UPSC Essentials | Society and Social Justice: Unemployment and associated issues (Part 2)

Relevance of the topic: The issue of employment has been at the heart of economic policy discussions, especially in recent decades when the link between economic growth and employment generation has a social dimension too. This topic has various dimensions: factual – reflected through surveys, government reports and think tank data and analytical-based on experts’ analysis and debates revolving around them. One may have to make a note of important definitions and terminologies, data and changing trends along with connecting the dots with other related issues. It is an important theme in GS I (Society), GS II, GS III, Prelims and personality tests. Aspirants will find it relevant for Essays as well.

Manas: In part 1 of the Unemployment topic, you have discussed the causes. What are the various consequences of unemployment that we generally see in society?

Pranay Aggarwal: Unemployment yields a spectrum of consequences that extend beyond individual hardships, resonating throughout society and the economy.

● Economic downturn: Persistent unemployment can contribute to economic slowdowns as reduced consumer spending and lower demand for goods and services impede overall economic growth.

● Poverty and deprivation: Unemployment is one of the major causative factors for widespread poverty. The unemployed frequently lack access to basic resources including food and shelter, which also results in deprivation and denial of basic human rights.

● Social strain: Unemployment often leads to heightened social tensions, as individuals and families grapple with financial stress, potentially giving rise to increased crime rates and social unrest.

● Health impacts: Individuals facing prolonged unemployment may experience deteriorating mental and physical health due to stress, anxiety, and a lack of access to healthcare resources.

● Skill erosion: Prolonged unemployment can lead to a deterioration of skills, diminishing the employability of affected individuals. This skill erosion poses challenges for both individuals and the broader economy.

● Generational effects: Youth unemployment can have lasting effects on a generation’s economic prospects, hindering career trajectories and contributing to a cycle of economic disadvantage.

● Government expenditure: Increased unemployment often necessitates higher government spending on social welfare programs, placing a strain on public finances and potentially affecting long-term fiscal sustainability.

● Diminished innovation: Unemployment leads to underutilization of human potential, stifling innovation and creativity within the workforce, which is detrimental to long-term economic progress.

● Migration: In search of better opportunities, unemployed individuals may migrate from rural to urban areas, contributing to urbanisation and related challenges such as overcrowding and inadequate infrastructure. People also may migrate from less industrialized regions, like Bihar, to more industrialized places like Mumbai and Bengaluru. These affect local politics, sometimes fomenting anti-migrant sentiment and movements.

Understanding and mitigating these consequences requires a holistic approach, encompassing social welfare measures, targeted economic policies, and initiatives that promote education and skill development.

Manas: It is generally said that unemployment of one country can be seen through a global prism. Simply, how does the global economy affect national employment?

Pranay Aggarwal: The global economy has a profound impact on national employment, influencing job creation, unemployment rates, and the overall health of the labor market. Several key factors illustrate this interconnected relationship:

● Trade Dynamics: Changes in global trade patterns directly affect industries and employment within a nation. Shifts in demand for exports or disruptions in supply chains can lead to fluctuations in employment levels across sectors.

● Economic Growth: The global economy’s overall growth or contraction can influence a nation’s economic performance. During periods of global economic expansion, there is typically increased demand for goods and services, leading to job creation. Conversely, economic downturns can result in reduced demand, impacting employment negatively.

● Foreign Direct Investment (FDI): Nations with attractive business environments often attract foreign investment, stimulating economic activity and job creation. Conversely, economic uncertainty or unfavorable conditions can deter foreign investors, affecting domestic employment opportunities.

● Currency Exchange Rates: Fluctuations in currency exchange rates can impact a nation’s competitiveness in global markets. A weaker currency may boost exports, supporting industries and employment, while a stronger currency could hinder exports and lead to job challenges.

● Global Supply Chains: Many industries operate within global supply chains. Disruptions, such as those caused by geopolitical events or natural disasters, can impact the production and availability of goods, influencing employment in affected industries.

● Technological Trends: Global advancements in technology, such as automation and artificial intelligence, can have universal effects on employment patterns. Industries adapting to these technological shifts may experience job transformations or disruptions.

● Commodity Prices: For nations heavily reliant on commodity exports, fluctuations in global commodity prices can significantly impact employment in related industries. Changes in oil prices, for example, can affect employment in the energy sector.

● International Cooperation: Collaborative efforts and agreements among nations can create opportunities for increased economic cooperation, leading to expanded markets and enhanced employment prospects.

