7115414 labour economics

8/6/2019 7115414 Labour Economics

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LABOUR ECONOMICS

Q2. Define Labour Economics. Explain the nature and scopeof Labour Economics. Explain the characteristics of

Labour?

Ans: - Labour Economics:-

Labour Economics may be defined as a study of theorganization, institutions and behavior of the labour market in anindustrising or industrial economy.

According to Dole Yoder:-

Labour economics or manpower economics is primarily

concerned with efficient utilization and conservation ofmanpower and resources. It studies and seeks to understand theprocesses by which manpower is applied and utilized in modernsociety. It is concerned of natural resources in the land.

Scope of Labour Economics:-

Labour economics has to deal with may be stated as manpowerplanning, labour organization, labour relations and public policywage and employment theory, collective bargaining theory andpractice of social security and welfare etc.

According to Dr. G.P.Sinha, the following areas of study may belisted to fall under the preview of labour economics:-

I. Institutional framework of the particular economic system.II. Size and composition of the labour force and labour market.III. Labour as a factor of production- productivity and efficiency

condition of work-industrial relation standard of livingIV. Labours risk and problems.V. Trade unionism

VI. Labours status and position in societyVII. Labour legislation.

Another different area of labour economics are:-I. Advance theory of labour economicsII. Labour lawsIII. Principles of personnel management and job evaluationIV. Principle and practice of labour welfare

LABOUR ECONOMICS(Page 1)Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)


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V. Theory and practice of trade union management.

Nature of Labour Economics:-

Labour economics is in the process of development, its definition

tends to vary and change according to the nature of theeconomy and is supposed to indicate the criteria for delimitingits scope and enumerating and classifying the problems.

I. The theoretical sectionII. The institutional section

A. The Theoretical Section:-

The theoretical section of labour economics is concerned withbuilding up of models of economic behavior by making different

sets of assumption.

B. The Institutional Section:-

The institutional section of labour economics is concerned withstudies of labour problems in an institutional historical content.The nature of the labour problems changes with the change inthe institutional framework of the economic systems.

Characteristics of Labour:-

According to Dr. Alfred Marshell, labour may be defined as Anyexertion of mind or body undergone partly or wholly with a viewto have some good other than the pleasure derived directly fromthe work.

Characteristics are as follows:-

1. Labour cannot be separated from the person who labours-In other words we can say that labour cannot be separated

from labourer body and personality. Thus, the environmentand the working conditions in which the worker has to workare of utmost important in the supply of labour.

2. The worker sells his work services but he himself remainshis own property: - In the words of Marshell, The workersells his work but he himself remains his own property.Thus, the supply of labour along with other things depends



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upon the forethought and selflessness of those who bringup the labourer.

3. Labour is perishable commodity, therefore it does not lastand cannot be stored for future- If a worker does not work

for a particular day, that day is lost for ever and he wouldnever be in a position to make use of his lost services.

4. As the seller of labour are commonly poor and have noreserve fund, therefore they cannot with held labour fromthe market.

5. The supply of labour cannot be decreased or increasedwith fall or rise of wage- Hence, a paid adjustment of thesupply of labour to its demand is not possible.

6. Labour is not mobile as capital: - The difference inenvironments, languages, customs etc at different places ishinderences to the mobility of the worker from one place toanother.

7. The marginal productivity of labour is comparatively lessthan capital.

8. Finally, labour is a living thing and that makes all thedifferences.



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Q3. What is meant by the term wages? How would youdistinguish between Nominal Wages and Real Wages?

Explain the factors influencing real wages.

Ans: - Wages:-

The price paid for the services of labours in production is calledwages. The labourer is generally paid a certain sum of money perday or week or month.

Beham defined a wage asA sum of money paid under contract by an employer to a workerfor services rendered.

However, in economics, payment made for all kinds of services,whether by way of salaries or in any other way is included inwages.

Differences between Nominal wages and Real wages:-

Nominal Wages:-

The amount of money that a labourer gets in exchange of hisservices is called money wages or nominal wages. If a labourer

gets Rs.200, a day for his work, his money or nominal wages willbe Rs. 200. However, mere money payment does not reflect thereal earnings of the labourer. They do not reveal the standard ofliving or the goods and services which labourer can buy andconsume.

