The state of having a paid job—of being employed—is most commonly referred to as employment. Employing someone includes paying them to work. An employer is a person who hires people. The act of employing people can also be referred to as employment. It is a crucial topic in the Economy syllabus for the UPSC Examination. The article below briefs the Employment followed by detailed explanations.

Why is Employment so Important?

• Work is an essential component of most people's lives. It necessitates more than just getting paid.
• It would include having the freedom to choose how you want to live your life.
• In terms of the economy, employment provides income to low-income families, rejuvenates domestic demand for goods and services, and boosts overall growth.
• On a social level, employment can aid in social healing, encourage the return of displaced people, and improve long-term social welfare.
• It's also linked to physical and mental health, and it's a big part of overall happiness.

What is Unemployment?

• Unemployment occurs when a person actively seeks employment but is unable to do so.
• Unemployment is an indicator of the economy's health.
• The most common measure of unemployment is the unemployment rate.
• The unemployment rate is calculated by dividing the number of unemployed people by the total number of people in the labor force.

Unemployment in India

• According to the Centre for Monitoring Indian Economy, India has 53 million unemployed people as of December 2021, with a large proportion of them being women.
• According to the CMIE, 35 million of those unemployed are actively seeking work, while 17 million are willing to work but not actively seeking it.
• According to CMIE, women made up 23 percent (8 million) of the 35 million unemployed who were actively looking for work in December 2021.
• At the same time, despite not actively looking for work, 53 percent of the 17 million women who were passively unemployed, or 9 million women, were willing to work.

*To know more about this, click Unemployment in India

Types of Unemployment

Open Unemployment

• It is a condition where people have no work to do.
• It is also known as naked unemployment.
• Here individuals are able to work and are also willing to work but there is no work for them.
• It is frequently found in larger cities and is less frequent in villages.
• Most of such individuals come from villages in search of jobs or might originate in cities themselves.
• Such employment can be seen and counted in terms of the number of such persons.
• Hence it is called open unemployment.

Disguised Unemployment

• It occurs when a person is the one who seems to be employed but actually is not.
• His/Her contribution to the total output is either zero or negligible.
• When more individuals are engaged in a job than the number actually required it leads to a state of disguised unemployment.
• It is mostly seen in rural areas such as in agricultural activities.

*To know more about this, click Disguised Unemployment

Seasonal Unemployment

• This happens during specific seasons of the year.
• It is more prevalent in sectors and occupations such as agriculture, holiday resorts, etc., where production activities take place only in some seasons.
• Therefore, they offer employment for only a certain period of time in a year.
• People engaged in seasonal activities may remain unemployed during the off-season

Cyclical Unemployment

• It occurs during the cyclical trends of booms and recessions of a business cycle.
• This type of unemployment occurs mainly due to either deficiency or fall in effective demand from consumers which in turn leads to a fall in production and low demand for labor.
• This type of unemployment occurs for a long period of time and workers remain unemployed during the entire phase of slowdown.
• The unemployment crisis due to the 2008 financial crisis is an example of Cyclical Unemployment.

Educated Unemployment

• Educated unemployment is a situation where someone has received an education but is currently unemployed.
• Although educational opportunities have increased, job opportunities have decreased.

Vulnerable Employment

• This means, people, working informally, without proper job contracts and thus get deprived of any legal protection.
• These persons are regarded as unemployed since records of their work are never maintained.
• It is one of the main types of unemployment in India.

Technological Unemployment

• It is unemployment that occurs as a result of the loss of jobs due to changes in technological developments.
• According to World Bank data, the proportion of jobs threatened by automation in India is 69% on a year-on-year basis.

Structural Unemployment

• It refers to a situation that arises as a result of a change in the structure of the economy.
• For instance, when an economy transforms itself from a labor-intensive to a capital-intensive economy, structural unemployment happens due to the mismatch of skills.
• As a result, workers who do not know how to operate the new and advanced technologies will be removed.
• This type of unemployment happens as the current workers do not have the skills required by their employers.

*To know more about this, click Structural Unemployment

Underemployment

• It is a scenario where employed people are contributing to production less than they are capable of.
• It can be estimated in terms of time, which is visible under-employment, or type of work, which is invisible under-employment.
• Part-time workers come under this category.

