Poverty & Unemployment – 03
Poverty line should be based on:
Normative level of adequate nutrition: Ideal and desirable level of nutrition.
Behavioral determination of non-food expenses: What people use or consume as per general behavior.
Nutritional Requirement: For normative levels of adequate nutrition – average requirements of calories, proteins and fats based on Indian Council of Medical Research (ICMR) norms, differentiated by age, gender and activity for all-India rural and urban regions is considered:
Calories: 2090 kcal in urban areas and 2155 Kcal in rural areas.
Protein: For rural areas 48 gm and for urban areas 50 gm.
Fat: For urban areas 28 gm and for rural areas 26 gm.
Poverty Threshold: Persons spending below ₹47 a day in cities and ₹32 in villages be considered poor.
Based on this methodology, Rangarajan committee estimated that the number of poor were 19% higher in rural areas and 41% more in urban areas than what was estimated using Tendulkar committee formula.
In 2015 the government had set up a task force under the chairmanship of Aravind Panagraiya to suggest new method for poverty estimation.
Multidimensional poverty index in India: a report
The global multidimensional poverty Index 2019 has placed India in the top 10 countries which is rapidly reducing poverty.
- India has lifted 271 million people out of poverty between 2006-2016.
- Improvements have been observed in areas such as assets, cooking fuel, sanitation and nutrition.
- Nutrition deprivation has reduced from 44.3% in 2005-06 to 21.2.5 in 2015-16.
- The situation of children is poor as 1 in3 children are multidimensional poor than 1 in 6 adults. Hence it is a cause of concern as malnutrition in children and global hunger index measures are quite alarming. Hence India is working on this respect with strategies like Poshan Abhiyan.
- The main aim of poverty alleviation has shifted from food security to nutrition security.
Income inequality, in economics, significant disparity in the distribution of income between individuals, groups, populations, social classes, or countries. Income inequality is a major dimension of social stratification and social class. It affects and is affected by many other forms of inequality, such as inequalities of wealth, political power, and social status. Income is a major determinant of quality of life, affecting the health and well-being of individuals and families, and varies by social factors such as sex, age, and race or ethnicity.
It shows the income inequality by drawing the line of perfect equality. A Lorenz curve is a graphical representation of income inequality or wealth inequality developed by American economist Max Lorenz in 1905. The graph plots percentiles of the population on the horizontal axis according to income or wealth. It plots cumulative income or wealth on the vertical axis, so that an x-value of 45 and a y-value of 14.2 would mean that the bottom 45% of the population controls 14.2% of the total income or wealth. In practice, a Lorenz curve is usually a mathematical function estimated from an incomplete set of observations of income or wealth.
The Lorenz Curve (the actual distribution of income curve), shows the proportion of income earned by any given percentage of the population. The line at the 45º angle shows perfectly equal income distribution, while the other line shows the actual distribution of income
- In a perfectly equal society, the “poorest” 25% of the population would earn 25% of the total income, the “poorest” 50% of the population would earn 50% of the total income and the Lorenz curve would follow the path of the 45° line of equality.
- As inequality increases, the Lorenz curve deviates from the line of equality; the “poorest” 25% of the population may earn 10% of the total income; the “poorest” 50% of the population may earn 20% of the total income and so on.
The Gini Coefficient, which is derived from the Lorenz Curve, can be used as an indicator of economic development in a country.
The Gini coefficient provides an index to measure inequality. It is a way of comparing how distribution of income in a society compares with a similar society in which everyone earned exactly the same amount. Inequality on the Gini scale is measured between 0, where everybody is equal, and 1, where all the country’s income is earned by a single person. It measures the degree of income equality in a population.
Higher value of Gini Coefficient means greater the income inequality
Note: It doesn’t Measuring inequality between different Social groups between Regions, between genders.
The Gini index or Gini coefficient is a statistical measure of distribution which was developed by the Italian statistician Corrado Gini in 1912. It is used as a gauge of economic inequality, measuring income distribution among a population.
The coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing perfect equality and 1 representing perfect inequality. Values over 1 are not practically possible as we don’t take into account the negative incomes. (Income can be 0 at its lowest but not negative)
Thus, a country in which every resident has the same income would have an income Gini coefficient of 0. A country in which one resident earned all the income, while everyone else earned nothing, would have an income Gini coefficient of 1.
As we know now, the Gini coefficient is an important tool for analyzing income or wealth distribution within a country or region, but,
Gini should not be mistaken for an absolute measurement of income or wealth.
A high-income country and a low-income one can have the same Gini coefficient, as long as incomes are distributed similarly within each country
Employment refers to the capacity in which a worker pursues gainful activity during the reference period. According to their status of emloyment, there are three types of emplyed workers, self employed workers, casual wage and regular wage employees.
Labour force participation rate is defined as the section of working population in the age group of 16-64 in the economy currently employed or seeking employment. People who are still undergoing studies, housewives and persons above the age of 64 are not reckoned in the labour force.it provides an indication of the size of the supply of labour available to engage in the production of goods and services, relative to the population at working age.
Full Employment :
Full employment is an economic situation in which all available labor resources are being used in the most efficient way possible. Full employment embodies the highest amount of skilled and unskilled labor that can be employed within an economy at any given time.
Under Employment :
It is a situation where a person is employed in a job, which is not commensurate with his/her qualification, skill set and experience. Under theis condition, capabilities of the workers are not utilised to the optimum level.
Unemployment refers to a situation, when a person is able and willing to work at the prevailing wage rate, but does not get the opportunity to work. the term unemployment is directly related with the concept of labour force, because the people, who are not included in labour orce cannot be regarded as unemployed.
UNEMPLOYMENT RATE The unemployment rate is defined as the number of persons unemployed per 1000 persons in the labour force (which included both the employed and the unemployed).
Types Of Unemployment:
Cyclical Un Employment :
This type of Un Employment occurs when all those who want to work cannot get employed because there is not enough demand in the market for their work. It s associated with a general depression in the overall economy. It occurs due to economic cycles of boom and depression.
During depression demand falls and production goes down which leads to fall in level of employment.
Frictional Un Employment / Functional Un Employment :
Frictional unemployment occurs when workers leave their old jobs but haven’t yet found new ones. This is temporary Unemployment and voluntary search for job may take considerable amount of time resulting in frictional Un Employment.
Frictional unemployment is short-term and a natural part of the job search process. In fact, frictional unemployment is good for the economy, as it allows workers to move to jobs where they can be more productive.
This type of Un Employment may be high in an economy if people change the job frequently for some reason and also when the economy is not doing so well.
Structural Un Employment :
Structural unemployment exists when shifts occur in the economy that creates a mismatch between the skills workers have and the skills needed by employers.
An example of this is an industry’s replacement of machinery workers with robots. Workers now need to learn how to manage the robots that replaced them. Those that don’t learn need retraining for other jobs or face long-term structural unemployment.
When structural Unemployment below certain level it implies that the country is not going for technological adaptation and it is not good for economy.
Frictional and structural Un Employment to is said to be called Natural rate of Un Employment. These two types of Unemployments are unavoidable (or) natural.
Note: Cyclical, Frictional and structural Un Employment are major in industries & Service sectors only.