Real Wages:-

The amount of goods and services that labourer can get with hisnominal wages is called real wages. Real wages refer to thegoods and services, which the money wages can buy, and

advantages and disadvantages associated with the jobs.Labourer is not so much interested in money wage as they are inreal wages because their standard of living depends on realwages. According to Wicksell, real wages means real income.

Real Income= Money income/Price Level



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Following are the factors or items that are generally taken intoaccount while calculating Real Wages of a worker as comparedto his nominal wages.

1. Purchasing power of money:-Real wages (i.e. wages in terms of goods and services) dependon purchasing power of money, which means on the prevailingprice level at particular place where a worker is working andliving.

2. Incidental advantages and benefits:-While calculating real wages, extra benefits or advantages aworker may be getting must be taken into consideration. Theseextra benefits may take the form of free or subsidized transport

facility.These incidental benefits generally known as Fringe Benefits orPerks if available must be added while comparing andcalculating real wages

3. Working Conditions:-While considering real wages, working conditions must beconsidered. By working conditions are meant number of workinghours per day, healthy atmosphere free from pollution,availability of facilities like drinking water and rest house etc.

4. Possibility of extra earnings:-Possibilities of extra earnings must be taken into account whilecalculating and comparing real wages of workers. Some jobs (likeprofessors and teachers) enjoy the opportunities of making extraincome by writing books, undertaking tuitions etc.

5. Nature of jobs:-While considering real wages of a worker nature of job must betaken into account whether the job is injurious to health, whetherthere exists great hazards, whether it involves frequent travelingetc.

6. Possibilities of promotion and success:-Possibility of quick promotions, foreign tours etc. must be takeninto account while calculating real wages.

7. Social prestige and status:-For example, some jobs carry higher social status and prestigethan some other. This must be taken into account while



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calculating real wages of workers and comparing real wages oftwo workers doing two jobs in different occupations.

8. Training expenses:-Training expenses involved in the case of different jobs must be

taken into account while calculating real wages and especiallywhile real wages of two jobs.

9. Trade and office expenses:-Some jobs like doctors and pleaders involves trading expenseslike maintaining an office and a clerk etc. while certain jobs donot involves such expenses. This must be taken into accountwhile determining and comparing real wages.



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6. Ignorance :-When workers suffer from ignorance, they suffer from lowerwages.

Wage differs between male and female labour:-

Female labourer is paid much less than male workers. Thereasons for this disparity are-

1. In certain occupations, there is an over crowding of femaleworkers. For instance, jobs such as teaching, domestic servants,nursing etc.

2. Owing to lower physical strength and other factors, theproductivity of female labourers is believed to be low.

3. The trade union movement is not very strong and has not takendeep roots in case of female labour.

4. It is believed that the necessity for the earnings by man isgreater than that of a woman. Generally, females are not solebreadwinner of the family.

5. The mobility of female worker is also low because of family tiesand domestic responsibilities. Female workers would not like tochange jobs even if a change of job has better prospectus for

them.

Differences in wages based on differences in sex are not justified.Many countries have tried to eliminate them based on principleof Equal pay for equal work. The international labourorganization had laid down in its constitution that men andwomen should receive equal remuneration for equal work.



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Q5. Give an idea about different concepts of Wages.

Ans: - Wages

The price paid for the services of labourers in production is calledwages. The labourers are generally paid a certain sum of moneyper day or week or month.Benham defines a wage as:-

A sum of money paid under contract by an employerto a worker for services rendered. Benham definition coversonly the payment made for the use of manual labour. It does notinclude the payment made in the form of salaries to individuals

working as clerks, accountants and white colored workers.

Different concepts of wages:-

Minimum Wage

Living Wage

Fair Wage

The problem of wage is the most controversial subject inindustrial relations. The reason of its significance is that wagesprovide worker with certain standard of living and they form ahigh proportion of the employers cost of production.