Casual Unemployment

When a worker is employed on a day-to-day basis for a contractual job and must leave when the contract expires, this is known as casual unemployment.

Chronic Unemployment

• Chronic unemployment refers to joblessness that has lasted for a long time in the economy.
• To put it another way, chronic unemployment is caused by persistent long-term unemployment in the economy.

Frictional Unemployment

• It is when there is the least amount of unemployment prevailing in an economy due to workers quitting their previous jobs and searching for new jobs.
• One of the major causes of occurrence of frictional unemployment is lack of information about the availability of jobs and non-willingness of mobility on the part of workers (it means workers are not willing to travel to a distant place or a new state for employment).
• A frictionally unemployed person remains unemployed for a very brief period of time.

*To know more about this, click Frictional Unemployment

Voluntary Unemployment

• It is when workers are either not seeking work or are in transition from one job to another.
• Voluntary unemployment is present all the time in an economy.
• As there will always be some workers, who quit their previous jobs in search of new ones

Involuntary Unemployment

• It is when workers are actively seeking employment and are willing to work but are unable to get work.
• Involuntary unemployment happens in an economy during the time of depression and decreases in aggregate demand for goods and services.

Measurement of Unemployment in India

• Measurement of unemployment can be carried out by various methods such as the usual status approach, weekly status approach, and current daily status approach.
• These measures enable quantification of the existing unemployment rate in the economy and thereby help in taking remedial steps.
• Some of the approaches used for measuring unemployment in India are the Usual Status Approach, Weekly Status Approach, and Current Daily Status Approach.

*To know more about this, click Measurement of Unemployment in India

Causes for Unemployment in India

• Rapid population growth and labor force expansion.
• Underdeveloped economy.
• Slowly growing agricultural sector.
• Flawed system of Education.
• Missing manpower planning.
• Deteriorating of village industries.
• Technology that isn't appropriate.
• Slowly growing industrial sector.
• Private investment has slowed in labor-intensive industries, especially since demonetization.

Government Policies / Schemes to Deal with Unemployment

• The government of India has implemented schemes to generate employment such as wage-based employment and promotion of self-employment.
• In order to counter the rising unemployment scenario in the country which spiraled during the pandemic, the government undertook various initiatives to generate employment and reduce unemployment in the country.
• Some of them are given below.

*To know more about this, click Government Schemes for Unemployment in India

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)2005

• In 2010 the National Rural Employment Guarantee Act, of 2005 introduced this scheme.
• This scheme guarantees 100 days of work a year to every rural household with an aim to enhance the livelihood security of people
• Its foundation was laid in 1991 when the P.V Narashima Rao government proposed a pilot scheme for generating employment in rural areas that included employment generation for agricultural labor during the lean season, infrastructure development, and enhanced food security.
• This act covers all the districts of India except those that have a 100% urban population.
• Its implementation is monitored by the Ministry of Rural Development (MRD) in association with the state governments.
• Since 2006, more than 30 million water conservation-related assets have been created in the country’s rural areas under this scheme.

*To know more about this, click Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)2005

National Career Service Scheme

• National Career Service (NCS) is one of the mission mode projects of the E-Governance Plan.
• It focuses on bridging the gap between job-seekers and employers such that candidates seeking training and career guidance are provided by various agencies concerned with training and career counseling.

*To know more about this, click National Career Service Scheme

National Rural Livelihood Mission

• This program was launched by the Ministry of Rural Development (MoRD), Government of India in June 2011 as a restructured version of Swarna Jayanti Gram Swarozgar Yojna (SGSY).
• It was renamed as Deendayal Antayodaya Yojana (DAY-NRLM) in 2015.
• This program was envisioned to facilitate the poor so as to achieve increased access to their rights, entitlements, and public services, diversified risk, and better social indicators of empowerment.

*To know more about this, click National Rural Livelihood Mission

National Urban Livelihood Mission

• It was envisioned to address the livelihood difficulties of the urban street vendors by helping them with space, institutional credit, social security, and skills accessing emerging market opportunities.
• It also provides the shelter with essential services to the urban homeless in a phased manner.
• It is implemented by the Ministry of Housing and Urban Affairs.
• The National Urban Livelihood Mission scheme consists of two basic elements one being for urban India and the other for rural India:
  • The urban component is known as Deen Dayal Antyodaya Yojana that is implemented by the Ministry of Housing and Urban Poverty Alleviation.
  • The rural component known as Deen Dayal Upadhyaya Grameen Kaushalya Yojana is implemented by the Ministry of Rural Development.

