DEFINITION OF UNEMPLOYMENT

unemployment as simple as people do not have a job. However, the concept of

unemployment is far more complex than the above mentioned. Generally,
internationally community define unemployment according to a resolution of
International Labour Organization in 1982. One can only be called as unemployed
if he / she is: without work", that means he / she was not in paid employment or
self employment during a particular reference period;.currently available for
work,that means he/she was ready for a paid employment or self employment
during the reference period;.seeking work, that means he / she had taken specific
steps in a specified recent period to seek paid employment or self
employment(ILO.1982).International Labour Organization,Resolution Concerning
Statistics of the Economically Active Population, Employment, Unemployment and
Underemployment(1982)

Unemployment is one of the key indicators of the economy Preventing mass

unemployment has universally considered primary goal. Why is it the primary goal?
As mentioned in the introduction,it is because employment indeed has great
influences on both economic and social development

Unemployment is defined by the Bureau of Labor Statistics (BLS) as people who do

not have a job, have actively looked for work in the past four weeks, and are
currently available for work. Also, people who were temporarily laid off and were
waiting to be called back to that job are included in the Unemployment statuistics.

Urban Youth Unemployment

Urban youth unemployment is simply defined as the state of urban youth being jobless. Youth
unemployment is perceived to be a symptom of a malfunctioning economic system team up with
political variability. Urban youth unemployment condition in Etiopa has increased in an alarming
rate; and consequently, afflicts the lives of many young people. Poverty which is one of the
effects of unemployment, contributes tremendously to related social problems like squatting,
criminality, street vending, malnutrition, and low literacy. Because employment is such an
important part of our personal life plan to survive, to be unemployed is to be out of our personal
life plan in order to survive, to be employed is to be out of the cultural and social mainstream.
From the economic parlance, urban youth unemployment arises when Gross National Product
(GNP) declines over a long period of time and when businesses reduce their output. Cutbacks in
production inevitably mean that industries use less labour and materials. Consequently some
workers will lose their jobs and graduates seeking new jobs will have a difficulty finding
employment. Increased youth unemployment is a major consequence of cyclical declines in real
GNP during period of recession. For example, workers in industries usually are laid off
especially those who are engaged in the production of producer durable and consumers goods
because investment purchases by business and purchases of durable goods by consumers decline
during the period of recession (UNDP, 2008 & Human Development Report, 2006).
Large cohorts of urban youth have become victims of the erroneous process of modernization
and development. The socio-economic impacts of development and modernization had a greater
impact on the normal life cycle of the youth. When the education system could not accommodate
everyone into the mainstream and limited jobs available it meant that most young people turn
into activities that would earn them a living for survival. Therefore this situation has forced
young females to participate in prostitution whilst young males survive by involving in criminal
activities.
The law and order situation in the country is bad enough and Port Moresby alone is far more
worse which is tarnished at the international level. Therefore the entire blame goes to the urban
youth but we are ignorant of our efforts to critically address them and put in place measures that
can effectively reduce the associated problems. Concerned individuals and groups have become
vocal about the issues for many years but little has been done. Government departments and
non-government organisations have been instrumental in drafting policies after policies,
programs after programs but to date, there are little or no concrete and empirical evidences of
implementation and achievement of the desired results. Such attitudes shown towards
implementing of policies and programs and level of funding by those responsible, has only
created frustrations among the youth community and as a result it has forced them to embark on
a life of crime.

Types of Urban Youth Unemployment

When a young worker leaves a job for any reason, a job separation occurs. Job separation results
when a young worker quits, is fired by the employer or is laid off for some reasons. Job
separation is always to be expected because of poor mismatch between education and industry in
matters of human resource development. Some colleges and universities produce young
graduates whose qualifications in terms of training, acquisition of knowledge and skills do not fit
the needs of the labour market and consequently, job search becomes difficulty. In addition to
that, the number of young graduates who pass-out from the universities and colleges also adds to
the list of urban youth unemployment.
The nature of urban youth unemployment has taken a different mode. This study further
investigates indebt the different types of unemployment that has not been explored by
researchers in the context of Ethiopa . In doing so, the participants views are analysed in
accordance with the authors views and classified accordingly into the different types of
unemployment where unemployed urban youth falls in as explain from the socioeconomic
perspectives: Frictional unemployment, structural unemployment, cyclical unemployment,
technological unemployment and seasonal unemployment. The unemployed urban youth are
undoubtedly in almost all categories mentioned.
Frictional Unemployment

Frictional unemployment occurs when young people search for jobs that best suits their skills
and preferences. Frictional unemployment represents the unusual amount of unemployment
resulting from young people who have left jobs that did not work out are searching for new jobs,
or young people who are either entering or re-entering the labour force to search for jobs. For
example, if one is a graduate and spend six months looking for the right job, they could be
counted among the frictionally unemployed during that period. If a worker who is dissatisfied
with a job like managing a fast food restaurant quits and takes two months to find a new job, that
worker would be among the frictionally unemployed for that period.

The amount of frictional unemployment depends on the frequency with which workers change
jobs and the time it takes to find new jobs. Job changes occur often and a considerable degree of
unemployment is frictionally and lasts only a short time. This is evident in the study, where
some of the urban youth have been frictionally unemployed. This is an area that needs
consideration by governments and other stakeholder to reduce this type of unemployment to
certain extend by more efficient placement services.