Minimum Wage

The concept of Minimum Wage stands for different standard ofdifferent countries. The fair wage committee in India hasobserved that in India the level of the national income is so lowat present that it is generally accepted that the country cannotafford to prescribe by law a minimum wage must provide notmerely for the bare sustenance of life but for the preservation ofthe efficiency of the worker.

Thus, a minimum wage is one, which may besufficient to enable q worker to live in reasonable comfort havingregard to all obligations to which an average worker wouldordinally be subject.



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The objective of minimum wage

1. To prevent explanation of workers and secure a wage equal towork load.

2. To raise the wages in the industries where they are low, thusprevent sweating in industry.

3. To promote peace in industry by guaranteeing a wage rate thiswill enable them to meet their minimum requirements.

4. Raise the standards of living and efficiency of workers.

Living Wage

According to the committee in fair wages,The living wage represented the higher level of

wage and it would include all amenities which a citizen living in amodern civilized society could afford. After considering variousobservations made by Indian authorities, the committee on Fairwages observed, the living wages should enable to male earnerto provide for himself and his family the bare essential of food,clothing and shelter but a measure of frugal comfort includingduration for the children, protection against ill healthrequirement of essential social needs and a measure ofinsurance against the more important misfortunes including old

age.

Fair Wage

To bring improvement in the relations between labour andmanagement the industrial truce resolution was passed in 1947,which provided for the payment of fair wages of labour, govt. ofIndia appointed a Fair wages committee in 1948, and thecommittee report was published in 1949.

Marshell and Pigou have defined fair wages. Marshell Says,

In any given industry wages are fair relatively to wage inindustry in general.

Lower limit of fair wages must be the minimum wage forworkers and upper limit will be the industry capacity to pay.However, between these two limits following factors have to beconsidered

The productivity of labour



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The prevailing rate of wages in the same or neighboring locality

The place of the industry in the economy

The level of national dividend and its distribution



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The concepts of minimum, fair and living wages should not betreated as water tight compartments, As the level of wagesactually prevailing a country would depend largely on the level ofeconomic development. Yet the task of wage regulating and

wage fining machinery can go a long way to evolve a wagestructure which is fair and also commensurate with the level ofeconomic activity in the country.



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Q6. Define Labour market. What are the main characteristicsof labour market? Explain the major imperfections inlabour market.

Ans: - Labour Market:-

Labour market may be defined as A process by which supplies ofparticular type of labour and demands for that type of labour balrseek to obtain a balance.The labour market is the place for operation of this process. It isthe only device for sorting out worker with varying skills andinterest among the multitude of different jobs in the economy.The labour market is also an area or place where relative wagelevels for different plants, industries occupations and d regions

are determined.

Characteristics of Labour Market:-

Main characteristics of labour market are as follows:-

1. Unlike a commodity market, relationship between a buyer andseller in a labour market (expecting a casual labour market) isnot temporary and is expected to continue for some limit.

2. Labour market is essentially local in character: - The

concept of labour market stands for the buyer and sellers oflabour who are in contact with each other for the purchase andsale of workers services. Thus, labour market is normally localmarkets in the sense of the demand for the supply of labourbeing confined to a particular locality.

3. Lack of mobility: -Lack of mobility is an important characteristicof a labour market owing to various reasons. Labour obviouslycannot move with the same ease and facility with whichcommodities are transported from place to place and the buyersof labour as well.

4. A labour market is essentially an imperfect market: - Labourmarket is an imperfect market where one does not find a normalwage rate to which the market rate naturally tends. There is adiversity of wage rate in a labour market for the same types ofwork different wage are paid: a feature, which may last for a longperiod and may even be regularized.



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5. Monopoly:- Monopoly in labour market is extremely rareexcepting when the skill of a particular type of extremely rare orwhen a very powerful trade union exercise a complete controlover the supply of labour in a given industry or in a given area.

6. Most of the labour markets in the world do not justice to theworkers in the matter of the division of the proceeds of industryas between the employers and workers. In other words, thelabour markets are usually the buyers market.

