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ISSUES OF UNEMPLOYMENT: A LEGAL STUDY


Ananya Kundu

(Heritage Law College)

Introduction

People loitering around the streets, looking for jobs, some standing in long queues, some sitting outside the recruiter’s office waiting for their turn; a familiar sight to behold!

Unemployment is a social evil slowly taking over the sanity of human race. It is an age-old socio-economic challenge that the world is not only facing but trying hard to conquer.

Meaning

Unemployment steps in when a person is earnestly looking for a job but is unfortunate to find one. It can be best described as the circumstance in which a person is unable to promote his labour power in the employment market irrespective of his willingness. Study shows that it is rarely the inability or incompetence of individuals. Rather, it is the inadequacy of the labour market which should be accountable for such a grave issue.


Historical aspect

Unemployment is an age-old phenomenon dating back to 1933. It was one of the consequences of the Great Depression where the rate was as high as 24.9%. In between 1931 and 1940, this rate was persistently high exceeding a good 14%, but in the due course, declined to a great extent. However, it was again ascended and surpassed 10% in 1982. History has witnessed a great deal of upward and downward movement in the employment graph.


Classification

For better apprehension, Unemployment can be categorised into four broad groups, mentioned underneath.


· Frictional Unemployment

Frictional Unemployment is the consequence of people changing different jobs for a better standard of living, within an economy. After a person terminates his professional relationship with a certain company, some amount of time is required to be placed at another job. This time period between two different jobs leads to unemployment. Recent graduates joining the workforce also amount to unemployment as it takes time to acquire knowledge about the practical implementation of the work and to be a professional. Although frictional unemployment cannot be avoided, but it provides a sigh of relief to learn that frictional unemployment is momentary and generates minimal issues for an economy.


· Cyclical Unemployment

High unemployment rates owe its origin to cyclical unemployment. It is the result of downtown in trade fluctuation during recession. Once recession ceases to exist and economic growth steps forward, cyclical unemployment declines. However, one of the major reasons behind the study of economics and the aim of introducing various economic policies by the Government to trigger growth of economy during recession, is for the prevention and reduction of cyclical unemployment.


· Structural Unemployment

Structural Unemployment is the product of technological change or technological progress in the economic framework. In simpler terms, when manpower is displaced with machines equipped with new technologies to do the same work but at a better speed and at lower costs, people working in such industries face termination and end up being unemployed for a long time, that category of unemployment is referred to as structural unemployment.


· Institutional Unemployment

Public-sector unemployment, as institutional unemployment might also be called, is another category arising from the public sectors’ incapacity to recruit people and provide employment. However, irrespective of the incompetency of the public sectors to provide jobs at a larger scale, these people don’t seem to give up on their aspirations to bag a Government job and look for employment in the private- sectors. Government strategies including generous social benefit programs, restrictive occupational licensing laws and minimum wage policies; the situation of labour market including discrimination in recruiting and regulation of wages; and labour market association such as high rates of organization, etc., all have a contribution in institutional unemployment.


Unemployment is serious concern in India and other Third World nations of the world than in progressive motorized countries. This is a result of inadequate economic development and escalation.


Unemployment in India

The biggest concern of the Indian citizens is unemployment. A good bulk of India’s population is dependent on labour-market, either self-employment or working for others, as a major source of livelihood. And, challenges arising out of the market, for instance, employment has been a field of consideration in possibly every national plan since pre-independent era. A survey conducted by Ipsos Public Affairs in 2019 revealed that 46% of the issues are due to unemployment followed by criminal offenses and violence at 37%, commercial and political corruption at 34%, terrorism at 29%, and poverty and social injustice at 28%. The shortage of capital with respect to the necessity of the uprising population is a major cause of unemployment in underdeveloped and developing countries like India. Another major ground behind the sluggish increase in employment is the utilization of monetary-based techniques where there is availability of labour-inclusive techniques.