Structural Unemployment

Structural unemployment is one of the determinant of urban youth being unemployed. It usually
results from shifts in the pattern of demand for goods and services or changes in technology in
the economy that affect the profitability of hiring young workers in specific industries. Structural
unemployment often requires that young workers who lose their jobs learn new skills or move to
another location to find satisfactory new jobs. When the demand for goods decreases, some
young workers will naturally be dismissed as production of those goods decline. For example,
decline in the demand for second-hand clothes from Ethiopa could cause a decrease in the
demand for customers and second-hand workers. Therefore, the second-hand workers can lose
their jobs as a result of this reduction in the demand are said to be structurally unemployed.

Some young workers in the pool of structurally unemployed will have to find jobs in the new
industries requiring different skills to regain employment. The changes in information
technology (IT) are also causing structural unemployment. For example, more machines and
electronic equipment in an industry will imply a reduction in the demand for manual workers.

Both the industrial and regional pattern of demand for young workers are also changing, implying
that some young workers will lose their jobs and have to search for new jobs as a result of normal
changes in the economy.

It is inevitable that a certain percentage of the young labour force in Ethiopa will experience job
separation over the years, forcing young workers to stay in a job and preventing employers from
ever cutting back employment. Going out of the business, or firing or lay-off young workers
would involve loses in efficiency just as surely as excessive unemployment would result in
waste.

. Cyclical Unemployment

Cyclical unemployment is evident among young people in most of the urban centers in ethiopa.
Cyclical unemployment results from recurring depressions and cyclical fluctuations in business
activities and government projects. It is also attributable directly to a cyclical decline in real
gross national product (GNP). Cyclical unemployment is the amount of unemployment resulting
from declines in real GNP during periods of construction or recession when the economy fails to
operate at its potential level. The increase in urban youth unemployment observed here is due to
political instability, uneven distribution of services and economic growth.

In macroeconomic policy analysis, cyclical unemployment received the greatest amount of

attention. This is because cyclical unemployment is viewed as controllable. Polices that help
prevent cyclical declines in real GNP can prevent cyclical unemployment. Thus, the ethiopa,
economy is utilising its labour force to the extent possible when cyclical unemployment is
present. This means that not only urban young workforce is unemployed but also that aggregate
production and aggregate real income are below the levels the economy is capable of supporting.

Technological Unemployment

Technological unemployment is manifested in some urban centers. This type of unemployment

arises due to the advancement of science and technology, resulting in the invention of labour-
saving machines and other devices to accelerate production. Technological development
necessitates new skills in many industries, leaving those workers who have out-dated skills
without a job. With the aid of new machines, one person can now do the work formerly
performed by many workers. While before we needed elevator person to maintain each
operation, we only have to push the bottom of the number and we can reach the floor of the
building to which we are going.

While industrialisation is perceived to be a sign or progress associated with social change, it has
greatly affect lives of young people. It is believed that the massive introduction of labour- saving
machines has created tremendous displacement of young labour force in industrial production.
Certainly the technological unemployment is evident in ethiopa where employees have been
replaced by machines. For example, the introduction of computers in the government departments
has created displacement of clerical and secretarial workers. Before the departments
have three to four employees doing the same work but now only one who knows how to handle
the computer is employed and as a result, unemployment.

Seasonal Unemployment

Seasonal unemployment arises during certain periods that usually result from the reduction in
demands for labour. This is maybe attributed to the seasonal pattern of consumers habits or to
variation in production associated with climatic change. Infrastructure and construction activities
are peak levels during summer and dropped down during the rainy season. Demand for clothing
necessarily varies with climatic change. This type of unemployment is apparent in ethiopa
especially in the informal market sector. Graduates and unemployed youth engaged themselves
selling cash crops and raise poultry for other people to be paid fortnightly or monthly.

Those are also variation in employment opportunities as a result of seasonal patterns of production,
especially in the agricultural sector.
The total amount of unemployment in any month in ethiopa is the sum of frictional, structural,
technological,seasonal,and cyclical unemployment. Frictional and structural unemployment result
from natural and perhaps unavoidable occurrences in a dynamic economy. Cyclical unemployment,
however, is the result of imbalances between aggregate purchases and the aggregate production
corresponding to full employment. There are no readily available solutions to cyclical
unemployment, unlike the other types of unemployment.
Causes of unemployment:

