Most of the unemployment in India is structural in nature. Examine the methodology adopted to compute unemployment in the country and suggest improvements. (250 words) (UPSC GS 3 2023/15 marks)

Introduction:

Structural unemployment occurs when there is a mismatch between the skills possessed by the workforce and the skills demanded by the job market. It is not related to temporary economic fluctuations but is a long-term issue.

Methodology to Compute Unemployment in India:

1. Labour Force Survey: The primary source of unemployment data in India is the National Sample Survey Organization (NSSO) conducted by the Ministry of Statistics and Programme Implementation. It uses sample surveys to estimate employment and unemployment figures.

2. Usual Principal Status (UPS): The UPS approach classifies individuals as employed, unemployed, or not in the labor force based on their primary activity during a reference period of 365 days preceding the date of the survey.

3. Current Weekly Status (CWS): This method classifies individuals based on their activities in the reference week preceding the survey, providing a snapshot of current employment status.

4. Unemployment Rate Calculation: The unemployment rate is calculated as the ratio of the number of unemployed individuals to the total labor force (those employed plus those unemployed).

5. Category-wise Data: The data is further categorized by age, gender, education, and urban/rural areas to analyze unemployment patterns in different segments of the population.
Need for Improvements

There are certain drawback in these methodologies as follows, which necessities the reforms:

1. Informal Sector Bias

2. Limited Frequency of Data Collection

3. Neglects Skill Mismatch and Structural Unemployment

4. Subjectivity in Reporting

5. Ignores Discouraged Workers

Suggested Improvements:

1. Skill Development Programs: Invest in comprehensive skill development programs to bridge the gap between the skills possessed by the workforce and the skills demanded by the job market.

2. Enhanced Data Collection: Improve the frequency and accuracy of labor force surveys. Conduct more frequent surveys to capture changes in unemployment patterns, especially during economic fluctuations.

3. Regular Sectoral Analysis: Regularly assess the labor market by industry and sector to identify structural mismatches. This can help policymakers target interventions effectively.

4. Promote Entrepreneurship: Encourage entrepreneurship and provide support for small and medium-sized enterprises (SMEs) to create more job opportunities.

5. Education Reforms: Reform the education system to align curricula with industry needs, promoting vocational education and practical skills development.

6. Labor Market Information System (LMIS): Establish an effective LMIS to provide real-time labor market information, aiding both job seekers and employers in making informed decisions.

Conclusion:

Structural unemployment remains a significant challenge in India. Accurate data collection and a focus on addressing the skills gap through education, training, and entrepreneurship support are crucial to mitigating this issue. By implementing the suggested improvements, India can work towards a more dynamic and inclusive labor market, reducing structural unemployment over time.