UNEMPLOYMENT

Unemployment and poverty are the two major challenges that are facing the world economy at present. Unemployment leads to financial crisis and reduces the overall purchasing capacity of a nation. This in turn results in poverty followed by increasing burden of debt. Now, poverty can be described in several ways. As per the World Bank definition, poverty implies a financial condition where people are unable to maintain the minimum standard of living. Poverty can be of different types like absolute poverty and relative poverty. There may be many other classifications like urban poverty, rural poverty, primary poverty, secondary poverty and many more. Whatever be the type of poverty, the basic reason has always been lack of adequate income. Here comes the role of unemployment behind poverty. Lack of employment opportunities and the consequential income disparity bring about mass poverty in most of the developing and under developed economies of the world. Sources of Unemployment Lack of effective aggregate demand of labor is one of the principal reasons for unemployment. In the less developed economies a substantial portion of the total workforce works as surplus labor. This problem is particularly prevalent in the agricultural sector. Due to excess labor, the marginal productivity of the workforce may be zero or even negative. This excess pool of labor is the first to become unemployed during the period of economic or social crisis. When a capitalist economy undergoes some dynamic changes in its organizational structure, it results in structural unemployment. This type of unemployment may also emerge if the lack of aggregate demand continues for a substantially long period of time. In case of frictional unemployment, workers are temporarily unemployed. There may be cases of hidden unemployment where workers restrain themselves from working due to absence of appropriate facilities. Unemployment and Poverty: the Latest Trends It is true that unemployment and poverty are mostly common in the less developed economies. However, due to the global economic recessions, the developed economies are also facing these challenges in the recent times. The US subprime crisis and its wide spread impacts have played a major role in worsening the situation. In India, the problems of unemployment and poverty have always been major obstacles to economic development. Underemployment and unemployment have crippled the Indian economy from time to time. Even during the period of good harvest, the Indian farmers are not employed for the entire year. Excessive population is another major problem as far as Indian economy is concerned. Regional disparity is also crucial in this context. A part of the urban workforce in India is subjected to sub-employment. Mass migration from rural to urban regions is adding to the problems of unemployment and poverty in India. Measures to Prevent Unemployment and Poverty Economic reforms, changes in the industrial policy and better utilization of available resources are expected to reduce the problem of unemployment and poverty that results from it. The economic reform measures need to have major impacts on the employment generating potential of the economy. The governmental bodies are also required to initiate long term measures for poverty alleviation. Generation of employment opportunities and equality in income distribution are the two key factors that are of utmost importance to deal with the dual problem of unemployment and poverty.

impact of unemployment on Society:

1. poverty and inequality: Particularly in rural areas lower castes and marginal social groups, such as tribal people and Muslims, are generally poor. Indias poor face disease, scarce educational opportunities, and often physical abuse by those who control their livelihood. It is difficult or impossible for the poor to escape and enter the modernizing sector of society, where discrimination on the basis of caste or community is less prevalent. In all classes and in urban as well as rural areas, discrimination and at times violence against women is almost taken for granted. Modern water supply and sanitation arrangements are rare in the poor areas of most towns and cities and are lacking entirely in most villages. As a result, many Indians suffer and even die from diarrhea, malaria, typhoid, and cholera. India has succeeded in eradicating smallpox and has brought down the overall death rate, in significant part by investing in a health-care system that includes hospitals, clinics, and drug manufacture and distribution. By the mid-1990s acquired immunodeficiency syndrome (AIDS) emerged as a serious problem. To combat the disease, the Indian government, with help from volunteer groups, established a vigorous AIDS-awareness program.

