UNIT-8

Poverty definition: When a person is unable to get the minimum necessities of life this situation
is known as poverty. Poverty means that the income level from employment is so low or no
employment that basic human needs are not met. Poverty-stricken people can go without proper
housing, clean water, healthy food, and medical attention.
Progress has been made in measuring and analyzing poverty, the World Bank Organisation is
working to identify other indicators and dimensions of poverty. This includes identifying social
indicators to track education, health, access to services, social exclusion, and vulnerability.

What is Poverty?
Poverty is defined as a state or circumstance in which an individual or a group lacks financial
means and necessities for a basic level of living. It can also be defined as a situation in which
one’s earnings from work are insufficient to meet fundamental human requirements.
Poverty, according to the World Bank, is a severe lack of well-being that has various aspects.
Low earnings and the inability to obtain the essential commodities and services required for a
dignified existence are examples. Poverty examples also includes poor health and education, a
lack of access to safe drinking water and sanitation, a lack of physical security, a lack of voice,
and a lack of capacity and chance to improve one’s life. In 2011, 21.9% of India’s
population was living below the national poverty threshold.

Understanding Poverty
Poverty is both an individual as well as a broader social problem. On the individual level, ends
are not met which can lead to physical and mental issues. At the societal level, high poverty can
damper to overall economic growth and be associated with problems like unemployment, crime,
urban decay, lack of education, and detrimental health.
Important points related to poverty are:
 The two main dimensions of Poverty are Hunger and lack of shelter.
 Poverty is a condition where one is barely having basic necessities of life. When parents are
not able to send their children to school or a situation where individuals or families can’t
afford medical facilities
 Lack of clean water and sanitation facilities is also one of the conditions of poverty.
 Lack of regular job to earn or live a regular life with basic necessities of life.

Types of Poverty
There are two major kinds of Poverty, that are:
1. Cyclic Poverty
It refers to poverty that can be widespread throughout the population, but its occurrence is of
limited duration. In non-industrialized countries, the inability to meet basic needs rests mainly on
temporary food shortages caused by natural phenomena. Prices can be hiked because of
scarcities of food, which brought misery.
2. Collective Poverty
Collective poverty involves relative permanent insufficiency of means for secure basic needs.
Both generalized and concentrated collective poverty can be transmitted from one generation to
the next. Collective poverty usually is related to Economic inequality.
3. Concentrated Collective Poverty
In many developed industrial countries, particular demographic groups are more vulnerable to
long-term poverty. Their chief economic traits include unemployment, underemployment,
unskilled occupation, and job instability.

Causes of Poverty
India’s population has been continuously increasing throughout the years. It has increased at a
pace of 2.2 percent per year for the past 45 years, implying that around 17 million people are
added to the country’s population each year. This has a significant impact on the demand for
consumer products. The following important reasons are mostly responsible for poverty:
Low Agricultural Productivity
The agriculture sector’s low productivity is a key source of poverty. Low productivity can be
caused by a variety of factors.
It is mostly due to fragmented and subdivided landholdings, a lack of cash, ignorance about
modern farming technology, the use of conventional farming practices, loss during storage, and
other factors.
Inadequate Utilization of resources
The country suffers from underemployment and hidden unemployment, notably in the
agricultural sector. Low agricultural productivity and a drop in living standards have ensued as a
result of this.
Economic Development at a Slow Rate
India’s Economic inequality has been slow, particularly in the first 40 years of independence
before the LPG reforms in 1991.
How to reduce Poverty?
Poverty can be reduced with the following steps:
1. Shelters for construction of homes for most needed ones.
2. Educating farmers for production of more foods.
3. Access to free and clean drinking water.
4. Building schools for educating the disadvantaged groups.

What is Unemployment? – Unemployment is an adverse condition where individuals who

are capable of working and actively seeking employment are unable to find suitable jobs. It is
a multifaceted socio-economic issue that stems from factors such as population growth,
economic opportunities, education and individual skills. In a developing country such as
India, where even the steady rate of economic growth is unable to match the requirements of
its educated, qualified youth looking for employment, unemployment is a peculiar
phenomenon. With a young and burgeoning workforce, the challenge of unemployment in
India is not merely a statistical concern but a social and economic imperative in order to
balance the rapid growth with the welfare of the country’s vast population.

o Unemployment in India is defined as the situation where people who are willing to work
at the going wages cannot find suitable employment.
o However, the phenomenon of unemployment is not simply characterized by a lack of
jobs, but is a multidimensional issue that has social, economic and political causes and
implications.
What is Unemployment? – Definition & Meaning

Unemployment in India refers to the condition where individuals who are capable of working,
actively seeking work, but are unable to find any form of employment. The unemployed are
individuals in the labor force, primarily in the age group of 15 – 59 years,, who currently do not
have a job or a steady source of income. As individuals who are capable and willing to work are
unable to find gainful employment, it leads to a wastage of manpower resources. Unemployment
and its related metrics are typically used tto
o measure the health of a country’s economy.

