business environment assignment.docx - Q1 Causes of unemployment Cause 1 Lack of the Stock of Physical Capital The major cause of unemployment and

business environment assignment.docx - Q1 Causes of...

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Q1 Causes of unemployment Cause 1# Lack of the Stock of Physical Capital: The major cause of unemployment and underemployment in underdeveloped countries like India is the deficiency of the stock of capital in relation to the needs of the growing labour force. A nation’s stock of capital can be enlarged by increased investment which, in the absence of any unutilized resources, requires additional saving on the part of the community. The country’s ability to offer productive employment to the new entrants in the labour market has been severely limited. Cause 2# Use of Capital-Intensive Techniques: An important factor responsible for slow growth of employment has been the use of capital-intensive techniques of production, even in consumer goods industries where alternative labour-intensive techniques are available. It is argued by them that the alternative labour-intensive techniques have low productivity and low surplus-generating capacity. Capital-intensive techniques are used in industries despite the condition of labour abundance in the economy. First reason is the relatively low price of capital. Second, higher wages of labour in the organised sector relative to their productivity under pressure from trade unions. Thirdly, rigid labour laws also discourage the employment of labour. Fourthly, Research and Development (R & D) activity has not been adequately directed to discover and identify labour- intensive appropriate techniques to be used in industries which, though labour-intensive, have also reasonably good productivity. Cause 3# Inequitable Distribution of Land:
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Another cause of unemployment prevailing in the developing countries like India is inequitable distribution of land so that many agricultural households have no adequate access to land which is an important asset for agricultural production and employment. Sub-division of land holdings under the pressure of rapid population growthhas further reduced access to land for several agricultural households. As a result many persons who were self-employed in agriculture have become landless agricultural labourers who suffer from acute unemployment and underemployment. Cause 4# Rigid Protective Labour Legislation: Another reason for the slow growth of employment in the organised sector has been the existence of unduly rigid protective labour legislation which makes it very difficult to retrench a worker who has been employed for 240 days. Labour legislation is so much rigid that it is even difficult to close down the unit and quit the industry. Thus, this excessively protective labour legislation induces private entrepreneurs to prefer the maximum use of capital in place of labour. Cause 5# Neglect of the Role of Agriculture in Employment Generation: An important factor responsible for slow growth of employment opportunities is the neglect of agriculture for generating employment opportunities. Agriculture though containing surplus labour can generate employment opportunities if proper strategy for its development is adopted. For instance, the empirical evidence shows that on
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