A detailed analysis of the unemployment data below reveals that jobless growth appears
to be the norm in Namibia with unemployment rising even in periods of high economic
growth as measured by the gross domestic product (GDP). This shows that the major
part of unemployment in Namibia does not react to cyclical changes in the level of
economic activities, supporting the argument that the major part of Namibias
unemployment is of structural and permanent nature. The causes of unemployment are
usually categorized into demand side and supply side explanations. There are a number
of key factors that have exacerbated unemployment in Namibia, namely:
7.1. Population Growth & Changing Demographics
Namibia has a youthful population and growing at a faster rate, resulting in high levels
of unemployment, especially youth unemployment, with unemployment in this category
standing at 72%, from 60% in 2004. In 2008, the youth comprised 51% of the total
population and has been growing at a faster rate, due to improved health conditions and
slowdown in mortality and fertility rates. A combination of these factors led to the
increase in the number of young people entering the labour force and with few
opportunities, most of these young people find themselves unemployed. There are
significant costs to society as well as individuals if decent jobs are not generated to
absorb youth into the economy, including wasted human resources, rising youth
unemployment, increased informality in the economy and, potentially, social and
political instability. Namibias rural labour force is relatively young with 72% of the total
labour force concentrated in the age group of 15 39 years, and a peak observed in the
age group 20-24 years (Figure 2). The high concentration of the labour force in the age
group of 20-24 reflects the entry of new labour force after finishing high school. Most of
those entering the labour force in the 15-19 age groups are grade 10 failures who are
not allowed to repeat their studies
Unemployment in Namibia: Measurement Problems, Causes & Policies -Working Paper
Page | 427.2. Rise in Female Labour Force Participation
Over the past two decades, Namibia experienced an increase in the labour force
participation of women. Participation of women in Namibias labour force increased by
13% between 2004 and 2008, compared to an increase of 2% growth in labour force for
men. This development reflects a major change in society and is caused by number of
factors including women high level of education attainment, women independence,
affirmative action laws, etc. As more and more women enter the labour market, and
finding no job opportunities many of them enters the army of unemployed Namibians.
7.3. Fast growing young unskilled labour force
Unemployment is particularly severe and concentrated among those without formal
education, primary and secondary education. Many school leavers enter the labour
market unprepared and with expectations that are very different from the realities of the
labour market. Thus many young women and men experience longer spells of
unemployment when they look for their first job. Unsuccessful attempts to seek work in
the formal economy often leads to discouraged youth who eventually end up in the
informal sector, where quality, productivity and security are low.
7.4. Low employment intensity of economic (GDP) growth
The Namibian government has since independence identified private sector as the
engine of economic growth, created investor friendly environment to support growth of
private sector and started slowly withdrawing from ownership of the economy by
targeted commercialization and privatization of government departments and functions.
Most sectors of the formal economy experienced major contraction and stagnation which
has depressed overall demand for labour and employment creation capacity of the
economy. According to the 2008 NLFS there are no new jobs coming up in the formal
economy, but rather more jobs were lost. Jobless economic growth appears particularly
acute in Namibia, with economic sectors that generated economic growth over the years
failing to generate jobs as reflected in low and declining low employment intensity of
GDP growth.
Unemployment in Namibia: Measurement Problems, Causes & Policies -Working Paper
Page | 437.5. Insufficient Effective Demand
Rising unemployment could be due to insufficient effective demand for goods and
services in the economy, which in turn implies that there is insufficient demand by
firms to hire workers at the going market wage. Insufficient effective demand for goods
and services is usually seen to be a cyclical phenomenon, linked to a downturn in
economic activity and not due to long-term structural factors. If unemployment is taken
to be caused by insufficient effective demand for goods and services, the solution is seen
to be an increase in aggregate demand induced by appropriate fiscal and monetary
policies, such as an increase in government expenditures or a decrease in interest rates
brought about by an expansionary monetary policy.
7.6. Supply-driven training
Supply driven training, in the absence of demand for these newly trained people leads to
skills mismatch has caused market saturation in such areas as teachers, technicians,
electricians, welding, carpentry, mechanics, bricklaying, etc and this is contributing to
high unemployment. Education and training institutions training and producing a
labour force not in line with skill needs of employers;