*To know more about this, click National Urban Livelihood Mission

Jobless Growth

• Jobless growth is a situation when the economy is able to produce more goods and services without a simultaneous increase in employment opportunities.
• It is a dominant issue in the Indian economy more so because of the decreasing window from when the demographic dividend becomes the demographic burden.
• There is the involvement of a greater population in the agriculture sector even though the sector contributes very less to the overall GDP of the country.
• The tertiary sector contributes the largest to the overall GDP of India, however, the job creation by this sector is mostly of formal type due to which inclusion of informal workforce in this sector is reduced.

*To know more about this, click Jobless Growth

Growth and Changing Structure of Employment

• The slow growth of employment in India during the post-liberalization period has been a striking feature of the country's economic transformation.
• Over this time, economic growth has been highly uneven across sectors and regions.
• Agricultural and manufacturing sector growth has been sluggish for the majority of the post-liberalization period.
• Not only has average employment growth been low over this period, but the uneven pattern of growth has resulted in significant changes in employment structure.
• Since the second half of the 2000s, the number of people employed in agriculture has decreased significantly.
• For example, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was introduced in the mid-2000s with the promise of providing each rural household with a guaranteed 100 days of employment.
• Despite the fact that such a promise was never fulfilled, the program did result in an increase in employment opportunities in rural areas, particularly in the early years of its implementation.
• On the other hand, a slow increase in children's school attendance rates is said to have resulted in the exodus of a group of young people from the labor force.

*To know more about this, click Growth and Changing Structure of Employment

Casualisation of Workforce

• The process of moving from self-employment and regular salaried employment to casual wage work is known as the casualization of the workforce.
• The construction industry, where agency work and false self-employment are common, the hospitality industry, and outsourced areas like home care and cleaning, are all examples of industries where this type of work is prevalent. However, casualization is becoming more common in professional fields such as aviation, education, local government, and the NHS ( National Health Service).

In formalization of Indian Workforce

• In India, the formalization of the workforce refers to the loss of workers from formal sectors due to competition or labor laws that are too strict.
• There is a rise in the number of people working in the informal sector.
• In recent years, India has seen a historic shift in the workforce from the formal to the informal sectors.
• In the midst of the ongoing debate over the extent to which the Indian economy has been formalized (a major policy goal of the central government), it is worth noting that the sudden loss of work during the pandemic forced a portion of salaried workers to turn to self-employment or casual wage work, or to leave the workforce entirely, thereby expanding the informal sector.

Formal Sector Employment

• All jobs in the formal sector have specific working hours and regular wages, and the worker's job is guaranteed.
• The employees are employed by the government, the state, or private businesses.
• It is a registered business that is required to pay taxes.
• In India, only 0.3 percent, or 1.7 lakh, of the businesses are registered or formal.
• In the July-September quarter of 2021, India's formal sector employment increased by 0.2 million compared to the April-June quarter, with 11,503 establishments surveyed.

Unemployment Rate (UR)

• The unemployment rate is the most frequent measure of unemployment.
• The unemployment rate is the number of people unemployed divided by the working population/people working in the labor force.
• It is represented in the following manner.

*To know more about this, click Unemployment Rate (UR)

Conclusion

India is one of the world's largest countries, with an annual population growth rate of one percent. The unemployment problem in India is not reflected in the country's unemployment rate. Its issue is a low employment rate and a discouraged young female workforce, according to CMIE. India's path to prosperity, according to CMIE, is to find work for nearly 60% of the population. "India needs to employ an additional 187.5 million people to meet global employment rate standards," it said, adding that this is a tall order given the current employment rate of around 406 million people.

FAQs

Q1: What are the main types of employment in India?

Q2: What is the current employment scenario in India?

Q3: What role does the service sector play in employment generation in India?

Q4: What is underemployment, and how does it affect the Indian economy?

Q5: How is the government addressing unemployment in India?