Part of the problem of disease and poverty in villages is that poor people cannot afford the money and time it takes to provide treatment for their children, many of whom are already weakened by an inadequate diet. Girls of all classes are given less medical care than their brothers and so die in greater numbers. Many parents prefer sons, who remain with them and provide security for them in old age. Because daughters often require a dowry at marriage and are unlikely to earn an income that could raise a familys economic position, they are seen as a liability. By the mid-1990s, the spread of family planning facilities and the increase in confidence that children would survive to adulthood helped reduce the preferred family size to just three children: two sons and a daughter. Second- and third-born daughters, especially in families without sons, continue to die at rates greater than average. Discrimination against women does not end with childhood, nor is it confined to the countryside. Although India has had a woman as prime minister, the percentage of women serving in political or administrative office still remains very low. Some women are major leaders of grassroots movements, and women play an active role in Indias vigorous press. Yet women are rare in senior business positions and in the legal and medical professions. Womens movements to combat violence against women have had considerable success in raising awareness of the issue and stimulating government action. Discrimination against lower caste members, including the Harijans or former Untouchables, is still a problem in India. As a result violence between castes sometimes breaks out. Since independence, many lower caste groups have mobilized politically and have achieved positions of power or leverage in several states. More than 50 percent of the positions in the national civil service were reserved for members of lower castes by the mid-1990s. Efforts to organize the landless and the homeless, however, have not enjoyed the same success. In rural areas, men of lower caste traditionally serve those of higher caste. This situation has aggravated caste conflict and has helped to keep the poor politically and socially weak. Relations between Hindus and Muslims have also been problematic. After the partition of British India into India and Pakistan, Muslims of the northern provinces who stayed in Indiawhere they were a minority became vulnerable. Riots between Hindus and Muslims have occurred on occasion since the mid-1960s. Muslims in rural areas remain largely untouched by the conflict. Riots tend not to occur in areas where there are structures of mutual social or economic advantagefor example, in towns with a large industry owned by Hindus and employing Muslims. Also, at the personal level, there are many examples of friendships and mutual respect. Muslim leaders have served as presidents of India, and Muslims have held positions of great prominence in all fields, including the military. impact of unemployment on society on economic :

India has struggled financially since independence, experiencing slow economic growth and economic setbacks due to climatic extremes or political disturbances. The country has been gradually transforming its economic base from agrarian to industrial and commercial. Under British rule in the 19th century, Indias cottage industries and thriving trade were virtually destroyed to make way for European manufactured goods, paid for by exports of agricultural products such as cotton, opium, and tea. Beginning in the late 19th century a modern industrial sector and an extensive infrastructure of railways and irrigation works were slowly built with British and Indian capital. Nevertheless, Indias economy stagnated during the last 30 or so years of British rule. At independence in 1947 India was desperately poor, with an aging textile industry as its only major industrial sector. Economic policy after independence emphasized central planning, with the government setting goals for and closely regulating private industry. Self-sufficiency was promoted in order to foster domestic industry and reduce dependence on foreign trade. These efforts produced steady economic growth in the 1950s, but less positive results in the two succeeding decades. By the early 1970s India had achieved its goal of selfsufficiency in food production, although this food was not equally available to all Indians due to skewed distribution and occasional shortfalls in the harvest. In the late 1970s the government began to reduce state control of the economy, making slow progress toward this goal. By 1991, however, the government still regulated or ran many industries, including mining and quarrying, banking and insurance, transportation and communications, and manufacturing and construction. Economic growth improved during this period, at least partially as a result of development projects funded by foreign loans. A financial crisis in 1991 stimulated India to institute major economic reforms. After the Persian Gulf conflict of 1990 to 1991 caused a sharp rise in oil prices, India faced a serious balance of payments problem (its foreign expenditures exceeded its foreign income). To obtain emergency loans from international economic organizations, India agreed to adopt reforms aimed at liberalizing its economy. These economic reforms removed many government regulations on investment, including foreign investment, and eliminated a quota and tariff system that had kept trade at a low level. Also, reform deregulated many industries and privatized many public enterprises. These reforms continued through the mid-1990s, although at a slower rate because of political changes in Indias government. In 1993 India permitted Indian-owned private banks to be established along with a minority of foreign banks. With the reforms, India made a dramatic shift from an economy relatively closed to the global economy to one that is relatively open. By 1996 to 1997, foreign investment had increased to nearly $6 billion, up from $165 million in 1990 to 1991. Exports and imports also grew dramatically in this same period. Economic growth since the 1980s has brought with it an expansion of the middle class, which was estimated to form 20 to 25 percent of Indias population in the mid-1990s. As a result, the demand for consumer goods from soap to luxury cars has expanded rapidly. In 2001 Indias annual gross domestic product (GDP) was $477 billion. In 2001 agriculture, forestry, and fishing made up 25 percent of the GDP, compared with 26 percent for industry (including manufacturing, mining, and construction) and 48 percent for services. A Labor The Indian economy employs 461 million people. The majority of this workforce67 percentlabors in the agricultural sector. Of the remainder, 20 percent work in services and 13 percent in industry. Women make up 32 percent of the total labor force. Significant numbers of children are employed in India. They not only perform agricultural tasks such as herding and helping at harvest time, but they also work in cottage industries such as carpet weaving and match manufacturing, help in small businesses such as tea stalls, and act as servants in private homes.

