Chapter-7                                                         Employment


Definition – When a person ready and willing to work gets the job at the prevailing wage rate is said to be employed.

Importance – It helps in the fuller utilization of country’s manpower.

(1)      Its help in understanding and planning our human resource.

(2)      It helps to analyze the contribution made by different sectors towards the national income.

(3)      It helps in poverty eradication and for raising the level of living of consumers.

Worker – All those who are engaged in economic activities in high or low capacity are called workers and they all constitute a workforce. Economic activities are those which contribute to the GNP of the country by the production of goods and services.



This ratio helps to know the proportion of population that is actively contributing to the production of goods and services. If the ratio is high it means engagement of people in work is greater. It is the ratio of total number of workers over the total population.



Self Employed – Workers who own and operate their enterprise to earn their livelihood are known as self employed more than 50% of the population belong to this category

Regular Salaried Employees – When a worker is engaged by someone or enterprises and paid his or her wages on a regular basis, they are known as regular salaried employees.  Around 15% of the Indian population is engaged under this category.

Casual wage workers- persons who are casually engaged in others farm or non- farm enterprises and receive wages in terms of daily or periodic contract are casual wage workers. Those who are not hired by their employer on permanent basis and do not get social security benefits.

CASUALIZATION OF WORKFORCE AND INFORMALISATION OF WORKFORCE Casualization of workforce- It is defined as a situation in which percentage of casually hired workforce teds to increase overtime.

Informalisation of workforce-

Workforce has been classified into 2 categories

(1)      Formal sector workers

(2)      Informal sector workers

Formal sector establishment –

All the public sector establishment and private sector establishment which employ 10 hired workers or more are called formal sector establishment.

It includes only 7% of the total workforce.

Formal sector worker-

Those who work in formal sector establishment are called formal sector worker

Benefits to formal sector workers

(1)      Those who are working in the formal sector enjoy social security (gratuity,    provident fund)

(2)      They earn more than those in informal sector

(3)      They get regular income

(4)      Technology in this sector is updated

(5)      They have protection and regulation from govt.


Informal Sector

All those undertaking other than formal undertaking are called informal sector

It includes 93% of the total workforce.

Informal Sector Worker

The workers working in informal sector are called informal sector workers.
Eg. Farmers, agricultural labors, self-employed, workers of small enterprises.


Jobless Growth

When there is an overall acceleration in the growth rate of GDP in the economy which is not accompanied by expansion in employment opportunities.


  Formal Sector worker   Informal Sector worker
(i) Work in organized sector of an economy (ii) Works in unorganized sector of an economy
(ii) They are entitled to social security benefits. (like provident funds, gratuity etc.) (ii) They are not entitled to social security benefits.
(iii) They can form trade unions (iii) They cannot form trade unions
(iv) They are protected by various labour laws against uncertainties of the market (iv) They are not protected by labour laws



The situation in which person that is ready and willing to work does not get the job at the prevailing wage rate.  It also means the wastage of precious labour force.

Types of Unemployment

(1)      Open Unemployment – Open unemployment refers to that situation wherein worker is willing to work and he has the ability to work but does not have the work.  It is mostly found in the industrial sector.

(2)      Structural unemployment – Structural unemployment occurs due to structural changes in the economy for eg. change in technology or change in demand.

(3)      Under – employment – It is a situation in which a worker gets a work for less time than the time he can work eg. part time work or when a work available to a worker generates inadequate income.

(4)      Frictional unemployment

It occurs when one wish to move from one job to another but in the process of change remain unemployed for sometime.

(5)      Disguised unemployment – It is a situation wherein the number of workers engaged in a job is much more than actually required to accomplish.  Such unemployment emerges due to heavy pressure of population.

(6)      Seasonal unemployment – It is a rural unemployment.  It occurs because of change in season and workers remains unemployed for part of the season.  To avoid this problem of unemployment it is essential to develop cottage industries in the rural areas.

(7)      Educated unemployment – Unemployment among the educated class is known as educated unemployment.  The main causes can be defective education system, lack of technical qualification or a various types of work.



1)       RURAL UNEMPLOYMENT –   Agriculture suffers from various problems leading to unemployment called rural unemployment. It is of 3 types

  1. a) Open unemployment
  2. b) Seasonal unemployment
  3. c) Disguised unemployment

2)       URBAN UNEMPLOYMENT –   The unemployed person in cities and towns constitute the urban unemployment. It includes

  1. a) Industrial
  2. b) Educated
  3. c) Technological unemployment


(1)      Unemployed worker cannot make their contribution to the country’s production and thus reduces the overall output in the economy.

(2)      They take their share even without contributing and thus reduce the per capita availability of goods and services for others as well.

(3)      It reduces the standard of living of the people also.



There are three sources of unemployment :

(a)      Reports of census of India.

(b)      N.S.S.O. reports on employment and unemployment situation.

(c)      Directorate General Employment and Training Data on registration with employment exchange.




(1)      Slow Economic Growth – Indian economy is underdeveloped and the rate of economic growth is very low.  This low growth rate fails to provide enough employment opportunities to the rising population.

(2)      High growth of population-It is one of the main causes of unemployment.  Due to the increase in population the number of unemployed has actually increased. The increase in the rate of labour force is much greater than the increase in employment opportunity.

(3)      Decline of cottage and small scale industries – The goods produced by these industries are now being produced by large scale industries.  The workers of these industries were therefore thrown out of employment.

(4)      Low Savings and Investments – There is a shortage of capital in India. Bank capital has been invested in large scale industries with high capital output ratio.

(5)      Mobility of Labour – Mobility of labour in India is very low people generally do not want to move to the far-off places even when goods jobs available there.  Factors like different languages, religion, and customs also contribute to low mobility of labour.


(6)      Lack of Irrigation Facilities

Despite of long planning, irrigation facilities have only covered 40% of the agricultural land. Because of this,farmers have to go for single crop production. In this absence, opportunities get limited.




(1)      Increase in the rate of capital formation – In the rate of capital formation, is very much essential to provide employment.  It helps in creating greater employment opportunities.  It is necessary to take care of type of capital formation to generate employment in the developing countries.

(2)      Employment Oriented Investment – There is a need to increase both production and employment together.  For achieving this objective, it is necessary to have labour intensive technique. More emphasis is required to be given to cottage and small scale industries or agriculture based rural industries.

(3)      Encouragement for self employment– The government should promote all sorts of facilities and encouragement to the people engaged in self employment. The facilities can be in the form of electricity, marketing, capital training etc.

(4)      Educational reforms- Indian education system should be improved in terms of making it employment oriented. It should be made in such a way that an educated youth does not face a problem of unemployment.

(5)      Entraprenural development– Encouragement to the self employment is very essential for solving the problem of unemployment in the country. Besides this a good entrepreneur can create new employment opportunities in the country. Therefore it is one of the most important steps in solving the problem of unemployment.

(6)      Employment generation programme– The government has involved in various employment generation and   poverty alleviation programme. Some important programmes are-

Rural employment generation namely  Khadi  and village industries commission, searanjayanti Gram sewa rozgar yogna, sampoorna gram rozgar yojna.

NREG (National Rural Employment Guarrantee Act) : was started in India to guarantee the employment for those in need of job in rural areas. The families which are living below poverty line are covered in this scheme.

It promises 100 days of guaranteed wage employment to all adult members of rural households who ready to do unskilled manual work.