Imperfections in the labour market:-

There are certain peculiarities of labour market, which distinguishit from the market of other commodity. These peculiarities alsomake labour market imperfect

1. No equilibrium between demand for and supply of labour: -In the markets of other commodities prices

keeps on changing till demand is equal to supply. In other words,the other markets are normally cleared. However, in labourmarket wages are not freely flexible. Therefore, as Hicks pointedout, the effect of incre3ase in demand for labour on wage rate isfelt only after a long passage of time.

2. Wage differentials:-In a perfectly competitive market for a commodity, all units of

the commodity are homogeneous and price tends to be uniform. Infact, George Stigler defined the mar4ket of a commodity as all thoseplaces where the price of that commodity tends to be uniform afterallowance for transport cost. However, in the actual market thewage differentials are often due to imperfections in the labourmarket.

a) No perfect knowledge: - Worker and employers do not haveperfect knowledge about the conditions in the labour market.Therefore, the wage differences prevail.

b) Lack of perfect mobility of labour: - There is no perfect mobilityof labour from one industry top another or from one locality toanother.

c) Barriers to the entry of labour: - There are barriers to theentry of new workers in specific occupations and so the artificialstorage of such workers is maintained and so the wages of suchworkers continue.



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d) Employers monopsony: - The labour market may havemonopsony employer of labour power and he can follow thepolicy of wage discrimination by paying different wages todifferent workers for the same work.

e) Institutional forces in determining wages: - In the market ofthe other commodities, mainly the market forces of demand andsupply determine the price. Therefore, there cannot be aneconomic explanation of wage rates based purely on demandand supply conditions.



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Q7. Discuss the factors influencing demand for and supply oflabour.

Ans: - Demand For Labour:-

In labour market, demand for labour is made by individual firms,which want to employ labour to carry out their production. Itmeans a firm is a buyer in the labour market. Unlike demand forconsumer goods, demand for labour is a derived demand.

Demand for labour by firms depends on the following factors:-

1. Demand for commodities produced by labour :-When demand for commodities increases, firms wants to sellmore, for which they have to increase production. In such cases,

they need labour as a factor of production.

2. Availability of Capital:-Largely capital and labour are complementary factors ofproduction. If more capital is available, private firms want toinvest more. When they increase investment and set up newproduction units, they need more labour and so demand forlabour increases because of increase in supply of capital.

3. Substitution between labour and machinery :-Labour and capital can also be substituted for each other. If work

done by labour can also be performed by machinery i.e. capital,it means producers have choices between labour and machinery.

4. Motives of the firms :-In modern economy, private firms are joint stock companies.They are run by professional managers. The management followsmany different motives. Sometimes firms have motives ofmaximum growth rate. To achieve this goal they keep investmentand producing more. It creates larger demand for labour.

5. Labour productivity :-

Just as demand for a commodity by a consumer depends on itsutility, demand for labour as a factor of production depends onthe productivity. If labour productivity is low, it becomes costlierto employ labour and so it is not profitable to increase demandfor labour.



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6. Wage rate :-Price of labour is nothing but wage rate per unit of labour.Normally there is inverse relation between wage rate anddemand for labour. The inverse relation between wage rate and

demand for labour until marginal product is equal to wage rate.

Supply of Labour:-Supply of labour refers to the number of labour units offeringthemselves for work. Supply of labour is normally measured asthe number of person-hours (or person-days) which workers arewilling to offer at the market wage.Factors, which influence the supply of labour in a country or tothe economy as a whole:-

1. Size of population :-Potential labour force in a country depends upon the size of thepopulation and its growth. Thinly populated countries likeCanada, Australia have less supply of labour.

2. Rate of working population to total population :- Though supply of labour depends primarily on the size ofpopulation of the country. We must also remember that not allpeople are available for work.

3. Sex Rate :-

The ratio of males to females in the working age group isdetermining factor in the supply of labour.

4. Working Hours :-Workers can give continuous and sustained work only if theworking hours are reasonable. Unreasonable long working hoursmeans fatigue and inefficient work.

5. Age of Retirement :-Workers retire at a certain age. In some cases, the retirementage is 55 years. In some other places, it is 58 to 60 years of age.

6. Social Attitude :-In certain occupations, sex and caste are taken intoconsideration. This restricts the mobility and availability oflabour.



