one can simply enjoy the benefits of doing nothing.
Harmonized unemployment rates: define the unemployed as people of working age who are without work, are available for work and have to taken specific steps to find work.