Causes of Unemployment

Economists from around the world determined various sources of unemployment. The major causes are identified to be the structural reduction of industry in an economy, and the cyclical imbalance in economic pursuit. The former ones create a relocation in the employment structure with technological innovation where companies replace certain outdated expertise with progressive technologies. The latter one however takes place when companies lay off the employees during the period of recession.

Socio-economic consequences

Unemployment is an important determinant to indicate the structure of economy in a nation, as it indicates the competency of labourers to effortlessly acquire constructive work and contribute to the fruitful production of the economy. Greater number of unemployed labourers is directly proportionate to less economic productivity. Also, unemployed workers require to uphold at least minimal consumption to sustain. Therefore, it can be concluded that an economy comprising of higher unemployment rate generates lower output with a decline in fundamental resources for consumption.


High rates of unemployment can cause severe social anguish in the community. It is a major cause of poverty. Global unemployment is a grave challenge with the tally of unemployed individuals rising to 1.1 billion in the most populous countries. Poverty is a result of people’s incompetency to buy basic commodities. With rise in number of unemployed labourers, poverty has become a basic phenomenon.


Dominance of Unemployment on Mental Health

The global challenge of unemployment has taken a toll on the psychological well-being of the mass. This has been the case since the last two-hundred years. Researches conducted at a global level reveal detailed reports on unemployment taking a toll on the mental health of people. Eisenberg and Lazarsfeld deduced in their 1938 review paper that it leads to emotional instability. Another research of 1996 conducted by Darity and Goldsmith came to a conclusion that unemployment causes the mental disorder of anxiety based on a feeling that one cannot control his life. It can result in decrease in social status and can make a person inferior in front of family, friends or society at large. This point gained much support in the study conducted by Bjorklund in 1985.


Unemployment and Crime

Crime is disincentive to social prosperity and progress. The relationship between unemployment and crime is a very controversial topic of debate in the discipline of law and economics. Crime or criminal offenses has been a crucial affair to the society since day one, and has increased over time. It has been given immense consideration by policymakers and scholars from around the world covering every discipline, including law, criminology, psychology, economics, sociology, etc. Numerous studies from around the world revealed that crime is partially influenced by socio-economic conditions, specifically unemployment. Theoretical researches have envisaged both constructive and destructive involvements of crime with economic pursuits, particularly rates of unemployment.


This constructive and destructive link between unemployment and crime was put forward by D. Cantor and K.C Land in 1985 through the Cantor and Land model. The effect of economic recession, measured on the basis of unemployment rate was separated by this model of unemployment and crime into two impeding impacts. Another study conducted by Becker, Ehrlich, in the early 20th Century examined criminal offenses on the basis of cost and benefit of crime. The loss of justifiable income of an individual and penalties with respect of being caught comprises of the cost of committing crimes, whereas, the stolen property comprises of the benefit. This analysis, when applied to understand the bond between unemployment and crime, it is concluded that with an upward rise in the unemployment curve, the slope of crimes also goes up.


An annual survey on “Angste der Deutschen” which is supposedly a survey on anxiety of German people conducted by a German Insurance company, namely R.V Versicherung, exposed that the fear and anxiety to become a victim to criminal offenses tops the list of fears of the Germans. Another fear, if not topping the list, but frequently makes its place in the top five is the fear of increasing unemployment in the country. All most half of the total examinee revealed their fear of being unemployed in the early 2000, but this rate eventually increased to 68% in 2005.


Belton M. Fleisher in 1963 conducted the very first research to analyse the effect of unemployment on crimes. From the analytics of The FBI Uniform Crime Reports for criminal offenses related to property over a period of 1932 to 1961 covering various states including Chicago, Boston, Cincinnati, etc., Fleisher observed that the variability of the arrest rates in respect of unemployment rate is with a range of 0.10 to 0.25.


Categorising crimes in two sections, blue-collar crimes are committed by individuals belonging to the socially inferior classes in contrast to white-collar crimes which are linked with people belonging to the socially superior classes. Blue-collar crimes cannot be formally categorised, it refers to general group of offenses. They are fundamentally small-scale and are carried out for instantaneous profit of the person or group committing that crime. Blue-collar crimes cover theft, assault, burglary, Narcotic production and delivery, and murder.