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7. Wage Level:-Labour supply is related to the wage level in a country. Highwage level contracts the supply of labour and lower wage levelforces the worker to work more due to economic compulsions.

8. Potential Desire to Work :-The actual labour supply depends not only on how many workersare there in the working age group. However, it also depends ontheir enthusiasm towards work.

9. Training Period :-If labour is educated and trained then the period of educationand training will be an important factor in influencing supply oflabour.



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Q8. What is mobility of Labour? Discuss the factors hinderingmobility of labour.

Ans: - Mobility of Labour:-

The ability and willingness of a worker to move from one placeto another place or from one occupation to another occupation toget a job is called mobility of labour.

Importance of mobility of labour:-

Mobility is of great advantage to the worker himself. It isadvantageous to them to move from the place of less demand toplace where their services are mere demanded or opportunitiesavailable.

Mobility of labour is advantageous from the point of view ofthe industrial structure. Industrial structure has undergone lot ofchanges.

Example: -From agriculture, we reached to industrial stage. Inindustrial field too from traditional industries to modern and nowautomation.

Unemployment is kept at bay by the mobility of labour. Alabour move from place where it is not demanded is there.

Factors hindering mobility of labour:-

Among all factors of production, labour is least mobile. Land isgeographically immobile and in an exception. Capital may bemoney or machine. It is a life less they and is transported to theplace where required which much ease and less difficulty.However, in case of labour, it is different. He is not merelyactuated by economic or monetary consideration. He haspractically a fixed place in the society and does not liked to berooted out from the known surroundings. Hence it is rightlyremarked that among all sorts of luggage, man is the most

difficult to be transported.

The factors, which hinder or inhibit the mobility of labour,can be listed as follow:-

1. New Climate2. Cost of Transport and Conveyance Facilities3. Problem of accommodation



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4. Language barriers5. Admission of children to schools or colleges.6. Diet and food habits7. Age and time of transfer and psychological conditions.8. Adjustment with new environment and surroundings and

locations9. education and training10.Political, social disturbance11.Cost of living12.Racial differences13.Family attachment14.New customs and rituals conventions15.Wages/pay scale16.Problem of adjusting with new culture and surroundings,

atmosphere etc.



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Q11. What do you understand by the term Efficiency ofLabour? Explain the factors affecting labour efficiency.Suggest the measures to improve efficiency of labour.

Ans: - Meaning Of Efficiency Of Labour

Normally though efficiency of labour means the ability or4 fitnessof a worker to produce goods and services in proper quantity andof the right quality which is a given period. The ability can bemeasured in terms of number of units of a commodity produced

by a worker with in a given period. Thus, one factor workerproducing more number of a commodity with in a given timethan the other worker is considered more efficient.

Efficiency of labour is thus an important determinant of thestudy of labour in a productive sense. It determines the size ofreal productive labour force in a country. A country labour supplywill be substantially augmented if it possesses a relatively smalllabour force possessing a high degree of efficiency.

Factors affecting the efficiency of labour are as follows:-

1. Racial Stock: - Man acquires some physical qualities from theracial stock to which he belongs. The Sikhs and Jats are verystrong and are capable of hard work.

2. Wages: - If a labourer get a low wage, he cant maintain hisefficiency, if wages are low, labour productivity will also be low.

3. Climate: - In temperate and cold climate, people can work hard.

Hot climate is not conductive to very hard work. In hot climate,labourers cannot work as hand as labourer in cool climate can.

4. Hours to Work: - The efficiency of labour is affected by theworking hours. If a labourer works for long hours, work becomesmonotonous and the labourers worse only half heartily. Hecannot give the best.



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5. Working Conditions: - If the factory building is dirty andnot well-ventilated workers cannot hard work. However, if factorybuilding is clean and well ventilated and if the atmosphere is

pleasant, workers like to work hard.

6. Education and Training: - Education and Training impacttechnical knowledge, sense of responsibility and improve theefficiency of labour. Trained labourer can use modern machineryefficiency.

7. Welfare Activities: - Social security measures like medicalfacilities and maternity benefits help laborer to maintain their

health and efficiency.

