INTRODUCTION:

Unemployment, according to the Organization for Economic Co-operation

and Development (OECD), is persons above a specified age (usually
above 15) not being in paid employment or self-employment but currently
available for work during the reference period.Unemployment is a key
economic indicator because it signals the ability (or inability) of workers to
readily obtain gainful work to contribute to the productive output of the
economy. More unemployed workers mean less total economic production
will take place than might have otherwise. And unlike idle capital,
unemployed workers still need to maintain at least subsistence
consumption during their period of unemployment. This means an economy
with high unemployment has lower output without a proportional decline in
the need for basic consumption. High, persistent unemployment can signal
serious distress in an economy and even lead to social and political
upheaval.The term “unemployment” can be tricky and often confusing, but
it certainly includes people who are waiting to return to a job after being
discharged. However, it does not anymore encompass individuals who
have stopped looking for a job in the past four weeks due to various
reasons such as leaving work to pursue higher education, retirement,
disability, and personal issues. Even people who are not actively seeking a
job anywhere but actually want to find one are not considered unemployed.
Interestingly, people who have not looked for a job in the past four weeks
but have been actively seeking one in the last 12 months are put into a
category called the “marginally attached to the labor force.” Within this
category is another category called “discouraged workers,” which refers to
people who have lost all their hope of finding a job.
The too many details and exclusions mentioned above make a lot of people
believe that unemployment is vague and that the rate does not fully
represent the actual number of people who are unemployed. So, it is a
good idea to also look at the term “employment,” which the Bureau of Labor
Statistics (BLS) describes as individuals aged 16 and above who have
recently put hours into work in the past week, paid or otherwise, because of
self-employment.

TYPES OF UNEMPLOYMENT:
There are various types of unemployment:
1. Frictional unemployment: Frictional unemployment refers to workers
who are in between jobs. An example is a worker who recently quit or
 was fired and is looking for a job in an economy that is not experiencing
a recession. It is not an unhealthy thing because it is usually caused by
workers looking for a job that is most suitable to their skills.

Seasonal unemployment is a type of frictional unemployment which occurs

in seasonal jobs such as in the agriculture sector.

2. Structural unemployment: Structural unemployment happens when the

skills set of a worker does not match the skills demands of the jobs
available or if the worker cannot reach the geographical location of a job. It
can happen when there is a technological change in the organization, such
as workflow automation.

3. Cyclical unemployment: cyclical unemployment occurs when there is not

enough aggregate demand in the economy to provide jobs for everyone
who wants to work. Demand for most goods and services falls, less
production is needed and consequently fewer workers are needed, wages
are sticky and do not fall to meet the equilibrium level, and unemployment
results.[16] Its name is derived from the frequent ups and downs in the
business cycle.
FULL EMPLOYMENT:

Full employment is a situation in which everyone who wants a job can

have work hours they need on fair wages. Because people switch jobs, full
employment involves a positive stable rate of unemployment. An economy
with full employment might still have underemployment where part-time
workers cannot find jobs appropriate to their skill level. In macroeconomics,
full employment is sometimes defined as the level of employment at which
there is no cyclical unemployment. It is said that that the full employment
level of a country corresponds to the real GDP level as shown by the long
run supply curve (LRAS). At the full employment level of output there is no
cyclical unemployment.

NATURAL RATE OF UNEMPLOYMENT:

The natural rate of unemployment refers to the sum of the seasonal and
the structural unemployment. An economy can have 0 cyclical
unemployment but it can not have no seasonal or structural unemployment.

UNEMPLOYMENT RATE = EMPLOYED WORKERS X 100

TOTAL LABOUR FORCE

RELATION BETWEEN INFLATION AND UNEMPLOYMENT:

What is inflation?
The gradual increase in price levels of goods in a country is its measure of
inflation. With increase in price of price levels the real GDP of a country
also increases. Hence inflation is a measure of the countries growth as
well.

PHYLIPPS CURVE is a measure to study the relationship between inflation

and unemployment. It suggest that there is an inverse relationship between
the 2.
Phillips conjectured that the lower the unemployment rate, the tighter the
labor market and, therefore, the faster firms must raise wages to attract
scarce labor. At higher rates of unemployment, the pressure abated.
Phillips’s “curve” represented the average relationship between
unemployment and wage behavior over the business cycle. It showed the
rate of wage inflation that would result if a particular level of unemployment
persisted for some time.

But most people found a more stable relationship between price inflation
rather than wage inflation with the levels of unemployment.

Why does there exist a trade off between price inflation and
unemployment?
An increase in aggregate demand (AD to AD2) causes higher real GDP (Y1
to Y2). We see that due to an increase in real GDP, firms would have to
hire more workers and contractors to produce more goods to match the
demanded amount of goods. As they are hiring more people, the
unemployment levels would decrease. Due to increase in number of
workers the input prices for goods are also increasing, hence the value of
goods increases, increasing the price levels leading to an increase in
inflation levels, proving an inverse relation between the 2.

STEPS TAKEN BY GOVERNMENT TO CONTROL UNEMPLOYMENT IN

INDIA

Integrated Rural Development Programme (IRDP) was launched in 1980 to

create full employment opportunities in rural areas.
▪ Training of Rural Youth for Self-Employment (TRYSEM): This scheme
was started in 1979 with objective to help unemployed rural youth
between the age of 18 and 35 years to acquire skills for self-
employment. Priority was given to SC/ST Youth and Women.
▪ RSETI/RUDSETI: With the aim of mitigating the unemployment
problem among the youth, a new initiative was tried jointly by Sri
Dharmasthala Manjunatheshwara Educational Trust, Syndicate Bank
and Canara Bank in 1982 which was the setting up of the “RURAL
DEVELOPMENT AND SELF EMPLOYMENT TRAINING INSTITUTE”
with its acronym RUDSETI near Dharmasthala in Karnataka. Rural
Self Employment Training Institutes/ RSETIs are now managed by
 Banks with active co-operation from the Government of India and
State Government.
▪ By merging the two erstwhile wage employment programme –
National Rural Employment programme (NREP) and Rural Landless
Employment Guarantee Programme (RLEGP) the Jawahar Rozgar
Yojana (JRY) was started with effect from April, 1, 1989 on 80:20 cost
sharing basis between the centre and the States.
▪ Mahatma Gandhi National Rural Employment Guarantee Act
(MNREGA):
◦ It is an employment scheme that was launched in 2005 to
provide social security by guaranteeing a minimum of 100 days
paid work per year to all the families whose adult members opt
for unskilled labour-intensive work.
◦ This act provides Right to Work to people.
▪ Pradhan Mantri Kaushal Vikas Yojana (PMKVY), launched in 2015
has an objective of enabling a large number of Indian youth to take
up industry-relevant skill training that will help them in securing a
better livelihood.
▪ Start Up India Scheme, launched in 2016 aims at developing an
ecosystem that promotes and nurtures entrepreneurship across the
country.
▪ Stand Up India Scheme, launched in 2016 aims to facilitate bank
loans between Rs 10 lakh and Rs. 1 crore to at least one SC or ST
borrower and at least one women borrower per bank branch for
setting up a greenfield enterprise.

CONCLUSION

Unemployment is a serious issue for any economy. It creates negative

affects to unemployed as they are jobless and suffer from worse prospects
to find new job and those who are employed feel less secure to keep their
jobs in future. However for overall development of economy, government
and individuals has to take initiative steps in increasing the productivity and
improving the standard of living.