1. The large number of technological advancements:

It is very needless to say that today we live in an age of technology. Previously companies required
a lot of labor in order to perform tasks for them. However nowadays, computers and various other
machines can perform even the most complex of tasks in a matter of minutes. In addition to that,
some years ago, even sending one message or reply took so much of time. Nowadays with the help
of the internet, things are done in the matter of minutes and it is for this reason that so many people
are no longer required to do tasks which required manual labor and intellectual ability.
2. Jobs have become increasingly specialized:
Big companies provide their employees with a large number of benefits and facilities. It is for this
reason that when looking for employees, they have a large number of specifications. Unless a
person fulfills all the requirements he or she will not even be considered for the position at hand.
Since job descriptions have become so very specific and particular, people are finding it very tough
to even get an interview. At such a point in time there is little which can be done, because
companies will not be willing to take on board those who are not exactly perfect for the job.
3. Companies prefer hiring few people on board:
Previously top companies hired a large number of people so as to ensure that all the jobs get done in
a proper manner, within the stipulated deadline. However nowadays, companies prefer to hire as
few people as possible on board. This is so that they do not have to spend too much money on
salaries and secondly so that their trade secrets do not go out. They are only willing to hire those
people who they trust and are entirely sure of. Many bosses believe that hiring five competent
people on board is better than having twenty average people. Offices only hire those who are all
rounders and are capable of excellent work at all times.
4. People voluntarily choose to remain unemployed:
There are many individuals out there who are very specific when it comes to choosing jobs simply
because they do not work in a company which they would not like to mention on their CV, in the
future. On the other end of the spectrum there are those individuals who are willing to take up any
job as long as they are getting a salary and job. The first kind of people prefer to wait for the right
job to come along and that is why they end up being unemployed. They too want to be employed
but they are unwilling to take up simply any and every job which happens to come their way.
5. A higher literacy rate among men and women:
Till a few years ago, the literacy rate the world over was not very high at all. However nowadays
more and more people from even the rural regions are coming forward in order to receive an
education. In addition to this even women are being encouraged to come forward and study so that
their future is bright and promising. It is very sad indeed that because so many people are educated,
the number of jobs are falling short and that is why there is so much of unemployment especially in
big cities. Once people are well educated, chances are that they will be unwilling to accept a job
which is not worthy of their intellect.
6. The issue of the immobility of the work force:
In certain places job opportunities are more than others. Some places are just not developed enough
to provide jobs to a large number of people. The immobility of the work or labor force is one major
reason for unemployment as well. For various reasons certain able people are simply unwilling to
migrate from one location to the next. Rather than taking the plunge, they prefer to remain close to
home and families as well. Doing this is something which is not very wise simply because if you
realize that your current location does not hold much potential for you and your career, you must be
willing to relocate.
CAUSES OF YOUTH UNEMPLOYMENT IN NIGERIA
In the study of youth unemployment in Nigeria, Adebayo (1999), Alanana
(2003), Echebiri (2005), Ayinde(2008), Morphy (2008 and Awobgenle and
Iwuamadi (2010) have identified the main causes of
youth unemployment in Nigeria.Rural Urban Migration: Rural urban migration is
usually explained in terms of pushpull factors. The push factor includes the
pressure resulting from manland ratio in the rural areas and the existence of
serious underemployment arising from the seasonal cycle of the
lackofinfrastructural facilities, which makes the rural life unattractive. Youths
move to urban areas with the probability securing lucrative employment in the
industries. In addition to this, there is the concentration of social amenities in
the urban centers. This meant that the rural areas are neglected in the
allocation of social and economic
opportunitie
Journal of Emerging Trends in Economics and Management Sciences(JETEMS)
4(4):397-402(ISSN:2141-7016) 399
Rapid Population Growth:
Going by 2006 census in Nigeria, the nations population was put at
140,431,790 and projections for the future indicate that the population could
be over 180 million by the year 2020, given the annual growthrate of 3.2
percent (National Population commission and ICF Macro, 2009). With this
population,Nigeria is the most populous nation in Africa. It is argued that the
high population growth rate has resulted in the rapid growth of the labour
force, which is far outstripping the supply of jobs. The acc
elerated growth of population on Nigerias unemployment problem is
multifaceted. It affects the supply side through a high and rapid increase in the
labour force relative to the absorptive capacity of the economy.
Low Standard of Education:
Some scholars and commentators have argued that as far as the formal sector
is concerned, the average Nigeria graduate is not employable and, therefore,
does not possess the skills needed by the employers of labour for a formal
employment. After all employers do not needpeople to pay or spend their
money on but people that will help their organization grow and make more
profit as the primary goal of every enterprise is to make profit. Often, this is
attributed to the Nigerias education system, with its liberal bias.Thecourse
contents of most tertiary education in Nigeria lack entrepreneurial contents
that would have enabled graduates to become job creators rather than job
seekers. Access to entrepreneurial training such as tailoring, computer,
incubation is been constraints by access to capital to establish their own after
the training. Inadequate farming tools that could enhance mechanized
agriculture. Henrik (2006) cities in Onno (2011) assert that low opportunities
for young graduates create problem of violence due to lack of job and idleness,
because without job they will not be able to play a useful role in the society
Lack of Stead
y and Sustainable Power Supply:
The fact is that the Nigeria is becoming hostile to investment due especialllack
of steady and sustainable power supply/energy crises in spite of the various
attempts of reviving this sector leading to firmsdepending on generators for
their operation whose cost of buying, fueling and maintenance are high,
thereby increasing the cost of operation in Nigeria besides, high and multiple
levies and taxations being paid by these companies, energy crises have
combined to make the cost of doing business in Nigeria to be very exorbitant.
When the industries and factories closed shops or relocated to a friendlier
economic environment, workers were laid off and prospect of recruiting new
ones were dashed. All these exacerbated the crisis of youth unemployment in
the labor market (Adeloye, 2010; Onifade, 2011).
Corruption:
Corruption, which has permeated the entire social structure of Nigeria, has
robbed the country of developing a vibrant economic base. Funds meant for
development projects have been misappropriated, diverted, or embezzled and
stashed away in foreign banks, while some incompetent and corrupt
bureaucrats and administrators in the public enterprise and parastala have
liquidated these organizations (Okafor, 2010). The point being made here is
that the collaboration of the political elites, local and foreign contractors in the
inflation of contract fees have robbed Nigeria of the chances of using more
than $500 billion estimated revenue from the oil sale in the last 50 years to
develop a vibrant economy that wouldhave created jobs for the youths in
various sectors of the economy. The ruling (political) class failed because they
replaced the vision, policy and strategy, which should be the thrust of every
leadership with transactions (contract award and other mundane money-
related activities), as each successivegovernment took turns to prey on the
nations wealth, by using public power, resources,
good will, utilities, instrument of abuse, and personal gains (Okafor, 2005).
Thus, crippling the economy
and engendering and exacerbating unemployment which creates abject
poverty, hunger and frustration
1.Causes of Unemployment in EthiopiaA high level of unemployment
indicates the failure of a
countrys economy to use its labour resources effectively. And there canbe
various factor sex plaining unemployment, such as a low level of general
economic activity, recession, inflation, rapid changes in technology, disability,
willingness to work and discrimination. In the case of Ethiopia, several factors
contribute tothe causes of youth unemployment:
Poor economic performance
. This is a major problem for most developing countries such as Ethiopia. Low
economic growth, which is manifested in low economic activity and low
investment, entails low overall job creation
(Brunero, 2008)
.This makes it especially difficult for youth since, even in an economic upturn,
youth are at a
disadvantage as they lack work experience.
Low level of education
. In Ethiopia, a large number of individuals enter the labour market below the
age of 15
with little or no formal education(Guarcello et al, 2006). Illiteracy is a major
factor contributing to underemployment and employment in the informal
sector. Education is a means for enhancing the productivity and employability
of a countrys labour force as it has a positive influence onoccupational type:
more-educated workers are much more likely to be in wage employment
and much less likely to be in unpaid work than their less
-educated counterparts
(Guarcello et al, 2006)
.
High population growth.
The increasing rate of population growth is another factoraffecting scarcity of
job opportunities. The size of the labour force has been increasing at an
average annual rate of 3.2%, reaching an
estimated 32.2 million people in 2005(Denu et al, 2007). Thedemand for
labour has a slower growth rate than the growing population.
Lack of entrepreneurship
. Ethiopias labour market is comprised of a large informal economy and this
informal sector is predominantly an employment of last resort rather than a
preference by entrepreneurs(World Bank, 2007).According to UN Habitat
(2003), most people are motivated to start their own businesses and create
their own employment because the chances of finding jobs in the current
labour market are so limited. However, starting small business without the
capacity to sustain it
or cope with other related challenges is not a viable solution to the problem of
unemployment.
Skills mismatch
. Mismatch of education and training skills with the requirements of the
labour market isanother
important reason for the high level of unemployment. According to Denu et al
(2005), a study of unemployment in urban areas revealed an increase in
unemployment rates of young people who have attained high school or a
higher educational level. This could be due to a mismatch between the type of
education provided at schools and the requirements of the labour market

