Economic and Social Issues - Concepts

8/8/2019 Economic and Social Issues - Concepts

1/22

ECONOMIC AND SOCIAL

ISSUES - CONCEPTS

INTRODUCTION

PROF.M.GURUPRASAD, AICARBUSINESS SCHOOL


2/22

UNEMPLOYMENT

A person is defined as a worker or as employedprovided he/she participates in any economically

productive activity. India is an under-developedthough a developing economy. The nature of unemployment, therefore, sharply differs from theone that prevails in industrially advanced countries.


3/22

NATURE OF UNEMPLOYMENT Lord Keynes diagnosed unemployment in advanced countries to be

the result of a deficiency of effective demand. It implied that insuch economies machines become idle and demand for labour fallsbecause the demand for products of industries is no longer there.Thus Keynesian remedies of unemployment concentrated onmeasures to keep the level of effective demand sufficiently high so

that the economic machine does not slacken the production ofgoods and services.

With the growth of Keynesian remedies, it has been possible tomitigate cyclical unemployment. Similarly after the Second WorldWar, when wartime industries were being closed, there was agood deal of frictional unemployment caused by retrenchment inthe Army, ordinance factories etc. These workers were to beabsorbed in peacetime industries.


4/22

NATURE OF UNEMPLOYMENT

But more serious than cyclical unemployment orfrictional unemployment in an underdevelopedeconomy like India is the prevalence of chronic

under-employment or disguised unemployment inthe rural sector and the existence of urbanunemployment among the educated classes. Itwould be worthwhile to emphasize here thatunemployment in under-developed economies lie

India is not the result deficiency of effectivedemands in the Keynesian sense, but aconsequence of shortage of capital equipment orother complementary resources.


5/22

How is employment or unemployment measured in India and what is its

coverage?

In India, the National Statistical Survey Organisation (NSSO) collects data onemployment and unemployment using alternative reference periodscorresponding to three approaches. These are: the `usual status' (US)approach, based on a reference period of one year; the `current weeklystatus' (CWS) approach, based on a reference period of one week; and the`current daily status' (CDS), based on the activity pursued on each day of

the reference week.

While all the three approaches are used for collection of data onemployment and unemployment in quinquennial (after every five years)surveys, the first two approaches are only used for the intervening annualsurveys. Every fifth year, the sample size is of the order of 120,000

households. In the intervening years, the sample size is of the order of40,000 households. Each survey is divided into four sub-rounds, with eachsub-round of three months duration. The survey covers the whole of therural and urban areas of India, except for a few inaccessible and difficultpockets. The activity status of each person in the household is collectedwith reference to the previous 365 days, the previous 7 days and daily for7 days.


6/22

How is employment or unemployment under the threeconcepts defined?

A person is considered to be ``working or employed'' on US basis if he or she wasengaged for a relatively longer time during the past year in any one or more work-related economic activities. A person is considered unemployed on this basis, if he orshe was not working, but was either seeking or was available for work for the majorpart of the reference year.

A person is considered to be working or employed on CWS basis if the person wasengaged for at least one hour on any one day of the previous week on any work-related economic activity. A person is considered unemployed under this concept if heor she had not worked even for one hour during the week, but was seeking or wasavailable for work.


7/22

How is employment or unemployment under the threeconcepts defined?

The CDS approach attempts to classify employment by person-days, rather than by persons. A person is considered to be`working' (employed) for the entire day if he/she has worked fourhours or more during the day. If a person has worked one hour ormore, but less than four hours, he/she is considered to be

`employed' for half the day, and `seeking/available for work'(unemployed) or `not available for work' (that is, not in the labourforce) for the other half of the day depending on whether he/sheis seeking or available for work.The US unemployment rate is generally regarded as the measureof chronic open unemployment during the reference year; the

CWS unemployment rates also measure chronic unemployment,but with the reduced reference period of a week. The CDS isconsidered to be the most comprehensive measure ofunemployment, including both chronic and invisibleunemployment.