According to National Statistical Office (NSO), employment and unemployment can be defined
by the following activity statuses of an individual –

1. Employed – Individuals engaged in any economic activity are class

classified
ified as 'Employed.'
This includes full-time,
time, part
part-time,
time, and temporary work, reflecting a broad understanding
of employment.
2. Unemployed – Individuals who are actively seeking or available for work but are not
currently engaged in any economic activity. Thi
Thiss emphasizes the willingness and ability
to work as key criteria.
3. Neither working nor willing to work – Individuals who are neither seeking nor
available for work fall outside the labor force, according to NSO. This category might
include students, retirees,
s, or homemakers.
4. The first two categories, i.e., Employed and Unemployed constitute the Labor
Force of an economy. It is typically the individuals between the age group of 15–59
15
years.
5. The following formula can be used to calculate the unemployment rate of a country –
Types of Unemployment

The various types of unemployment refer to the different categories of unemployment based on
the underlying causes and characteristics. The following are the major types of unemployment
witnessed in India –

o Frictional Unemployment

Frictional unemployment occurs when individuals are temporarily without a job while
transitioning from one position to another or entering the workforce for the first time. For
example, a recent graduate actively looking for a job or a professional who has quit one job to
find a more suitable one would fall into this category. This type of unemployment is generally
short-term and is often seen as a regular and healthy part of a dynamic economy.

o Structural Unemployment

Structural unemployment arises when there is a mismatch between the skills that workers in the
economy can offer and the skills demanded by employers. For instance, the automation of
manufacturing processes may render certain manual jobs obsolete, leaving those without the
necessary technological skills unemployed. This type of unemployment can be long-term and
may require significant retraining and education to overcome.

o Cyclical Unemployment

Cyclical unemployment is related to the fluctuations in the economy over the course of the
business cycle. During recessions, many industries can suffer, leading to layoffs and thus, higher
unemployment. An example would be the increase in unemployment during the global financial
crisis of 2008. Cyclical unemployment will decrease when the economy starts to improve.

o Institutional Unemployment

Institutional unemployment results from long-term or permanent institutional factors and

incentives in the economy. Government policies, such as high minimum wage floors or
restrictive occupational licensing laws, can contribute to this type of unemployment. For
example, if a government sets the minimum wage too high, it might lead to employers being
unable or unwilling to hire workers at that wage, leading to increased unemployment.

o Demand Deficient Unemployment

Demand deficient unemployment, or demand-deficit unemployment, occurs when there is not

enough demand for workers that are available. This is often a result of a general downturn in
the economy and is closely related to cyclical unemployment. For example, during a severe
recession, consumer demand falls, leading to reduced production and, consequently, a reduction
in the workforce.

o Voluntary Unemployment

Voluntary unemployment happens when a worker decides to leave a job because it is no

longer financially compelling or satisfying. An example might be a worker whose take-home
pay is less than his or her cost of living or someone who leaves a job to pursue a hobby or other
personal interests. While it's a personal choice, it can still contribute to the overall
unemployment rate.

o Involuntary Unemployment

Involuntary unemployment occurs when individuals who are willing and able to work at the
prevailing wage rate are unable to find employment. This type of unemployment is not a
result of a personal choice or voluntary decision to leave a job; rather, it's a situation where
individuals are actively seeking employment but are unable to secure a position. An example
might be factory workers who lose their jobs due to a factory closure and are unable to find new
employment despite their best efforts. Involuntary unemployment can be particularly distressing
as it's often beyond the control of the individual and may require broader economic or policy
interventions to address. It can encompass aspects of structural, cyclical, and demand deficient
unemployment, reflecting broader economic challenges and trends.
 o Disguised Unemployment