some Effects of Unemployment probelem

IN NIGERIA
The following are someEFFECTS OF UNEMPLOYMENT PROBLEMS of the e
unemployment in Nigeria which include:ffects of inequality of Income:
Inequalityofincome is one of the effects of unemployment in Nigeria. The
National Bureau of statistics opined that in 2010 65% of Nigerias wealth is
owned by 20% of the population, which manifest itself in so many dimensions
such asconcentration of wealth on the hands of few
individual while many are in abject poverty. Inequality of income, poverty and
unemployment has
led to increase in violent crimes in Nigeria. Hallary (2012) assert that the crisis
in Nigeria was a result of failure of governance to address socio-economic
issues facing the nation.
Decline in Quality of Life:
Decline in quality of life depends largely on family income, insecurity, tension
and conflict. Decline in access to shelter, education and health care, nutrition
are drastically reduced which ultimately led to reduction in life span. NLC
(2012) assert that bodied employment growth and improvement in the GDP
had not transform into social well being, adding that unemployment had
aggravated the spate of insecurity among other social vices in the polityt is
important to note that the figures above may not have captured in totality the
youth unemployment situation in Nigeria, however, they are pointing to the
fact that the phenomenon is a very critical issue with far-reaching implications
for stability of democracy, good governance and socio-economic virility.
Job Insecurity:
Job security is the panacea for any meaningful socio-economic activities which
has not been fully understood and integrated in our scheme of things. The
South African White Paper on Defence (1996) defined job security as an all
encompassing condition in which individual citizen lives in freedom, peace and
safety,participate fully in the process of governance, enjoy the protection of
fundamental rights, have access to resources and the basic necessities of life,
and inhibit an environment which is not detrimental to their health and well-
being. In the same vein inNigeria job security is an all-encompassing condition
in which individual citizen lives in an environment where job equals
opportunities are not provided for all citizens but exceptionally for the rich and
those with the highest connection. In Nigeria, job security suppose to have
been a situation whereby one can have access to the type of job he or she is
trained to do which gives individual job satisfactions. In Nigeria today, accurate
unemployment rates are difficult to access. However, according to Oyebede
(2003), Nigerias unemployment can grouped into to categories: first, the older
unemployed who have lost their jobs through retrenchment, redundancy, or
bankruptcy and the second ones are the younger unemployed, most of who
have never been employed.

Causes of Unemployment in Developing Countries:

We have explained above the two basic explanations of unemployment and under employment
prevailing in the developing countries. We now explain below in some detail the various causes
which account for unemployment and underemployment that still prevails in the developing
countries.

1. Lack of the Stock of Physical Capital:

The major cause of unemployment and underemployment in underdeveloped countries like India is
the deficiency of the stock of capitaI in relation to the needs of the growing labour force. In the
modern world, man by himself can hardly produce anything. Even the primitive man needed some
elementary tools like the bow and arrow to engage in hunting for the earning of his livelihood.

With the growth of technology and specialisation, he needs much more capital with which to
engage in the productive activity. If he is an agriculturist, he needs a piece of land and also a
plough, a pair of oxen, seeds and some foodgrains and other necessities of life to sustain himself
during the period of sowing to the reaping of the harvest. In the industrial sector, he needs factories
to work in and machines to work with. All these aids to production belong to the communitys stock
of capital.

Now, if the working force grows faster than the stock of capital of a country, the entire addition of
labour force cannot be absorbed in productive employment because not enough instruments of
production would be there to employ them. The resulting unemployment is known as the long- term
or chronic unemployment.

