Causes of Unemployment in India
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Demographic Factors:
- Large and Growing Population: India’s population is massive and continues to grow. This creates immense pressure on the job market, with the number of job seekers often exceeding available opportunities.
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Skill Mismatch:
- Education System Focus: The education system is not adequately aligned with the skills demanded by the job market.
- Skill Gaps: This mismatch can leave graduates unprepared for the jobs available, leading to unemployment despite having educational qualifications.
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Economic Factors:
- Slow Economic Growth: If the economy is not growing fast enough to create new jobs, unemployment can rise. This can be due to various factors like global economic slowdowns or insufficient domestic investment.
- Informal Sector Dominance: A large portion of India’s workforce is employed in the informal sector, which often lacks job security and social benefits. This can make it difficult for workers to transition to the formal sector.
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Structural Issues:
- Labour Market Rigidities: Strict labour laws and regulations can sometimes discourage companies from hiring new employees, hindering job creation.
- Limited Job Mobility: Social factors or lack of awareness about opportunities in different regions can restrict worker mobility, making it harder for them to find jobs in areas with higher demand.
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Other Factors:
- Automation and Technological Advancements: While technology can create new jobs, it can also automate some existing tasks, potentially displacing workers in certain sectors.
- Discrimination: Discrimination based on caste, gender, religion, or other factors can limit employment opportunities for certain groups.
Associated Terms
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Labour Force Participation Rate (LFPR):
- LFPR is defined as the percentage of persons in the labour force (i.e. working or seeking or available for work) in the population.
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Worker Population Ratio (WPR):
- WPR is defined as the percentage of employed persons in the population.
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Unemployment Rate (UR):
- UR is defined as the percentage of persons unemployed among the persons in the labour force.
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Activity Status- Usual Status:
- The activity status of a person is determined based on the activities pursued by the person during the specified reference period.
- When the activity status is determined based on the reference period of the last 365 days preceding the date of the survey, it is known as the usual activity status of the person.
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Activity Status- Current Weekly Status (CWS):
- The activity status determined based on a reference period of the last 7 days preceding the date of the survey is known as the CWS of the person.
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Unemployment Trap:
- It is a situation where 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 by doing nothing.
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Harmonised Unemployment Rates:
- It defines the unemployed as people of working age who are without work, are available for work, and have taken specific steps to find work.