The phenomenon of open unemployment emerged in the West with the onset of the Industrial Revolution in the nineteenth century. Similarly, open unemployment in India started manifesting itself on a significant scale only in the twentieth century, with the emergence of a modern factory sector in the urban areas.
Unemployment is thus curiously enough a product of industrialisation while industrialisation in turn is regarded as a cure for unemployment. As a result of industrialisation in India, under-employment and disguised unemployment is being converted into open unemployment.
This conversion has occurred because of four factors: (i) the detachment of workers from land where previously they were owners or tenants or labourers, (ii) the detachment of members from joint families where they were sharing previously total product as dependents, (iii) increase of literacy and (iv) increase of women’s participation in labour force.
Employment is, largely, means to an end rather than an end in itself. From the production point of view, unemployment is a waste, a loss of potential output which could be used for any purpose society-deems desirable.
From the income point of view, unemployment denies the means of earning a living to those who are affected by it. Very few people have unearned incomes and it is difficult in a poor country to maintain the unemployed by social security programmes.
The Planning Commission has observed that an inhabitant from the Mars would be surprised to see that an underdeveloped country in which there is shortage of goods and services should have at the same time insufficient employment opportunities resulting in a surplus labour force. But in the underdeveloped economy of India this strange situation exists and there is massive unemployment.
It is now widely recognised that employment generation should form the central element in the strategy of the development planning during the 1990s.
Primacy of employment objective is warranted not merely by urgency of utilising the vast mass of unemployed labour, but also by the realisation that it is the only effective way for the fulfilment of the major objectives of development planning, namely, elimination of poverty, reduction in inequality and sustenance of a reasonable rate of economic growth.
According to the Planning Commission findings employment has grown at around 2 per cent per annum over the period 1972-73 to 1987-88. Rural employment grew at a rate of 1.75 per cent per annum while urban employment has grown at a relatively much faster rate—around 4 per cent per annum.
As a result, the share of urban areas in total employment has increased from 16 to 22 per cent over this period.
Male and female employment have grown at more or less the same pace so that their relative shares in total employment have remained more or less stationary at a ratio of 2:1 over this period. Most sectors of economic activity experienced a rate of growth of employment higher than 3 per cent per annum over this period.
But agriculture, by far the biggest sector, registered an average rate of growth of only 1.37 per cent per annum.
Construction, mining and electricity which together accounts for about 5 per cent of total employment have registered a high employment growth rate of 5 per cent or more per annum. So has another small sector, transport, with an average annual rate of growth of employment of 4.7 per cent.
Employment in manufacturing and services, including trade increased at 3.61 and 3.5 per cent per annum respectively.
There has been a deceleration in the rate of growth of employment over the years. It was 2.82 per cent during 1973- 78, 2.22 per cent during 1978-83 and 1.55 per cent during 1983 to 1987-88.
This decline over the years in the rate of growth is noticed in all sectors except in mining and construction. In agriculture, employment has grown at less than one per cent per annum and in services, manufacturing and transport at 2.5, 2, and 2.7 per cent per annum respectively during 1983-88.
Deceleration in the rate of employment growth has been somewhat sharper in the recent years, particularly in the organised sector. While the long term rate of growth of organised sector employment has been around 2 per cent per annum, it has declined from 2.42 per cent during 1978-83 to 1.36 per cent during 1983-88. The deceleration is observed generally in all sectors, but it has been the steepest in manufacturing which accounts for one-fourth of organised sector employment.
Whatever growth has taken place in the organised sector has primarily been contributed by the public sector.
Thus while total organised sector employment has grown at around 2 per cent per annum during 1973-88, public sector employment grew at about 3 per cent and growth of private sector employment has been just about half a per cent per annum.
Between 1983 and 1988, private sector employment fell by 0.18 per cent per annum while public sector employment grew at the rate of 2.13 per cent per annum.
Trends in employment in the unorganised sector as a whole have been similar to those in total employment.
But construction, manufacturing, transport and services have shown uniformly higher rates of employment growth in the unorganised sector than the corresponding rates of growth for the economy as a whole. In the unorganised construction sector employment has significantly accelerated in recent years.
Despite a slow and declining rate of employment growth in aggregate, employment of the educated has shown relatively high and accelerating growth, particularly among the women.
The educated work force has grown at an average annual rate of 7.5 per cent over the decade 1978-88. The educated female work force has grown at a relatively faster rate of 9.7 per cent per annum during this period.
Organised sector accounts for about 90 per cent of the total employment and its share has been more or less constant throughout the 15 year period.