MCQs

1. Which sector currently employs the largest share of India’s workforce?

a) Manufacturing

b) Services

c) Agriculture

d) Mining

2. Which of the following is a key issue related to employment in India?

a) Surplus labor

b) Low unemployment

c) High productivity

d) Technological revolution

3. What is the primary goal of the MGNREGA scheme?

a) To promote IT sector jobs

b) To provide minimum guaranteed wage employment

c) To support private-sector employment

d) To enhance education for workers

4. Which of the following sectors has seen significant employment growth due to the rise of IT services?

a) Agriculture

b) Manufacturing

c) Services

d) Mining

5. Underemployment in India is most commonly associated with which sector?

a) Manufacturing

b) Services

c) Agriculture

d) Mining

GS Mains Questions and Model Answers

Q1. Discuss the challenges of informal employment in India and suggest measures to address them.

Answer: Informal employment in India is a significant challenge, with a large portion of the workforce engaged in jobs that do not provide social security, legal protection, or formal contracts. Workers in the informal sector often face low wages, job insecurity, and poor working conditions. The informal sector dominates areas like construction, agriculture, and retail, where labor laws are difficult to enforce.
To address these challenges, the government needs to focus on policies that encourage formalization of jobs, such as simplifying labor laws and providing incentives to employers to offer formal contracts. Programs like Skill India and Digital India can also help in upgrading the skills of informal workers, enabling them to transition to more stable jobs. Additionally, expanding social security schemes to include informal workers would provide them with much-needed financial protection.

Q2. Analyze the role of government schemes like MGNREGA in addressing rural unemployment in India.

Answer: The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is one of the most significant employment generation programs in India, particularly in addressing rural unemployment. The scheme guarantees 100 days of wage employment to every rural household, helping alleviate seasonal unemployment and providing income security.
MGNREGA also contributes to rural infrastructure development, such as building roads, irrigation facilities, and water conservation structures, which further enhance long-term agricultural productivity. However, the program faces challenges such as delayed payments, corruption, and inefficient implementation in some regions. To enhance its effectiveness, there needs to be better monitoring, digitalization of wage payments, and capacity-building at the local level to ensure that workers receive timely and fair wages.

Q3. Evaluate the impact of the service sector on employment generation in India.

Answer: The service sector has played a critical role in employment generation in India, particularly in urban areas. Industries like information technology (IT), banking, telecommunications, and healthcare have seen substantial growth, creating millions of jobs for skilled workers. The IT-BPM sector alone has emerged as one of the largest employers, providing both direct and indirect employment.
However, despite its rapid growth, the service sector has not been able to absorb the large unskilled and semi-skilled labor force, which continues to depend on agriculture and informal jobs. To make the service sector more inclusive, there is a need for upskilling programs, vocational training, and infrastructure development to accommodate a broader segment of the workforce. Expanding service-based industries to rural areas could also create more employment opportunities.

Previous Year Questions on  Employment

1. UPSC CSE Mains 2019

Question. Discuss the role of government initiatives like Skill India in addressing the employment challenges in India.

Answer: Skill India is a government initiative aimed at enhancing the employability of India’s workforce by providing skill development and vocational training. The program focuses on equipping young people with skills relevant to the modern economy, particularly in sectors like manufacturing, services, IT, and construction.
Skill India plays a critical role in addressing the skills gap in the workforce, especially as the country transitions from an agrarian economy to a more diversified one. By training workers in new technologies and professional skills, the initiative helps them secure better-paying jobs in the formal sector. However, challenges remain in terms of the quality of training provided, alignment with industry needs, and the reach of the program in rural areas. To maximize its impact, public-private partnerships and continuous updating of curricula to match industry demands are necessary.

2. UPSC CSE Mains 2018

Question. Analyze the impact of underemployment on India's economic growth.

Answer: Underemployment is a major challenge for India's economy, particularly in rural areas and the agricultural sector. While people may be employed, they are often working in roles that do not fully utilize their skills or potential. This leads to low productivity, as workers are not contributing as efficiently to economic output as they could be.
Underemployment also affects income levels and living standards, as people working in low-productivity jobs often earn below the minimum wage or struggle to make ends meet. This has a ripple effect on the overall economy, limiting consumer demand and slowing economic growth. To address underemployment, India needs to focus on policies that promote skill development, improve access to better jobs, and incentivize sectors like manufacturing and services that can absorb surplus labor from agriculture.