Disguised unemployment refers to a situation where more people are employed in a job than is
actually required. It is often prevalent in the agricultural sector, especially in developing
countries like India. For example, a farm may need only three workers, but the entire family of
five may be working. The extra two workers appear to be employed, but their contribution to
productivity is minimal or nil. Disguised unemployment represents an inefficient allocation of
labor, where individuals are underemployed rather than completely unemployed.

o Seasonal Unemployment

Seasonal unemployment occurs when individuals are unemployed during certain seasons or
times of the year when their skills or labor are not in demand. This type of unemployment is
common in industries that are dependent on particular seasons, such as agriculture, tourism, and
construction. For example, agricultural workers may face unemployment after the harvest
season, while ski resort employees might be without work during the summer months.
Governments and industries often address seasonal unemployment through temporary
employment opportunities and unemployment benefits tailored to these fluctuations.

o Vulnerable Unemployment

Vulnerable unemployment refers to individuals who are employed in precarious or insecure

conditions, often lacking legal protections, benefits, or job security. This type of
unemployment is prevalent in the informal sector, where workers might be engaged in low-
paying, temporary, or part-time jobs without contracts. For example, street vendors, daily wage
laborers, and domestic workers often fall into this category in many developing countries,
including India. Vulnerable unemployment highlights the need for comprehensive labor laws and
social protections to ensure the well-being and rights of these workers.

o Technological Unemployment

Technological unemployment arises when advancements in technology render certain jobs or

skills obsolete, leading to job losses in affected industries. Automation, artificial intelligence,
and digitalization are common drivers of technological unemployment. For instance, the
introduction of automated teller machines (ATMs) has reduced the need for bank tellers, while
automation in manufacturing has replaced many manual labor positions. While technological
unemployment can lead to increased efficiency and productivity, it also raises concerns about
retraining, education, and social support for displaced workers, emphasizing the need for a
balanced approach to technological progress.

Each of these types of unemployment has distinct characteristics and underlying causes,
reflecting the multifaceted nature of unemployment as an economic issue. They provide a
comprehensive view of the various ways individuals may find themselves without work in
different economic contexts.

Causes of Unemployment in India – What Leads to the Unemployment Situation?

Unemployment in India is a multifaceted socio-economic issue, which has economic,

technological, demographic, educational, social, and policy-related cause factors. In the Indian
context, the primary cause of unemployment is the increasing population growth rate which is
not at par with the number of qualified individuals graduating from the colleges/universities
every year. However, to understand what is unemployment and its causes requires a broader lens
taking into account the mix of factors The following are the major causes of unemployment in
India –

Causes of Unemployment
S.No. Cause Description Example
1 Economic Factors Economic downturns and The 2008 global financial crisis
global fluctuations lead to led to a slowdown in many
reduced demand for goods and sectors, causing job losses in
services. India.
2 Technological Advancements in technology Automation in manufacturing
Changes can make certain jobs obsolete. has reduced the need for
manual laborers.
3 Demographic Factors A growing population exceeds India's youth population is
 the rate of job creation. increasing, but job
opportunities aren't growing at
the same rate.
4 Educational Factors Mismatch between education Many engineering graduates
and industry demands. struggle to find jobs due to a
lack of industry-relevant skills.
5 Rural-Urban Divide Limited opportunities in rural Lack of industrial development
areas compared to urban in rural areas leads many to
centers. migrate to cities seeking work.
6 Seasonal and Dependence on agriculture Farmers often face
Agricultural Factors leads to unemployment during unemployment post-harvest due
off-seasons. to the seasonal nature of
agriculture.
7 Government Policies Policies and regulations can Stringent labor laws might
sometimes limit job creation. deter some industries from
expanding operations in India.
8 Lack of Infrastructure Inadequate infrastructure Poor road connectivity in
hinders economic growth and remote areas can deter
job creation. businesses from setting up
operations there.
9 Social and Cultural Gender biases, caste Women in certain regions
Factors discrimination, and other might be discouraged from
barriers limit access to working due to societal norms.
opportunities.
10 Globalization Impact Global policies can lead to job The influx of cheap Chinese
losses in certain sectors. goods might affect local
manufacturing units, leading to
job losses.
11 Informal Labor A significant portion of the Street vendors might face
Market workforce in the informal unemployment due to urban
 sector lacks job security. development projects.
12 Lack of Limited support for new Lack of easy access to credit
Entrepreneurship and businesses and innovations might deter potential
Innovation hinders job creation. entrepreneurs from starting
businesses.