● Global Crisis: Global crisis, such as financial meltdowns or pandemics, can have widespread repercussions on national economies and employment. Economic interconnectedness can amplify the effects of such crises across borders.

● Labour Reforms: India and several other developing economies have significantly changed the legal landscape governing industrial relations; largely in response to the dictates of the globalised economy. These reforms have a direct and significant bearing on workers’ rights and entitlements.

Understanding and navigating these global economic dynamics is crucial for policymakers. Effective strategies to manage and respond to the global economy’s impact on national employment include diversifying industries, fostering innovation, and maintaining a skilled and adaptable workforce. Additionally, international collaboration and diplomatic efforts can contribute to creating a more stable and favorable global economic environment.

Manas: Not much is talked about, but rural unemployment is as relevant as urban unemployment. Please discuss the two.

Pranay Aggarwal: Certainly, both rural and urban unemployment are critical facets of the overall employment scenario, each presenting distinct challenges and requiring tailored interventions.

Rural Unemployment

● Agricultural Dependency: Rural areas often rely heavily on agriculture, and fluctuations in agricultural productivity can directly impact rural employment. Seasonal variations and dependence on weather conditions contribute to the cyclicality of rural employment.

● Underemployment: While individuals may be engaged in agricultural activities, the level of productivity and income generation may not be commensurate with their potential. This underemployment highlights the need for diversification and value addition in rural economic activities.

● Limited Non-Agricultural Opportunities: The scope for non-agricultural employment in rural areas can be limited, leading to a concentration of workforce in traditional sectors. Diversification of the rural economy through initiatives like rural industrialisation becomes crucial.

● Skill Mismatch: The skills possessed by the rural workforce may not align with the requirements of emerging job opportunities. Bridging this gap through skill development programs is essential to enhance employability.

Urban Unemployment

● Formal vs. Informal Sector: Urban areas often have a more diversified economic landscape with opportunities in both formal and informal sectors. However, the informal sector can pose challenges in terms of job security, benefits, and regulatory oversight.

● Technological Disruption: Urban areas are more susceptible to technological advancements that may automate certain jobs, potentially displacing workers. Ensuring adaptability through upskilling becomes crucial in this context.

● Educational Disparities: Urban centers attract a large number of skilled professionals, leading to increased competition for well-paying jobs. Disparities in educational access and quality; along the lines of caste, class and gender; can contribute to uneven employment opportunities.

● Cost of Living: Urban areas often have a higher cost of living, and inadequate wage levels can lead to economic vulnerabilities for urban workers. Affordable housing and social welfare measures become significant considerations.

In addressing both rural and urban unemployment, comprehensive policies must recognise the unique challenges of each context. Rural development strategies should focus on agricultural diversification, skill enhancement, and infrastructure improvements. Policies for urban areas need to address technological disruptions, promote inclusive education, and ensure the availability of decent work opportunities in both formal and informal sectors. Recognising the interconnectedness of rural and urban dynamics is also vital for fostering balanced and sustainable employment growth.

Manas: Some experts opine that ‘wages are the worry, not just unemployment.’ How should we address this aspect?

Pranay Aggarwal: One cannot but agree with the statement. It underscores the importance of considering not only job availability but also the quality and compensation associated with employment. A focus solely on unemployment rates may overlook the prevalence of low-wage jobs. Even if employment opportunities exist, inadequate wages can lead to economic vulnerabilities, hampering individuals’ ability to meet their basic needs and achieve financial stability. Some crucial aspects I can highlight in this context are:

● Working Poverty: Some individuals may be employed but still experience poverty due to insufficient wages. Addressing wage concerns is essential for combating working poverty and ensuring that employment leads to a reasonable standard of living.

● Income Inequality: The emphasis on wages acknowledges the broader issue of income inequality. Disparities in earnings can lead to social and economic imbalances, affecting overall societal well-being and contributing to social unrest.

● Quality of Employment: Job quality encompasses factors beyond wages, such as working conditions, job security, and benefits. A narrow focus on reducing unemployment rates may not guarantee the creation of high-quality jobs that offer stability and opportunities for career advancement.

● Productivity vs. Wage Growth Gap: In some cases, productivity gains have not been proportionally reflected in wage growth. Addressing this gap is essential for ensuring that workers share in the benefits of increased productivity and economic growth.

● Living Wage: A living wage is the minimum income necessary for a worker to meet their basic needs such as food, housing, and clothing. The goal of a living wage is to allow a worker to afford a decent standard of living through employment, without government subsidies. Advocates of the concept argue that attention to it is crucial to creating a more equitable and just society.

