An Analysis of the fastest growing Indian economy facing the situation of unemployment-A Dichotomy

Abstract

Classical economist believed that full employment was a normal situation in the economy- in other words all those persons, who are qualified to work, willing to work and able to work at the current wage rate, get the job without any considerable delay. Supply could create its own demand, hence there was no need for any kind of Govt. Intervention in the economic affairs of any economy (Production Arises Due to Joint Actions of all the factors of Production but labour is the most important) If disequilibrium exists between the forces of demand and supply conditions of labour, commodity and savings, it could be automatically adjusted with the flexibility of wage rate, price and interest rate. The real wage rate is determined at a point where the demand of labour is equal to supply of labour. According to Pigou, decline in Money wages increases the volume of employment through reduction in cost and prices of Goods, (Since prices do not respond in the same proportion, therefore real wage also declines with the fall in nominal wage rate) During the great depression of thirties, workers were willing to accept a nominal wage cut but volume of employment was constantly declining Keynes came on this juncture and gave his macro-economic analysis wages are not only a part of the cost of production but also the income of the workers. This reduces the level of aggregate demand and hence volume of employment. Psychologically nobody wants money wage to be cut (neither it is theoretically sound, nor practically possible). In almost all countries laws have been formulated for minimum wages, unemployment insurance, sickness, maternity benefits and a number of other social security measures (Transfer payments). UN report (2010 to 2019) shows that working population (population between the age 15-64) is 67% percent and on the other side, India has become a fastest growing economy in the world, but jobs are not increasing Fundamentally when an economy grows it means output and employment both the variables respond in the positive direction An attempt has been made to examine this mismatch /dichotomy in this research paper.