Why in the news?

Recently, there have been contentious talks regarding Pakistan’s unemployment being lower than India’s.

According to Keynes, lower wage rate will lead to lower income of workers and thus to lower demand of goods. Lower demand will lower output that in turn will lower employment.

Issues related to Unemployment vs Wages

• Questioning on Data Accuracy and Interpretation: There is skepticism about the accuracy of unemployment data, particularly regarding the CMIE Consumer Pyramids Household survey. This raises questions about the basis of claims regarding unemployment rates and the subsequent policy responses.
• Labor Force Participation: Concerns are raised about the significant withdrawal of individuals from India’s labor force, indicating potential issues with labor force participation rather than solely unemployment rates.
• Youth Unemployment: The high youth unemployment rate of 45% is highlighted as a significant concern, suggesting challenges in integrating young people into the workforce and addressing their employment needs.
• Informal Employment: The prevalence of informal employment, such as subsistence agriculture and informal wage employment, is noted as a structural issue in the labor market, potentially impacting wages and job quality.
• Wage Levels: Despite low reported unemployment rates, there are concerns about the adequacy of wages, particularly for the poor. This raises questions about the quality of employment and the extent of underemployment or disguised unemployment.
• Policy misalignment: Certain policy proposals, such as increasing public sector employment or implementing fiscal job guarantees, are critiqued for potentially misdiagnosing the problem and offering unsustainable solutions that may not address underlying wage issues.

Steps taken by the Government: 

• Pradhan Mantri Rojgar Protsahan Yojana (PMRPY): This scheme incentivizes employers to generate employment by having the government pay the entire 12% employer’s contribution to the Employees’ Provident Fund and Employees’ Pension Scheme for new employees for the first three years of their employment
• Pradhan Mantri Mudra Yojana (PMMY): This scheme provides collateral-free loans up to ₹10 lakh to micro and small businesses and individuals to help them set up or expand their enterprises, thereby promoting self-employment.
• Aatmanirbhar Bharat Package: This economic stimulus package, announced in response to the COVID-19 pandemic, includes various long-term schemes and policies aimed at making India self-reliant and creating employment opportunities.
• Garib Kalyan Rojgar Abhiyaan: This 125-day campaign was launched to boost employment and livelihood opportunities for migrant workers and others affected in 116 districts across 6 states.
• PM GatiShakti: This is a multi-modal connectivity plan that aims to create infrastructure and generate employment opportunities in sectors like roads, railways, airports, ports, and logistics.

Way forward: 

• Addressing Labor Force Participation: Implement policies aimed at increasing labor force participation, particularly among youth and marginalized groups, by creating more formal employment opportunities.
• Improving Informal Employment Conditions: Develop strategies to formalize the informal sector by providing incentives for informal employers to register their businesses, improve working conditions, and ensure compliance with labor laws.
• Enhancing Wage Levels: Take steps to improve wage levels, particularly for low-skilled workers engaged in subsistence agriculture, marginal self-employment, and informal wage employment.

Mains PYQ:

Q Besides the welfare schemes, India needs deft management of inflation and unemployment to serve the poor and the underprivileged sections of the society. Discuss.

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