● Economic Stimulus: Higher wages can contribute to increased consumer spending, providing a boost to the economy. Addressing wage concerns is not only a matter of social justice but also has potentially positive effects on economic growth.

● Skewed Economic Recovery: In the aftermath of economic downturns, recovery efforts should not only focus on restoring employment numbers but also on ensuring that the recovered jobs offer fair compensation and job security.

While reducing unemployment is a vital goal, the quality of employment, as reflected in wages and overall job conditions, is equally significant. A comprehensive approach to economic policies should encompass strategies that not only create jobs but also prioritise fair compensation, reducing income inequality and promoting a more inclusive and sustainable economic environment.

Manas: No topic is complete without understanding the AI connect to it. Is AI going to be the new age cause of unemployment?

Pranay Aggarwal: The impact of AI on employment is a nuanced and evolving subject. Frankly, the jury is still out on this one. While AI has the potential to create efficiencies, improve productivity, and contribute to economic growth, it also poses challenges related to job displacement and shifts in the nature of work.

A recent IMF study suggests that AI may affect as many as 40 per cent of jobs globally. In developed countries, around 60 percent of jobs are expected to be impacted by AI. In emerging markets and low-income countries, AI is likely to affect 40 per cent and 26 per cent of all jobs, respectively.

Some likely impacts and considerations of AI on the employment scenario are:

● Job Displacement: Automation and AI can replace certain routine and repetitive tasks, potentially leading to the displacement of jobs in specific industries. This is particularly true for jobs involving manual or routine cognitive tasks.

● Emergence of New Jobs: Conversely, the adoption of AI can create new job categories, often requiring human skills such as creativity, critical thinking, and emotional intelligence that AI currently lacks. New industries may emerge as an outcome of technological development.

● Skill Requirements: The integration of AI emphasises the importance of skills that complement technology. Upskilling and reskilling the workforce to adapt to the changing demands of the job market become crucial to mitigate the potential negative impact on employment.

● Job Transformation: AI is more likely to transform jobs rather than completely eliminate them. Tasks that are automated may free up human workers to focus on more complex, strategic, and value-added aspects of their roles.

● Ethical and Societal Impacts: Ethical considerations, such as bias in AI algorithms and the impact on privacy, also need attention. Governments and organizations must implement policies and regulations to ensure responsible AI deployment.

● AI in Supportive Roles: AI is increasingly being integrated into supportive roles, enhancing human capabilities rather than replacing them. Collaborative efforts between humans and AI can result in more efficient and effective outcomes.

My sense is that while AI has the potential to impact employment dynamics, it is not a deterministic force leading to widespread unemployment. Not just as yet, at least. The overall impact will depend on how societies, businesses, and policymakers navigate the integration of AI, ensuring that the benefits are maximized while mitigating potential negative consequences. Proactive measures such as education reforms, continuous skill development, and ethical AI practices are essential components of managing the evolving relationship between AI and employment.

In the upcoming part on unemployment we shall focus on questions such as:

What have been some of the measures or policy initiatives taken to control unemployment?

What can be some remedies to address unemployment?

How is skill education or skill development and employment connected?

and many more points to ponder…

Previous topics on Society and Social Justice:

UPSC Essentials | Society and Social Justice : Unemployment and associated issues (Part 1)

UPSC Essentials: Society & Social Justice | Population and associated issues (Part 1)

UPSC Essentials: Society & Social Justice | Population and associated issues (Part 2)

UPSC Essentials| Society & Social Justice — Urbanisation and associated issues (Part 1)

UPSC Essentials | Society & Social Justice : Urbanisation and associated issues (Part 2)

UPSC Essentials | Society & Social Justice : Urbanisation and associated issues (Part 3)

UPSC Essentials | Society & Social Justice : Literacy and associated issues (Part 1)

UPSC Essentials | Society & Social Justice : Literacy and associated issues (Part 2)

UPSC Essentials | Society & Social Justice : Literacy and associated issues (Part 3)

UPSC Essentials | Society & Social Justice : Poverty and associated issues (Part 1)

UPSC Essentials | Society & Social Justice : Poverty and associated issues (Part 2)

UPSC Essentials | Society & Social Justice : Poverty and associated issues (Part 3)

🚨 The Indian Express UPSC Essentials brings to you the March issue of its monthly magazine. Click Here to read. Share your views and suggestions in the comment box or at manas.srivastava@indianexpress.com🚨