Estimates of the number of working children varied widely in 1995, from 14 million to 115 million. This large range in estimates is due in part to a lack of formal government data on child labor. Child labor is illegal in India, and efforts have been made to abolish it, particularly in the most hazardous industries. Unemployment rates in India are difficult to estimate because many people work in temporary or part-time jobs. Few workers are permanently unemployed, but seasonally or marginally employed people such as agricultural laborers are often underemployed. State and national governments have established fairly successful rural employment plans that hire labor to build roads and other public works. Labor unions are relatively small in India and operate primarily in public-sector enterprises. Indias labor laws allow multiple union representation not only within an industry but even within a factory. Laws also tend to favor workers rights over employer prerogatives. As a result there is an increasing trend in business to hire workers on daily contracts. Older unions are linked to national trade union federations controlled by political parties. The draft Employment Guarantee Act seeks to push policies that make a mockery of employment guarantee itself, furthering the neo-liberal agenda of privatisation of public services and the retreat of the state from all development activities that are not targeted. THE stark visibility of rural distress compelled the Congress party to put the promise of a 100-day employment guarantee in its election manifesto and the United Progressive Alliance (UPA) government to make it part of the Common Minimum Programme (CMP). The CMP begins with the following promise: "The UPA government will immediately enact a National Employment Guarantee Act. This will provide a legal guarantee for at least 100 days of employment to begin with on asset-creating public works programmes every year at minimum wages for at least one able-bodied person in every rural, urban poor and lower middleclass household." To this end, the National Advisory Council (NAC) drafted a Rural Employment Guarantee Act and gave it to the government for consideration. However, there has been a consistent dilution of the provisions of the proposed Act. The draft as it stands today is neither national, nor a guarantee nor indeed at minimum wages, becoming a hoax that reduces the CMP and the NAC's legitimacy to a farce. The Finance Ministry and the Planning Commission have drafted an Act that is effectively a narrowly targeted scheme, which can move from district to district at any wage for any duration, all at the whims and fancies of the Central government. Unlike the commitment in the CMP, the final draft places an unnecessary and unaffordable burden on the State governments. The Central government is hoping to bulldoze this diluted anti-people, anti-woman and anti-State government Act through. Although there are several problems in the draft, a few examples will illustrate the dangers and weaknesses in the Act. The draft prepared by the NAC had envisaged a scheme with a 100-day guarantee for all rural households, which had a provision for the payment of an unemployment allowance in case the applicant was not provided work within 15 days of being unemployed. This entitlement was essential to create pressure on the government to provide work and to help the household tide over slack periods. In the absence of this, the guarantee becomes toothless. The Preamble to the Act has now been reformulated to include the word `poor' before defining the households whose livelihoods are sought to be secured. "An Act to enhance livelihood security of the poor households in rural areas of the country by providing at least one hundred days of guaranteed wage employment to every household whose adult members volunteer to do unskilled manual work." The `poor' are officially those identified as being below the poverty line (BPL) by the government. This has allowed the government to restrict the eligibility for the payment of the unemployment allowance only to those who are identified as BPL. This effectively reduces the scheme to a targeted one, since there is no penalty for not generating work to those outside the BPL list. "If the applicant, who is from a poor rural household, is not provided with employment in the manner provided in sub-section (3), he or she shall be entitled to a daily unemployment allowance in accordance with provisions made in Section 11." This opens the door to targeting only BPL households.