A nations stock of capital can be enlarged by increased investment which in the absence of any
unutilised resources, requires additional saving on the part of the community. The concern of the
classical economists was to ensure that the rate of capital formation was kept sufficiently high so
that employment opportunities were successively enlarged to absorb the additions to the working
force of a country as a result of population growth.
This is also the problem that the developing countries like India are facing today. In recent times,
the labour force in India has been growing at more than 2 per cent per year, yet our rate of
investment expressed as a percentage of our stock of capital has not been growing at a fast enough
rate so as to keep pace with the growth of population. As a result, the countrys ability to offer
productive employment to the new entrants in the labour market has been severely limited.

This manifests itself in two things: first, the prevalence of large-scale open unemployment in the
urban areas as evidenced by the statistics of employment exchanges; second, it manifests itself in
the form of open unemployment in the rural areas as well as disguised unemployment in agriculture.

2. Use of Capital Intensive Techniques:

An important factor responsible for slow growth of employment has been the use of capital-
intensive techniques of production, even in consumer goods indpstries where alternative labour-
intensive techniques are available. Even before 1991, under the industrial policy resolution 1956,
the development of consumer goods industries were left open for the private sector.

However, private sector prefers to invest in highly capital-intensive plants and equipment on the
basis of technology developed in labour- scarce western countries. It is argued by them the
alternative labour-intensive techniques have low productivity and low-surplus-generating capacity.
However, the important reason for the use of capital-intensive techniques has been the availability
of cheap capital.

Even firms in modern small industry sector which were expected to generate large employment
opportunities have also tended to use capital-intensive techniques of production. Thus, Prof. J.C.
Sandesara states, the availability of cheap capital has tended to encourage the modern small-scale
industries sector to over-capitalize and use more capital-intensive methods of production and thus
reduce employment potential.

In agriculture, reckless mechanisation of various agricultural operations despite the existence of

surplus labour has reduced the employment-augmenting effect of new high-yielding technology
involving the use of HYV seeds, fertilisers and pesticides. This has prevented the generation of
enough employment opportunities in rural areas.

Now, a pertinent question is why capital-intensive techniques are used in industries despite the
condition of labour-abundance in the economy. First reason is the relatively low price of capital,
relatively low price of capital has caused by (a) lower rate of interest, (b) liberal depreciation
allowance on capital investment permitted in the taxation system of the country, (c) relatively cheap
capital equipment imported from abroad. Second, higher wages of labour in the organised sector
relative to their productivity under pressure from trade unions. Thirdly, rigid labour laws also
discourage the employment of labour. It is difficult to retrench labour even when it is not required in
case an industrial unit becomes sick and proposes to close down or exit.

Fourthly, Research and Development (R & D) activity has not been adequately directed to discover
and identify labour-intensive appropriate techniques to be used in industries which, though labour-
intensive, have also reasonably good productivity.

3. Inequitable Distribution of Land:

Another cause of unemployment prevailing in the developing countries like India is inequitable
distribution of land so that many agricultural households have no adequate access to land which is
an important asset for agricultural production and employment.

Sub-division of land holdings under the pressure of rapid population growth since 1951 has further
reduced access to land for several agricultural households. As a result many persons who were self-
employed in agriculture have become landless agricultural labourers who suffer from acute
unemployment and under-employment.

4. Rigid Protective Labour Legislation:

Another reason for the slow growth of employment in the organised sector has been the existence of
unduly rigid protective labour legislation which makes it very difficult to retrench a worker who has
been employed for 240 days. Labour-legislation is so much rigid that it is even difficult to close
down the unit and quit the industry. Thus, this excessively protective labour-legislation induces
private entrepreneurs to prefer the maximum use of capital in place of labour.

5. Neglect of the Role of Agriculture in Employment Generation:

An important factor responsible for slow growth of employment opportunities is the neglect of
agriculture for generating employment opportunities. The general perception, as existed in the first
three five year plans in India (1951-65) as well as in the theoretical models of growth for dualistic
economies such as Lewis Economic Development with Unlimited Supplies of Labour was that
agriculture already contained surplus labour and it was required to withdraw this surplus labour
from agriculture and employ them in the modern industrial sector. By the mid-sixties it was realised
that not to speak of employing new entrains to the labour force year after year, the modern
industrial sector could not absorb productivity even a fraction of the then existing unemployed
persons in the foreseeable feature.

Agriculture though containing surplus labour can generate employment opportunities if proper
strategy for its development is adopted. For instance, the empirical evidence shows that on an
irrigated hectare of land the number of man-hours employed is almost twice that on the unirrigated
hectare. Irrigation requires more labour input for watering the fields, but also since output per
hectare on irrigated land is much higher, more labour is used for harvesting and threshing the crop.
Besides, irrigation makes the adoption of double cropping possible which greatly raises the
employment potential of agriculture.

It is worth noting that new agricultural technology, commonly called green revolution technology,
involving the use of HYV (High Yielding Varieties) seeds, greater use of fertilisers and pesticides
along with water is highly labour absorptive. What is equally important, this new green revolution
technology is size-neutral, that is, it can be equally well adopted by small farmers. Further, HYV
seeds are of short-duration type, that is, they mature in a short time so that they make multiple
cropping more feasible.

The use of double or multiple cropping greatly enhances the opportunities of employment
generation in agriculture. The experience of Punjab, Haryana and Western UP is a shining example
of large employment generation in agriculture. What is needed for the generation of large
employment opportunities in agriculture, the new green revolution technology should be widely
diffused and adopted in the backward and lagging agricultural regions in India.