Though the shares of the organised and unorganised sectors in total employment have not changed over the years, there have been significant increases in the proportion of the unorganised sector in some sectors of economic activity.
An increase in employment at an average rate of 2 per cent per annum during the 70s and 80s has not been high enough to take care of the backlog and the addition to the labour force.
In 1972-73, the backlog of unemployment was around 8 million. Labour force was growing at a rate of 2.5 per cent per annum.
Labour force participation rates have registered a marginal decline over the years and therefore growth in labour force during the 80s is estimated to be around 2.2 per cent per annum.
In 1987-88 unemployment was estimated to be 12.43 million according to usual principal status, as a percentage of labour force, unemployment works out to be 3.77 per cent.
The unemployment rates are much higher for the urban than for the rural areas and for women than for men. For example, unemployment rate was 6.56 per cent for the urban and 3.07 per cent for the rural areas and 8.77 per cent for females and 6.07 per cent for males in the urban and 3.52 for females and 2.87 per cent for males in the rural areas.
The absolute magnitude of unemployment has been increasing over the years. Unemployment rates increased from 2.77 per cent in 1983 to 3.77 per cent in 1987-88.
Five states—Tamil Nadu, Andhra Pradesh, Kerala, West Bengal and U.P.—together accounted for 56 per cent of the total unemployment. Another five states—Maharashtra, Bihar, Rajasthan, Karnataka and Gujarat—contributed 28 per cent of the unemployment in the country.
Orissa, Madhya Pradesh, Haryana, Punjab and Assam were other states claiming more than one per cent of the total national unemployment, together accounting for 14 per cent.
Growth of employment over the 1970s and 1980s has been about 2 per cent per annum but only around 1.55 per cent during the recent years.
One per cent growth in GDP was accompanied by 0.6 per cent growth in employment during 1972-73 to 1977-78; this figure continued to be reasonably high at 0.55 during the next five years 1977-78 to 1983; but steeply declined to 0.38 during 1983 to 1987-88.
If this trend continues the rate of GDP growth required to achieve full employment in the near future would have to be unrealistically high—10.5 per cent per annum to achieve the goal by 1995 and 8 per cent if it is set for 2000 AD.
Thus it is clear that it would be unrealistic to target for its achievement by the end of the eighth Plan and even by 2000 AD. The pattern of growth would need a significant restructuring with a view to raising its employment content.
A restructuring of growth on the following lines would be necessary to accelerate growth of employment opportunities for achieving the goal of near full employment by the end of the decade:
1. Economic growth would be mainly derived from sectors which have high observed and potential employment content.
2. Within each major sector, growth of commodities and lines of production with high employment intensity would be accorded high priority.
3 Wherever possible use of production techniques with higher employment potential per unit of capital would be encouraged in different production lines and tendency towards indiscriminate increase in capital intensity would be discouraged.
4. Besides reorienting public sector investment towards employment inducing sectors and lines of production, macroeconomic fiscal and credit policies would be used for more effectively influencing private investment decisions in favour of sectors and technologies with high employment potential.
At the beginning of 1990-91, about 16 million persons—10 million in rural areas and 6 million in urban areas—were unemployed. Of these, 12 million are males and 4 million females. Another 12 million are severely under employed. Thus the backlog of unemployment could be taken to be around 28 million.
Employment would have to grow at a rate of over 4 per cent per annum to reach the goal of near full employment by 1995 and over 3 per cent per annum if it is to be reached by 2000 AD.
The goal would be feasible if employment is consciously built into the development strategy so that the growth is mainly derived from the sectors with high employment intensity. Such a strategy includes the following elements:
i. A rapid and geographically diversified growth of agriculture so that the hitherto lagging regions have a major share in agricultural growth during the 1990s;
ii. Diversification of agriculture into non-staple high value crops;
iii. Development of an appropriate support and policy framework for the growth of non-agricultural particularly manufacturing activities in rural areas;
iv. Emphasis on small and decentralised segments of the manufacturing sector as a major source of industrial growth;
v. Large scale programmes of construction both of infrastructure and residential accommodation; and
vi. Expansion and strengthening of social infrastructure, education and health, particularly in rural areas.
In the context of the commitment of the Government to guarantee right to work, the adoption of an employment oriented strategy has assumed special importance.
The eighth Plan has assumed special importance. The eighth Plan has aimed at the rate of employment growth at 3 per cent per annum over the decade with a view to achieve near full employment by 2000 AD.