Targeting has many problems. The identification of the poor is far from satisfactory, in terms of both the criteria and the procedure. The problem of wrong exclusion is rampant and has far more serious consequences than wrong inclusion. The livelihoods of vast sections of the near poor too are extremely precarious and fragile. No matter what measure one uses of hunger or malnutrition, there is no doubt that Indian people suffer pervasive and persistent food insufficiency. The employment guarantee and the payment of the unemployment allowance must remain universal and self-targeted, as per the CMP. In Section 1(3), the Centre has been empowered to notify the areas as well as the period for which the Act will remain in force in different States. "The Act shall come into force in those districts in a State on such date for such period as may be notified by the Central government and different dates may be appointed for different districts of the States. Provided that it shall come into force immediately in such areas and for such periods as may be notified and shall be extended to cover all the rural areas of India after evaluating the implementation of the Act in the districts chosen." This effectively erodes its ability to act as a legal right or guarantee for all rural households. It is a contradiction to guarantee employment through an Act while retaining the privilege of withdrawing it, any time. Linking geographical coverage to an evaluation of the programme again does the same thing. The Act must clearly state a time period of, say at the most, five years within which all rural areas of India are notified and brought under its coverage. Wages are no longer linked to any norms, either to the statutory minimum wages or to the Central advisory minimum wage. Section 8(3) iii states: "Notwithstanding anything contained in the Minimum Wages Act, 1948, the Central government may fix the rate at which wages shall be paid to the labourers employed under the programme. Provided that, different rates may be notified for different areas. Provided further that, until the Central government notifies wage rates for the purposes of this Act, labourers shall be paid the statutory minimum wages fixed by the respective State governments for agricultural labourers." This puts in place a framework of completely flexible and arbitrary wages, without setting a lower limit linked to a minimal cost of living. At the moment, most centrally sponsored programmes such as the Food for Work Programme, the Sampoorna Grameen Rozgar Yojana (SGRY) and so on, entail payment at the rate of the statutory minimum wages fixed by the respective State governments for agricultural labourers, without causing any administrative or legal difficulty. The wage issues can be resolved in one of two ways: either the wage should be no less than the current level of the minimum national reference wage of Rs.66, which should be indexed to the All India Consumer Price Index for Agricultural and Rural Labourers (CPI-AL) for future revision, or the Centre should support the statutory minimum wages fixed by the respective State governments for agricultural labourers as in the case of the SGRY and the Food for Work Programme. The definition of works too has been narrowed substantially and made even more stringent than before. "The focus of the programme shall be on works relating to water conservation, creation of additional irrigation potential through micro and mini irrigation, drought-proofing (including afforestation and tree-plantation) and wasteland development. Flood control and protection works (including drainage in water-logged areas), rural connectivity to provide all weather access and such other labour-intensive activities, as may be notified by the Central government from time to time, may also be included under the programme." While it is important that the scheme mobilises surplus labour for social and economic development through the creation of durable assets and provision of useful public services, over-specification will severely erode its ability to provide employment guarantee. It might be more difficult for panchayats to generate work. All works undertaken under the Act should be productive in the broad sense that they contribute directly or indirectly to the provision of essential public services, the increase of production, the creation of durable assets, the preservation of the environment or the improvement of the quality of life. The design of works will also determine access, because women who face high malnourishment and older people will not be able to do the heavy earthwork envisaged under the present definition of permissible works. The way the Act is at present structured, the nodal officer functions at the block level and is not accountable to the intermediate panchayat but to the District Collector. Panchayati raj institutions should be in control of