Measures to improve efficiency of labour:-

Efficiency of labour can be improved by eradicating the cause oflow efficiency. This can be done particularly through propereducation, training improvement in machines and betterment inworking living conditions.

Thus, labour efficiency can be improved with respect offollowing points:-

1. By linking about labour efficiency and by wages and incentivebonus, it is possible to motivate labour.

2. Labour efficiency can be raised by mutual argument betweenmanagement and workers regarding distribution of benefits ofraising labour productivity.

3. Improving industrial relations can raise labour efficiency.

4. Comprehensive planning and introducing input is creating qualityconsciousness in production and in cost control, that efficiency

can be raised.

5. Bringing improvement in plan lay out material handling andbetter internal management in a factory has positive effect onlabour efficiency.



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6. By providing modern training course to those in personneldepartment who handle worker such trained personnel will beable to create an atmosphere of better effort by workers.

7. Providing training to workers and taking measures to improve

labour welfare.

8. By introducing modern methods of organization, labour efficiencycan be raised.

Q12. Explain the concept of social security. Briefly review theSocial security Measures adopted by the government inIndia.

Ans: - Social Security

Social security as at present understood is one of the dynamicconcepts of the modern age, which has deeply influenced thesocial and economic policy of many countries in the world. Theidea of social security is that the state shall make itselfresponsible for ensuring a minimum standard of material welfareto all its cities on a basis wide enough to cover all the maincontingencies of life.

The social security system aims to helpindividual in such times of dependency. The main risk ofinsecurity, to which human life is liable and in relation to which

organized society can afford relief to the helpless individual areincidents of life occurring right from childhood up to old age anddeath and include mainly sickness, maternity invalidity accidentand industrial disease unemployment, old age, death of breadwinner and other such emergency.

Social security measures in India:-

In an industrial economy, the worker is subjected to periodicunemployment due to cyclical fluctuation in business, sickness

industrial accidents and old age. There is nothing more serious toworker to his/her family than unemployment. Sickness suspendsearning capacity of a worker temporarily industrial accidentsmay disable him/her permanently or partially and old age put astop to his/her ability to earn support himself/herself and thefamily.

Naturally, the state has the obligation to helpthe worker and provide them security. In western countries, Govt.



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started various measures to protect workers in time of sicknessand unemployment and provide relief in case of accident and oldage. All these measures are collectively known as social securityschemes.

Various security measures adopted in India is

divided into two categories:-

Before Independence

After Independence

Before Independence:-

Workmens Compensation act:-

In 1923, the Govt. of India passed the Workmens CompensationAct in order to provide for compensation to the workers incase of industrial accidents and injury. The act now coversworkers employed in factories, mines plantation, mechanically

propelled vehicles construction workers and certain otherhazardous occupations. Under this act, the amount ofcompensation depends upon the nature of the injury and thesalary of worker concerned.

The Act is however not applicable to the persons who arecovered by Employee State insurance Act, 1948.

After independence-The employees state insurance act,1948.

The employees state insurance act was passed in 1948 with the

objective of providing compulsory and contributory healthinsurance of workers. The act provides for medical care andtreatment cash benefits during sickness, maternity andemployment injury, pension to the dependent on death.

Administration



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The act of 1948 set up the autonomous Employees statecorporation, which has the responsibility of administering thebody of 40 people representing the union and the state Governs,the parliament, employees and employers organization and themedical profession.

Finance and Contribution

The act of 1948 provided for the setting up of a fund known asthe Employees State Insurance Fund. The rate of contribution bythe employer, which was earlier fixed at 4%, has been raised to4.75% and that of employee rose from 1.5% to 1.75% of thewage.

The state Govt. share the expenditure on theprovision of medical care to the extent of 12.5%. Besides the

employer, employee contribution the central and state Govt. alsoprovides grants for the working of the scheme.

