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. This article discusses various approaches used for the measurement of unemployment, which is essential for aspirants preparing for the UPSC examination.

Measuring Unemployment

Based on time and willingness criteria unemployment mainly open unemployment and underemployment have been estimated using the following three approaches which were recommended by an expert committee headed by Prof. M L. Dantwala:

Usual Status Approach

• The Usual Status Approach captures long-term unemployment prevalent in the economy.
• Usual Principal Activity status (UPS), or Usual Status (PS), is determined using the majority time criterion and refers to the activity status on which he/she spent a longer part of the year.
• The principal usual activity status is further used to classify him/her in/out of the labor force.
• This approach measures the number of persons who remained unemployed for a major part of the year and gives the lowest estimates of unemployment.
• It enables one to determine the usual activity status of a person as being employed or unemployed or outside the labor force.
• The persons covered may be grouped into those working or available for work in their principal activity sector and subsidiary sector.
• It records only those persons as being unemployed who had no gainful work for a major time during the 365 days preceding the date of the survey and are actively seeking work.

Weekly Status Approach

• The approach measures unemployment with respect to one week.
• A person is said to be unemployed if he/she is unable to work even for an hour during the survey period.
• This approach measures both the long-term open chronic unemployment and seasonal unemployment.
• A person is considered to be employed if he or she pursues any one or more of the gainful activities for at least one hour on any day of the reference week.
• Contrary to this, if a person does not pursue any gainful activity, but has been seeking or is available for work, the person is considered to be unemployed.
• The individual who may be employed on a usual status approach may however become intermittently unemployed during some seasons or parts of the year.
• Therefore, unlike the usual status approach, the weekly status approach can measure not only open chronic unemployment but also seasonal unemployment.

Current Daily Status Approach

• In a daily status approach, the present activity status of the person with respect to whether a person is employed or unemployed or outside the labor force is recorded for each day in the reference week.
• The measure adopts half day as a unit of measurement for estimating employment or unemployment.
• It is the most inclusive of all approaches used as it captures the days of unemployment of those who are recorded as employed on the weekly status approach.
• An individual working for 4 hours or more but up to 8 hours on a day is recorded as employed for the full day.
• An individual working for 1 hour or more but less than 4 hours is recorded as employed for the half day.
• Accordingly, a person having no gainful work even for 1 hour a day is described as unemployed for a full day.
• It is beneficial in sectors like farming and non-farming households where employment often fluctuates over a small period within a week.
• Hence the need for the use of a daily status approach to measuring the magnitude of unemployment and underemployment in India is better.

Some of the other indicators which are used in the measurement of Unemployment are:

Unemployment Rate

• 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.
  • Unemployment rate = (Unemployed Workers / Total labor force) × 100

Labor Force Participation Rate

• It is an important metric when the economy is not growing or witnessing recession.
• The labor force participation rate (LFPR) is a measure undertaken to evaluate the working-age population in an economy.
• The participation rate estimates the total number of people who are currently employed or are in the search of a job.
• People who are not looking for a job such as full-time students, homemakers, individuals above the age of 64, etc are not a part of this data set.

Worker population ratio

• The worker population ratio is defined as the ratio of a country's working population to its population multiplied by 100. Symbolically,
• Worker population ratio = Total number of WorkersTotal Population ×100
• If the ratio is higher, it means that the engagement of people is greater.
• If this ratio is medium or low, it means that a very high proportion of the population of its population is not involved directly in economic activities

Periodic Labour Force Survey (PLFS)

• PLFS was launched by National Statistical Office (NSO) in 2017 and is India’s first computer-based survey.
• It was constituted based on the recommendation of the Amitabh Kundu committee.
• Earlier the National Sample Survey Organisation(NSSO) was used to bring the data related to employment and unemployment based on its quinquennial (every 5 years) household socio-economic survey program.

Conclusion

Unemployment can be caused by various reasons which can vary from seasonal to technological advancements, and hence require diverse measures to estimate the presence of unemployment in the economy. The current daily status approach is a more inclusive and accurate measure to estimate unemployment as it takes into account the informal workers such as those engaged in agriculture, which constitute a major chunk of the economy.

FAQs

MCQs

1. Which of the following surveys is primarily responsible for measuring unemployment in India?

A) Census of India
B) Periodic Labour Force Survey (PLFS)
C) Economic Survey
D) Agricultural Census

2. Disguised unemployment is most commonly found in which sector?

A) Manufacturing
B) Information Technology
C) Agriculture
D) Service sector

3. Which of the following is an example of structural unemployment?

A) Job loss during an economic recession
B) A seasonal worker looking for a new job
C) Workers displaced due to technological changes
D) Individuals transitioning between jobs

4. What does a high labor force participation rate indicate?

A) A large portion of the population is actively seeking work
B) A small portion of the population is unemployed
C) A large portion of the working-age population is engaged in education
D) The country has low economic growth

5. Which type of unemployment is prevalent when workers are temporarily between jobs?

A) Structural unemployment
B) Cyclical unemployment
C) Frictional unemployment
D) Seasonal unemployment

GS Mains Questions and Answers

Q1: Discuss the main causes of unemployment in India and suggest possible solutions to address it.

Answer: The main causes of unemployment in India include structural factors such as mismatched skills, population growth, economic slowdown, and technological advancements. Cyclical unemployment occurs during economic downturns, and seasonal unemployment affects sectors like agriculture. To address unemployment, there is a need for skill development, education reforms, and policies that encourage industrial growth and employment generation. Expanding the scope of programs like MGNREGA and promoting startups and entrepreneurship can also provide sustainable employment opportunities.

Q2: Analyze the impact of unemployment on India's economy and society.

Answer: Unemployment negatively impacts the economy by reducing consumer demand, slowing economic growth, and increasing poverty. Socially, it leads to inequality, dissatisfaction, and unrest among the population. The lack of income opportunities can push individuals into informal sectors with low wages and poor working conditions. Addressing unemployment is critical to ensuring social stability and equitable economic growth.

Q3: Explain the difference between cyclical and structural unemployment, with examples from the Indian economy.

Answer: Cyclical unemployment occurs due to fluctuations in the economy, such as during a recession, when demand for goods and services decreases, leading to job losses. For example, during the COVID-19 pandemic, many sectors in India faced a demand shock, causing cyclical unemployment. Structural unemployment, on the other hand, results from a mismatch between workers' skills and the demands of the economy, such as the rise of automation in manufacturing, rendering some skills obsolete. In India, structural unemployment can be seen in sectors like textiles, where traditional skills are being replaced by mechanization.

Previous Year Questions on Measurement of Unemployment

1. UPSC CSE Prelims 2019

Question: Which of the following surveys provides data on unemployment in India?

A) Census of India
B) National Family Health Survey
C) Periodic Labour Force Survey
D) Economic Survey

Answer: C

Explanation: The Periodic Labour Force Survey (PLFS), conducted by the National Statistical Office (NSO), provides data on employment, unemployment, and other labor force indicators in India.

2. UPSC CSE Mains 2020 (GS Paper 3)

Question: Discuss the measures taken by the Indian government to reduce unemployment and promote skill development in the workforce.

Answer: The Indian government has implemented several measures to reduce unemployment and promote skill development. Initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) focus on equipping the youth with industry-relevant skills. The Start-up India campaign promotes entrepreneurship, while MGNREGA provides employment in rural areas. Additionally, the Atmanirbhar Bharat scheme aims to boost manufacturing and create jobs. These measures are essential in addressing both structural and cyclical unemployment.