the planning and monitoring of works taken up under the Employment Guarantee Programme. In particular, monitoring agencies should be accountable to elected bodies at all levels and regular social audits should be conducted by the gram sabhas. Despite the persistent demand made by women's organisations that if individual entitlements are not provided the household should be defined as a nuclear family, the definition in the draft has been further diluted to cover much larger units with a larger number of working adults, on the basis of a common ration card or kitchen. There is an apprehension that women will be excluded from the scheme; that would be dangerous in the context of the abysmally low levels of employment of women in rural areas. Unfortunately, the Act does not provide adequate safeguards against the exclusion of women from the scheme and only brings grievances relating to discrimination and harassment of women under the purview of the redress mechanisms, which will be prescribed by the State government under the rules. The Act should safeguard the interests of women and give full attention to their concerns with regard to availability, location, type and organisation of work. It should be ensured that at least 40 per cent of workers employed in a particular block are women, so that women are not pushed disproportionately on to the unemployment allowance scheme or out of the job guarantee scheme. ALTHOUGH the CMP promises a centrally-funded scheme, the Planning Commission and the Finance Ministry have repeatedly tried to pass on the burden to the State governments. Even the early versions of the draft Act that were strong on people's entitlements had a highly problematic financial structure that would realise these rights. Several economists argued for a fully centrally-funded Act along the lines of the Food for Work Programme and clear demarcation of liability for payment of unemployment allowance between the Centre and the States in accordance with the cause for non-provision of work. This was because the State governments are in the grip of a fiscal crisis owing to factors beyond their control, which are an outcome of the policies of reform. Under the guise of imposing `fiscal discipline' on the State governments, the Centre shows a growing tendency to centralise finances and reduce taxation efforts and keep more and more finances outside the exercise of the Gadgil formula and route them through `discretionary' or `conditional' schemes that do not come under its purview. The much-maligned increase in revenue expenditure is primarily on two counts: higher salaries to fewer government employees after the implementation of the Fifth Pay Commission recommendations and high interest payments against debt. As far as the hike in salaries is concerned, the State governments have no say and have to give the same scales as those received by the Central government employees who work in the States. This imprudent generosity could only be balanced by freezing dearness allowance payments. The popular perception that all is not well with the finances of State governments is true. What is disturbing is the near-universal appeal of certain myths that are propagated to undermine the fiscal credibility of the State governments. Strange as it may seem, these half-truths find believers in both grassroots organisations and the urban elite alike. Amongst these myths, the most popular ones are the following: too many State government employees are in service and on pension (an inflated size can only lead to bankruptcy); profligacy and overspending in the past has created the severe debt situation (living beyond ones means comes with a price); it was the sops to farmers that bled these governments dry (sops that were based on political and not sound economic considerations); over-dependence on the Centre for funds has resulted in State governments that lack accountability and fail to generate their own resources; delivery of public services will remain poor in quality so long as the State governments remain mere implementing agencies instead of stakeholders (costs need to be shared with the Centre); State governments do not really suffer from a shortage of resources (when they want to spend, they find funds); and corruption and leakage plague rural development (resources hardly ever reach the target groups). These myths have assumed the stature of gospel truth. In reality, these only cloud the truth. The World Bank and its ideologues propounded many of these myths. These attacks on the mismanagement of State finances came at a time when these agencies were gearing towards establishing an environment

conducive to advancing the policies of liberalisation, privatisation and globalisation. In India, State governments are entrusted with most of the social and economic development activities and establishment of infrastructure. The Constitution empowers them with financial and legal rights under a framework of fiscal federalism and decentralised development. This implies that the privatisation project cannot come to fruition without bringing State governments to heel. The charges made against the States in the form of these myths were intended to weaken the case for fiscal federalism and advocate a model of decentralisation in which the state retreats from the provision of public services and becomes an agency to facilitate private sector profits. By weakening the financial health and administrative autonomy of the States, they could be coerced to borrow from the Asian Development Bank or the multilateral agency that had `adopted' the State in question and accept their conditionalities. The myths propagated by them facilitated in making all this acceptable to the elite and civil society organisations. From time to time, the Central government exploits the myths about the self-created fiscal bankruptcy and distress of States to erode the autonomy of State governments. These are currently being used to buttress the argument that State governments do not lack the resources to fulfil the promises made in the Central Budget and the CMP, which include the restoration of public expenditure on rural development, employment and agriculture. In the final draft Employment Guarantee Act, the Centre proposes to "meet the wage component of the cost of the programme, while material component of the costs of the programme shall be shared by the Central and State governments in the ratio of 3:1... .Unemployment allowance payable under the provisions of the Act shall be the liability of the State governments". The programme, however, should be fully funded by the Centre. The wage contribution of the Centre must extend at least to a national norm initially fixed at no less than Rs.66 a day, and indexed to the All India CPI-AL for future revision. Additionally, the Centre should finance material costs in the ratio of 70:30 labour is to material. When there is a delay in the devolution of funds to the State government from the Central Fund, the Central government must reimburse the State government for the associated unemployment allowance payments. In order to meet the administrative costs of the programme, the funds devolved by the Centre to each State should include an additional component amounting to 5 per cent of the total spending on wages and materials. However, the larger ramifications of the Act are in a sense far more serious than the Act itself. This is because the conditions of employment under this Act will determine working conditions in all government employment in rural areas, since work provided under all other ongoing Central and State schemes is likely to merge into the employment guarantee programme. The Act as it stands today will convert a bulk of the universally accessible rural employment programmes into targeted ones and supersede the very notion of a statutory minimum wage. This will institutionalise a regime of targeted wage flexibility in most government employment programmes, something which has not yet succeeded in India despite the best efforts of the World Bank and the IMF. The Employment Guarantee Act must not become a smokescreen to push policies that make a mockery of employment guarantee itself while furthering the neoliberal agenda of privatisation of public services through the erosion of State finances; wage flexibility; retreat of the state from all development activities that are not targeted; and so on. There are powerful forces at work that want an early passage of this farcical legislation in the hope that populist rhetoric will provide the fig leaf to their intent. The fight for an effective Act must continue within and outside Parliament. Unemployment problem can be solved in India by initiating corporate agriculture system, improving marketing system, providing social security to farmers, subsid Indian agriculture is a field, which can solve future unemployment situation in India, but this is the most neglected field by politicians and government officials. Now, I will list down a few bullet points how this can be done.