6. Lack of Infrastructure:

We have explained above lack of physical capital with which labour is equipped for productive
employment as the cause of unemployment prevailing in the developing countries like India. By
capital we generally mean machines, plant & equipment, factory buildings etc. But a similar factor
responsible for huge unemployment prevailing in these countries is lack of infrastructure such as
roads, power, telecommunications, highways, irrigation facilities in agriculture. Inadequate
availability of infrastructure is a great obstacle for the generation of opportunities for productive
employment.

It follows from above that unemployment and under-employment prevailing in India and other
developing countries is not cyclical Keynesian type of unemployment caused by decline in
aggregate demand. Unemployment and under-employment in India are caused by more basic
structural factors such as lack of capital, use of capital-intensive technologies, lack of access to land
for agricultural household, lack of infrastructure, racial growth of population resulting in large
annual increments in labour force year after year. Unemployment in India, as in other developing
countries, manifests itself in both open unemployment and under-employment.

Effects or Consequences of Unemployment:

1. Affects the economy of a region very negatively:
It is rather interesting to note that the global economic crisis is not merely a cause but also an effect
of unemployment. Once people are unemployed the government of a country becomes responsible
for providing the people with amenities and facilities which they cannot afford. So when so many
people of a country are unemployed it automatically results in recession.
2. Reduces the spending power of both the employed as well as unemployed:
Once people are unemployed they are naturally unwilling to have any purchasing power. However
besides the unemployed, even those who are employed are unwilling to spend a lot of money,
simply because they fear that if things get worse and the company closes down they too might end
up losing their jobs.
3. Makes the individual feel very depressed:
In addition to affecting the country and society it also negatively effects the individual who begins
to second guess all his decisions as well as his personal worth at such a time.
4. It is a cause of distress to the entire family:
When someone in the family is unemployed, it is usually not just that one person but the entire
family which is affected and has to suffer. In addition to money being scarce in the family, the
family also has to cater to the emotional needs of the person who is unemployed.
5. Increase in crime in the country:
Of all the negative effects of unemployment, one of the worst effects is that it leads to an increase in
crime in the country. When bread winners in a family are unable to provide for their loved ones,
they have no option but to resort to crime as well as fowl means in order to feed their family
members. At such a time when people are unable to keep body and soul together, their conscience
seizes to function and they do what seems correct to them at the moment as well as under the given
circumstances. It is often said that desperate times call for desperate measures and that is the motto
which such people choose to live by.
Theories of unemployment

The four major theory of unemployment has discussed of the following (Smith 1997.)
A-classical theory of unemployment
main characteristic of this theory is that the labor market force of supply and demand respond to
change in the real wages beginning and remaining too high to allow the labor market to clear
,government wage lariat and trade union are identifying as significant casual factor consequence
,unemployment in the classical system realized up on markets not clearing ,the polices
recommendation forward from classical analyses of unemployment in that reduced government
regulation and reduces trade union power to make labor competitive in the market(smith 1997.)
B- neo-classical theory of unemployment
The neo- classical economical school focused on choice on techniques. That a best cost of
minimization boundless of factor production, thus Approach a voids focusing on the social possess
which determines incorporation of labor power in to production; labor and capital Are, reviewed as
factor price wise, the relative cheapens of capital in relation labor on the terms of technological
consideration related to the non sustainability of the capital for labor or what has been dominated
of production problem. (ibid)
C- Keynesian theory of unemployment
Keynesian economics emphasize the aggregate condition of economic and labor force
disequilibrium that emerge from the instability of market force re stabilization full employment
equilibrium Keynesian recognized some unemployment on job to other (Schervish 1983). Never
tresses in the work of the great person keynes(1936).Formulated his history of involuntary
.unemployment in which workers are an ability to located job even when offering to work at the
labor lags because the demand for goods and services land to behind to the capacity of economy to
produce them (ibid)
D-Marxist theory of unemployment
Marxist analysis like the Keynesian approach is at the aggregate level in the Marxist traditional,
unemployment derives from the Marxist traditional ,unemployment derives from the general and
normal anarchism of the market economy in which what power beneficiary for an individual firm is
distinction for the system as whole this individual firms maximize profit and enjoy their must
efficiency production at level of employment that fails to provide employment for forces as whole
(Scherivish 1983)

Strategies to Reduce Unemployment

uses of labour intensive technology

Both the organised and un-organised sectors must adopt labour-intensive technology if sufficient
employment opportunities are to be generated in both the rural and urban sectors of the economy.

The decline in employment elasticity of output growth is primarily due to the increasing trend in
capital intensity in the organised industrial sector as well as in agriculture.

Increasing mechanization of agriculture in various states has lowered the employment elasticity of
growth of agricultural output. Therefore, for raising labour intensity, suitable monetary and fiscal
measures need to be adopted to discourage the use of capital-intensive techniques.