Q13. Write short note on:-

(4) Types of Unemployment and Unemployment in India.(10) Factors affecting demand for labour

Ans 13(4):- Type of Unemployment

Unemployment of some kind has always been a running problemof modern societies whether developed or underdeveloped.The various types of unemployment may be classified are asfollows:-

1. Voluntary Unemployment2. Frictional Unemployment3. Casual Unemployment4. Seasonal Unemployment5. Structural Unemployment6. Technological Unemployment

7. Cyclical Unemployment8. Chronic Unemployment9. Disguised Unemployment

Brief descriptions of various type of unemployment are asfollows:-

1. Voluntary Unemployment



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In every society, there are some people who are unwilling towork at the prevailing wage rate and there are some who do notwant to work. Such type of unemployment in any society isknown as Voluntary Unemployment.

2. Frictional UnemploymentFrictional unemployment is a temporary phenomenon. It maytake place in various ways. When some workers are temporarilyout of work while changing job it called Frictional Unemployment.

3. Casual UnemploymentIn industries such as building construction catering or agriculturewhere workers are employed on a day-to-day basis, there arechances of casual unemployment occurring due to short-termcontract.

4. Seasonal UnemploymentThere are some industries and occupations such as agriculture,the catering trade in holiday resorts, some agro-based industriesactivities such as sugar mills and rice mills etc. in whichproduction activities are seasonal in nature.

5. Structural UnemploymentDue to structural changes in economy, structural unemploymentmay take place. Structural unemployment is caused due to a

decline in demand for the production in a particular industry.

6. Technological UnemploymentA kind of structural unemployment may take place in aneconomy because of technological improvement. Suchunemployment may be described as technologicalunemployment.

7. Cyclical UnemploymentCapitalist biased, advanced countries are subject to trade cycles.Trade cycles, especially during recession and depression phase

cause cyclical unemployment in these countries. Since cyclicalphase cannot be Permanente, cyclical unemployment remainsonly as a short-term phenomenon.

8. Chronic UnemploymentWhen unemployment tends to be a long-term feature of acountry, it is called Chronic Unemployment. Lack of developedresources and their utilization.



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9. Disguised UnemploymentUnemployment may be classified into (i) Open and (ii) Disguised The term-disguised unemployment commonly refers to asituation of employment with surplus manpower.

Disguised unemployment in the strict sense impliesunderemployment of labour.

Unemployment problems in India:-

In developed countries, unemployment of labour is mostlycyclical or frictional in nature. Cyclical unemployment can becured by increasing aggregate demand for goods.

Causes of unemployment in India:-

1. Population growth: - In India during the planning period,population has increased at the average rate of 2.5% butemployment opportunities owe not increase accordingly.

2. Change in age structure of population: - It is estimatedthat when population increases by 2.3% per year, the populationbelonging to the working age group increase by more than 4.5%per year.

3. Increase in labour force participation rate: - It showsthat percent of working population is actually ready to work at

existing wage rate. It is found that people now want the incomeas income of one person in family is not enough & henceunemployment increases.

Ans 13 (10):- Factors affecting demand for labour:-

In labour market, demand for labour is made by individual firms,which want to employ labour to carry out their production. Itmeans a firm is a buyer in the labour market. Unlike demand forconsumer goods, demand for labour is a derived demand.

Determinants or factors affecting demand for labour:-

1. Demand for commodities produced by labour: - Whendemand for commodities increases, firms wants to sell more forwhich they have to increase production. In such case, they needlabour as a factor of production. Thus in growing countries, thedemand for labour goes on increasing.



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2. Availability of Capital: - largely capital and labour arecomplementary factors of production. If more capital is available,private firms want to invest more. When they increaseinvestment and set up new production, they need more labour.

3. Substitution between labour and machinery: -Labour and capital can also be substituted for each other. Ifwork done by labour can also be performed by machinery,demand for labour well reduces.

4. Motives of the firm: - In modern economy, private firmsare joint stock companies. Professional managers run them. Theyhave many different motives. Sometimes firms have motives ofmaximum growth rate. To achieve this goal they keep investingand producing more. It creates larger demand for labour.

5. Wage Rate: - Price of labour is nothing but wage rateper unit of labour. Normally there is inverse relation betweenwage rate and demand for labour. If wage rate increase cost ofemploying labour also increases. Hence, firms reduce demand forlabour.

7115414 labour economics

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