Introducing corporate agriculture system The Soviet method of agriculture may not fit. The possible solution could be corporate agriculture where corporate companies will invest their money and technology in agriculture and share the profits with farmers. The most important thing, which can improve agricultural scene in India, is water. For this, we need to build big dams. Agriculture in India needs more support from industries. Food processing is one. In India, only 2% of the agricultural output is processed. In developed countries, it is as high as 80%. This will give better returns to the farmers from their crops and can also eliminate middlemen since the industries will buy directly from farmers. Also, the government must invest in irrigation, technology, and more efficient, reliable and cost effective credit system. Improving marketing system and providing social security The marketing system should also be improved. Social security will have to be brought in for every person in India. That will at least mean that people would not have to live in acute poverty when their crop fails or they lose their job. But at the same time, it should be realized that bulk employment will be generated by the services and manufacturing sectors. We can also help farmers in places where traditional crops have been a failure due to water scarcity, by helping them plant crops like Jatropha, which needs only a little amount of water, and also would directly help the corporate world as it helps in the production of biofuel. Subsidizing farmers and implementing crop insurance system Other suggestion would be complete crop insurance and subsidizing the farmer rather than the consumer. The government must subsidize the farmers heavily, so that they are able to reduce the price of the food and it is available in the market at a cheap price rather than procuring from the farmers and selling it cheap to the public. Government needs to subsidize more initially. Better irrigation system needs to be laid out. We are good in terms of production but if an efficient system is laid out, it would be much better. Irrigation is the key. We have the natural resources, so we just need to utilize them better. For example: In Gujarat, after the Sardar Sarovar Dam project is complete, it would not only provide drinking water to the Saurashtra/Kutch region but also possibilities of better agricultural produce in the not-so fertile land in this region. So there has to be an increased effort on the part of the government in laying out a better infrastructure for agriculture. Increasing storage facilities Government should also provide more storage facilities for the crop produced, as Indian granaries are overflowing and rotting while people who cannot afford the food are dying of hunger. We need to figure out a system through which we can store food better and process it better. Why farmers are committing suicides? Most farmers who commit suicides make poor choices of crops and grow high-risk crops like cotton, tobacco etc. Water shortages and pests can devastate these crops much more easily than others. The government can do a lot about this (and to my knowledge is working towards it). They should use our research and extension facilities and provide advice to the farmers as to what to plant and what not to. Additionally, lot of emphasis should be placed on research to diversify the crops that can be grown. Fruit crops, some grain crops, legumes need less water and reasonably less resources. Educating the farmers about these "non-traditional" choices and opportunities is really important.

Tightening of agricultural credit system The agricultural credit system should be tightened so that farmers get credit only when they make informed decisions. In this way, farmers will not be in heavy debt and will not be forced to kill themselves. I think if these steps are introduced in an effective manner in the agricultural system, then agriculture business in India can provide employment to millions of people in the rural and urban parts of the country, as the people who have come to the urban areas to gain employment in other fields will return to their villages and will do hard work in agriculture business which is their basic living in their area.