Of course, the use of labour-intensive techniques with lower productivity of workers in the industry
and agriculture may lower the growth of output. Thus, there might be same trade off between
employment and growth of output. In our view due to the seriousness of unemployment problem
some output growth should be sacrificed for the sake of more employment.
Accelerating Investment in Agriculture:

Second, an important reason for slow growth of employment in agriculture and rural sector has also
been a shortfall in investment or capital formation in agriculture. Both the public and private sector
investment in agriculture has declined since the early nineties. Of special importance from the
viewpoint of employment generation is investment in irrigation, rural roads, flood control projects,
power generation and other infrastructure.
It is worth noting that investment not only generates employment directly but also has a multiplier
effect which operates through backward and forward linkages. Therefore, UPA governments
Common Minimum Programme (CMP) which provides for stepping up of investment in agriculture
and rural infrastructures is a greatly welcome step for employment generation.

The announcement by the government to furnish more credit to farmers at lower than market rates
of interest from commercial banks will also ensure that the small and medium farmers will be able
to buy fertilizers, other high-yielding inputs, and arrange for their irrigation.

This will raise their productivity and tend to reduce underemployment and disguised
unemployment. Despite more than five decades of planned industrial development, agriculture
continues to be principal source of employment in the Indian economy. Though the share of GDP
from agriculture has come down to around 22 per cent, still about 58 per cent of labour force
continues to be employed in agriculture. In fact, agriculture continues to be the parking lot of the
unemployed in the country.

ADVERTISEMENTS:

But a good number of persons engaged in agriculture and related activities are not productively
employment. In fact there is widespread under-employment and disguised unemployed. Economic
reforms initiated in 1991 have by and large neglected agriculture which even now does not get
enough credit from commercial banks.

No wonder that there has been a fall in investment or capital formation in agriculture both by the
private and public sectors. This is an important reason why employment opportunities in agriculture
have not risen much causing increase in rural unemployment. Now, UPI (United Progressive
Alliance) government with Dr. Manmohan Singh as Prime Minister, has set before itself the task of
making substantial investment in agriculture so as to generate enough employment opportunities in
this sector.
Diversification of Agriculture:

Besides there is urgent need for diversification of agriculture. For example, there is an urgent need
for a relative shift from growing of crops to horticulture, vegetable production, floriculture, animal
husbandry, fisheries etc. which are more labour absorbing and higher income-yielding. In addition
to this, promotion of agro-processing industries for export purposes has a large employment
potential.

For the rapid growth of employment opportunities in agriculture and related sectors and agro-
processing industries, investment in infrastructure including irrigation, rural reads, power supply,
and development of agricultural markets are required.
Labour-Intensive Industrial Growth:

ADVERTISEMENTS:

For solving unemployment problem in the urban areas, the organised industrial sector must also
absorb a sufficient number of workers. The failure of the organised industrial sector to generate
enough employment opportunities is due to the use of capital-intensive technologies imported from
abroad.

The tendency to use the higher capital-intensive technology by the Indian industries in the post
reform period has been intensified because they are trying to improve competitiveness to face
competition from imported commodities.
The other factor responsible for the use of higher capital intensive technologies is the factor-price
distortions such as cheap capital and relatively higher wages of workers who have strong labour
unions. Capital has become relatively cheap due to various fiscal concessions such as liberal
depreciation and investment allowance and low interest rates on borrowed funds for investment.
Consequent to the use of high capital-intensive technologies in our industries the labour
productivity has been increasing while employment has been growing at a snail pace.

Therefore, to encourage the use of relatively more labour-intensive technologies and thereby to
generate more employment opportunities, fiscal and monetary concessions mentioned above on use
of capital must be withdrawn. In this case there is bound to be some loss of workers productivity.
Therefore, this will involve some trade-off between employment and output. In our view, because
unemployment problem is very serious and greatly hurts peoples welfare, some growth of output is
worth sacrificing for more employment opportunities.
Services and Employment Growth:

The growth of services has a large employment potential. In 1993-94 to 1999-2000, next to the
construction sector the employment elasticity of output growth in services was higher and was
estimated at about 0.50. Of special mention are software services and BPO (Business Processing
Outsourcing) which have a lot of employment potential, especially for the educated youth of the
country.

The other services such as finance, insurance, trade, hotels, and restaurants have also a lot of
employment potential. But an important thing to note is that growth of these services is dependent
on industrial and agricultural growth in the economy.
Education, Health and Employment Generation:

Lastly, the expansion of education and health care not only promotes accumulation of human capital
and thereby contributes to growth of output, it will also generate a good deal of employment
opportunities. More schools, hospitals, health care clinics in the rural and urban areas will not only
create employment during their construction but also, and more important, when they start working
to provide education and health services. Their working provides employment to both the educated
and unskilled persons. Therefore, a higher allocation of resources is required to be made for them in
government budgets and in our future plans.

Solutions of Unemployment:
1. The creation of more job opportunities:
The work force of any country usually makes up a large part of its population. In order to cater to
the needs of its people all countries should ensure that they create many job opportunities so that all
the people who are eager to work, get the chance to do so. This having been said the government
should ensure that people are paid adequately for the services which they provide so that at the end
of the day no person feels like he or she is being over worked and paid less. Once more job
opportunities are created the unemployment rate is sure to come down a great deal.
2. Individuals should be encouraged to enter diverse fields:
Many of us would know that from a very young age we are made to choose from very specific job
options. Most often than not, our parents encourage us from a very tender age to become either
doctors or lawyers. There are very few children who are encouraged from a very tender age to
dream big. It is for this very reason that from a very young age kids should be encouraged to
broaden their horizons. Not everyone needs to be a doctor, lawyer or a part of the corporate jungle.