8/22

Why is the usual status concept

the most commonly used? Of the three concepts, the usual status covers 'principal' and'subsidiary' workers and is the closest to the concept used in theCensus to enumerate workers. By including even those who workin a subsidiary capacity, e.g. students, pensioners, etc, the usualstatus concept comprehensively covers all those engaged in or

seeking economic activities. Moreover, the usual status concept isseen to yield more stable estimates of employment in contrast tothe other two concepts which have shorter reference periods of aweek or an average day of the week respectively. Projections oflabour force and employment have, therefore, been made on theusual status concept, and qualified, where necessary, on the basis

of the other two concepts. The Ninth Plan document envisages full employment by `07, contingent

upon acceleration in growth of employment in the post-Ninth Plan periodto 2.8 per cent compared to a realised growth of 2.36 per cent (1978-94)and a projected growth of 2.44 per cent in the Ninth Plan (1997-02). Thiswould require GDP to grow at 7.7 per cent per annum during the post-Planperiod.


9/22

POVERTY

What is the poverty line? The poverty line is an abstraction that's essential to measure how poor a

country is. That knowledge is useful to make policy, to design politicalcampaigns, for development. Behind statements like, `40 per cent ofIndians are poor,' there is an implicit poverty line.Among the most common ways to define a poverty line is a broad income-based level, pegged to, say, 60 per cent of a country's average income per

head. The average Indian earns about $400, or Rs 17,600 per year. Goingby the 60 per cent of income rule, a poor Indian has an annual income ofRs 10,560, or Rs 880 per month. India draws a poverty line by calculatingthe `minimum' cost of living that can sustain people. For very poorcountry like ours, this boils down to a nutritional requirement: the cost ofthe minimum number of calories needed to keep people alive.

.


10/22

Limitations

This looks like a fairly foolproof method, but has some built-in

glitches. For example, calorie needs vary across genders (womenneed fewer calories than men do) and age (children and theelderly need fewer calories than working adults). A very roughaverage for the required intake is 3,000 calories daily for working

men and about 2,900 for working women. The basket of foodschosen can distort measurement. So can the prices ofcommodities within the basket.

India's poverty line is calculated by asking a simple question: howmuch would a person need to spend to get this minimal basket?

The answer gives an expenditure figure, which is the poverty line.People whose spending falls below this number are poor -- `belowthe poverty line'.


11/22

Do these indices matter in real

life? They do matter for good politics and well-designed policy.

India's poverty estimates are a subject of much heat andlittle light. Recently, two Princeton economists have shownhow erroneously measured prices resulted in the National

Sample Survey (NSS) data lead to wrong measurement ofthe degree of poverty. Policy makers, who advisepoliticians, should get savvy with state-of-the-art tools.


12/22

Measurement of poverty?

What is a Gini index?

Gini index is a measure of inequality in the income distribution inan economy. The index measures the extent to which thedistribution of income (or, in some cases, consumption

expenditure) among individuals or households within an economydeviates from a perfectly equal distribution.

What is the Gini index for India?

The World Bank publishes the Gini index numbers for differentcountries in its 'World Development Indicators'. The latest

publication puts the Gini index for India at 37.8. The distributionin India is, thus, less equitable than in France (32.7), Germany(30) and Poland (31.6). But it is more equitable than in China(40.3), Malaysia (49.2) and Russia (48.7).


13/22

How is it measured?

For this purpose, a curve called Lorenz curve is plotted first. This curve has on its X axisthe cumulative number of recepients of income as revealed in an income survey. Andon the Y axis, it plots the cumulative proportion of income received. The curve isplotted in a manner so that it starts from the poorest group of individuals orhouseholds in the economy. Then a hypothetical line of perfect equality is plottedwhich is nothing but a line crossing the origin at 45 degrees to the X-axis.

Gini index is then measured as the area between Lorenz curve and the line of perfectequality. Thus, a Gini index of zero would mean a situation of perfect equality and an

index of 100 would mean a perfect inequality.

ALSO READEconomics for everyone

The Paradox of Poverty

http://www.indiainfoline.com/Markets/News/Ar

chived/Economics-for-everyone-The-Paradox-

of-Poverty/877999969


14/22


15/22

POPULATION/DEMOGRAPHY/HEA

LTH

CONCEPTS What is meant by birth rate and death rate?

These are two important measures of vital statistics. Birthrate relates to the number of new births per thousand ofpopulation in the country. Similarly death rate refers to the

number of deaths per thousand of population in thecountry.

