Employment: Growth, Informalisation and Other Issues — Practice

Question 1

Distinguish between 'labour force' and 'workforce'. If a district has 5,00,000 working-age people, 2,00,000 employed, and 50,000 unemployed (actively seeking work), calculate (a) the Labour Force, (b) the LFPR, and (c) the Unemployment Rate.

Accepted Answer

(a) Labour Force = Employed + Unemployed actively seeking work = 2,00,000 + 50,000 = 2,50,000.

(b) LFPR = (Labour Force / Working-Age Population) × 100 = (2,50,000 / 5,00,000) × 100 = 50%.

(c) Unemployment Rate = (Unemployed / Labour Force) × 100 = (50,000 / 2,50,000) × 100 = 20%.

Note: 2,50,000 people of working age are OUTSIDE the labour force — they are students, homemakers, discouraged workers, or retired. They are NOT counted as unemployed.

Question 2

Identify the type of unemployment in each case and give reasons:
(a) A farm labourer in Punjab has no work from December to March.
(b) A textile mill worker loses his job because the mill installs automated looms.
(c) Five workers cultivate a 2-acre plot that could be managed by 2 workers — the extra 3 contribute nothing to output.
(d) A fresh engineering graduate is searching for a job while employers look for experienced engineers.

Accepted Answer

(a) SEASONAL UNEMPLOYMENT — agricultural work is concentrated in sowing and harvesting seasons. Off-season leaves agricultural labourers without income. Solution: MGNREGA provides 100 days of work specifically targeting this problem.

(b) STRUCTURAL UNEMPLOYMENT — automation has made textile workers' skills redundant. This is a mismatch between skill supply (manual textile work) and demand (machine operators). Solution: retraining/skilling programmes.

(c) DISGUISED UNEMPLOYMENT — marginal productivity of those extra 3 workers is zero (removing them does not reduce output). Very common in Indian agriculture where family farms are overstaffed. The 3 appear employed but are effectively unemployed.

(d) FRICTIONAL UNEMPLOYMENT — temporary mismatch between employer needs and worker qualifications during the job search process. Exists in all economies. Usually short-duration.

Question 3

Explain the design of MGNREGA. What problem does it solve? Evaluate its successes and limitations using specific evidence.

Accepted Answer

**Design**: The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), enacted 2005, guarantees 100 days of unskilled manual work per year to every rural household that demands it. Key features: (i) DEMAND-DRIVEN — workers must apply; government must provide work within 15 days or pay unemployment allowance. (ii) Workers paid minimum wage indexed to CPI-RL. (iii) Works must be within 5 km of village. (iv) 33% of workers must be women. (v) Focus on durable assets: roads, water conservation, watershed development.

**Problem Solved**: (i) Seasonal unemployment — provides income in agricultural off-season, reducing distress migration. (ii) Acts as wage floor — MGNREGA wages compete with private sector, raising rural wages overall. (iii) Automatic stabiliser — demand for MGNREGA rises during drought or economic distress.

**Successes**: (i) ~7 crore households demanded work in 2022-23; ~3 crore women participated. (ii) Studies show MGNREGA reduced rural poverty by 2–3% and slowed distress migration to cities. (iii) Created durable infrastructure: 3 crore km of roads, 1 crore water-harvesting structures.

**Limitations**: (i) Frequent payment delays — workers wait months for wages. (ii) Quality of assets created is often poor. (iii) Wage is often NOT competitive with private sector in better-developed states. (iv) 100 days is insufficient for year-round income. (v) Corruption in muster rolls (ghost workers). Reform suggestion: increase to 150 days in drought years; digitise payments to reduce corruption.

Practice — Employment: Growth, Informalisation and Other Issues

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