Practise calculating and measuring unemployment, classifying its causes and evaluating effects on workers, firms, government finances, aggregate demand and productive potential.
Unemployment in India
Changes in the rate of unemployment in India between July 2020 and May 2021 can be seen in Fig. 1.1.
Fig. 1.1: India's unemployment rate, July 2020 to May 2021
India's unemployment rate rose in December 2020, reaching a six-month high. The fact that the unemployment rate has been rising during this period, despite an economic recovery, has raised concerns among economists at the Centre for Monitoring Indian Economy (CMIE) research institute in Mumbai, although they recognise that there are possible difficulties in the measurement of unemployment.
One of the reasons for the increase in unemployment in December 2020 is an increase in frictional unemployment. According to CMIE, India's labour force increased from 421 million in November 2020 to 427 million in December 2020 and the majority of these new workers were unable to find work immediately. Many of these people are reluctant to relocate to take jobs and others are unaware of job vacancies.
Another reason for this increase in unemployment in India is because of seasonal unemployment. One of the main reasons behind rising unemployment has been the failure of the agricultural sector to absorb the additional labour. One economist at CMIE has stated: 'Farming is the last resort of many who are without work. However, December is not the month in which farming can absorb labour. This is the month when it needs fewer workers. In December 2020, the job losses from agriculture were 9.8 million.
The economists at CMIE stated that the rise in unemployment in certain months was not a good sign for the Indian economy as it could lead to higher income inequality and poverty.
Using the data in Fig. 1.1, calculate the change in India's unemployment rate between July 2020 and May 2021.
Using the information provided, explain how agriculture caused seasonal unemployment in India in December 2020.
Consider the extent to which difficulties may arise in the measurement of unemployment in India.
Assess whether seasonal unemployment is likely to be a more serious problem than frictional unemployment for India's economy.
Explain three causes of unemployment and consider which cause is likely to be most damaging to a high-income economy.
The graph gives the percentage unemployed for all people aged 16 and over, and for young people aged 16-24.
What is the consequence for consumer expenditure on products consumed by the 16-24 age group over the period 2010-2020?
a fall in consumer expenditure across the whole period
an initial fall in consumer expenditure followed by a rise
an initial rise in consumer expenditure followed by a fall
a rise in consumer expenditure across the whole period