Both these measures are estimated through the SampleRegistration System. An advantage of these measures liesin the frequency of this data. Unlike the census of

population, which is carried out only once in a decade, thebirth rate and death rate data are released at an annualfrequency. Therefore, these numbers can be used forestimating population for the period between two rounds ofcensus.


16/22

What determines the trends in

birth rate and death rate? Both these measures are sensitive to the stage of development of theeconomy. As an economy develops, the birth rate falls. The death rate fallsat the same time reflecting the improved access of the population tohealthcare facilities. However, during the early stages of economicdevelopment, the death rate often falls faster than the birth rate; andhence the population might increase at a faster rate for some period.

What are the trends in India's birth rate and death rate?In line with the behaviour outlined above, India's birth rate as well as thedeath rate have fallen in the recent times. Between 1951 and 1981, thefall in death rate was sharper (from 25.1 to 12.5) compared to the fall inthe birth rate (from 40.8 to 33.9). Subsequently, the birth rate has fallenfurther to 25.8 in 2000 and the death rate has fallen to 8.5.


17/22

SEX RATIO

What is a sex ratio?The sex ratio refers to the number of females in the given population per

1,000 males. This is considered to be an important social development

indicator and demographic measure in the population studies. As per the

latest census of India for 2001, the sex ratio for the country stands at 933.

The sex ratio for the child population (below 6 years of age) stands at 928.

What is the significance of sex ratio?

Sex ratio indicates the gender equality in a society and therefore, indicates

the level of social development. The ratio for 0-6 aged population is quite

significant as it indicates whether the girl child is treated on par with a boy

child in terms of medical care and attention at the time of birth. Within

India, the sex ratio is usually lower for the less developed regions than inthe more advanced states of West and South India.

Sex ratio is also determined by the phenomenon of migration. Very often

male workers migrate alone to cities leaving their other family members in

the home town / village. Therefore, those cities that attract migrants on a

large scale generally tend to have a lower sex ratio.


18/22

INFANT MORTALITY RATE

What is meant by infant mortality rate?

Infant mortality rate (IMR) refers to the number of infants dyingbefore reaching one year of age per thousand live births. The IMRis an important indicator of socio-economic development. It isdependent upon the spread of healthcare facilities and the

attention received by mothers and newly born kids at the time ofbirth.

What has been the trend with respect to IMR in India?The IMR in India has been brought down from 146 in 1951 to 68by the year 2000. This indicates the improvement in the country'ssocio-economic status. However, data indicate that there is a wide

disparity on this parameter - across States as also across differentincome groups. According to the World Bank, IMR for the richestquintile of Indian population was 44 in 1992-93, compared to 109for the poorest quintile.


19/22

WELFARE MEASURES

Broadly speaking welfare measures try to present a picture of thematerial well being of society as a whole, though as with any sortof measure of averages, it is not indicative of each and everyindividual's state. The easiest and most widely used measure ofwelfare is per capita income. This is simply the average income of

all citizens of a country, obtained by dividing the total income ofthe country by its population.


20/22

WELFARE MEASURES

Are average income indicators good enough to measurewelfare?

Per capita NNP is still a very crude measure of welfare, since itdoes not say anything about literacy, health and nutrition,employment opportunities, stability of jobs, rule of law, absence

of corruption, leisure, and other such indicators that make up thequality of life. The UN Development Programme UNDP brings outa Human Development Index (HDI) each year, which rankscountries according to their relative position on these indicators,including among other things issues related to empowerment of

women, child labour and so on.


21/22

LITERACY RATE

How is the literacy rate computed?

The Census gives information on the number of literate persons in the population. Aperson is defined as a literate person if he / she is able to read and write withunderstanding in any language. The literacy rate is calculated as the percentage ofliterate persons to the population aged 7 and above. This is considered to be animportant measure of human development. The female literacy rate is especially

looked at as an indicator of the development of a region.What has been the trend in India's literacy rate?

The literacy rate in India has been rising - though perhaps not as fast as what theplanners have usually aimed at. As per the latest census of 2001, literacy rate stoodat 65.4% in India, compared to 52.2% in the 1991 census. The female literacy ratehas increased from 39.3% to 54.2% over the same period.


22/22

THANK YOU

Documents

Economic and Social Issues - Concepts