Individuals unemployed because of reasons that are not socially acceptable and are unable to find a job, are more prone to commit burglary or robbery.


Unemployment has different impact on different age groups. Unemployed individuals between the age group of 18 to 29 years are four times more prone to commit crimes including theft or robbery than unemployed individuals around the age of 30 years.


Unemployment and Juvenile Delinquency

Crimes committed by adults has always been a social issue. However, the increase in apprehension in the society is a result of the increasing rate of crimes committed by juveniles. Unemployment is not supposed to increase the rates of juvenile delinquencies as not all juveniles are expected to be employed in the labour market. In United States, children under the age of 14 might not be employed. Children in the age group of 14 to 16 years might be allowed to work for limited hours, and children in the age group of 16 to 18 years may however be employed in non-hazardous jobs. On the other hand, in China, employment of children below the age of 16 is illegal. Employment of children between 16 and 18 years are although legal but there are certain restrictions in employing children between that age group.


However, researches conducted by scholars, such as, Fougere D, Kramarz F and Pouget J in 2009; and Narayan P.K and Smyth in 2004, have concluded that unemployment is related to juvenile delinquency in a positive way.


Unemployment Insurance Fraud

Unemployment Insurance, also known as unemployment benefit, is a state-ensured insurance which provides financial aid to the unemployed mass of the country. However, one has to meet the basic criteria to be eligible to obtain such monetary help. This criterion varies with different nations and their states.


In India, insured individuals under Unemployment Insurance are eligible to receive benefits for unemployment or joblessness where they were not responsible for losing their job. The Government provides this aid and not any insurance company. However, this insurance is made accessible for a limited period along with fundamental eligibility criteria. For instance, individuals with voluntary unemployment or self-unemployment shall not be entitled to the insurance.


Unemployment Insurance Fraud is committed by individuals who deliberately and proposedly show fake statements and evidences to obtain the payments for insurance of unemployment. These misinterpretations and lies might result in fraud charges if used to receive payments arising out of insurance for unemployment.


In California, Unemployment Insurance include continuation of collecting payment of insurance even after being employed again without reporting about the new work and wages; collection of benefits more than one is allowed to obtain by working part-time and not reporting about the earnings; employed at temporary jobs and not producing the earnings while collecting Unemployment Insurance benefits; etc. Washington reported several cases of unemployment insurance fraud throughout the year. The administration claimed that criminals have been taking the advantage of job losses in order to steal unemployment benefits from those in need. As a result of this, a lot of needy Americans are deprived of the monetary aid they deserve.


India has been a victim of unemployment insurance fraud amounting to around Rs 45,000 crore in the year 2019. Despite such loss, the country is deprived of any insurance fraud law that would control, regulate and punish possible cases of insurance fraud.


Efforts to unemployment

In India, Articles 14 to 16, Article 19(1)(c), Articles 23 and 24, Article 38, and Articles 41 to 43A of the Constitution give attention to labour rights. Article 14 provides equality before law, Article 15 prohibits any kind of discrimination against the citizens, and Article 16 provides extension to the fundamental right of equal opportunity while employing or recruiting under the State Government. Article 19(1)(c) provides the citizens the right to form association. Article 23 restricts trafficking and forced labours, while Article 24 prohibits employment of children under the age of 16 years in any factory, mine, or any hazardous occupation.

Although, Article 38 and Articles 41 to 43A contained in Part IV of the Constitution are non-enforceable rights, but it shall be the duty of the states to implement these provisions. Article 38(1) makes it a duty of the state to promote the welfare of the people. Article 38(2) minimises the inequalities in income in all other jobs. The National Rural Employment Guarantee 2005 makes an attempt to implement Article 41 which provides the right to work. Article 42 obliges the state to take steps to secure better conditions for work and maternity relief. Article 43 provides that workers shall have the right to a standard living. Article 43A requires the states to secure workers’ participation in various undertakings.

In U.S certain benefits are provided to the unemployed workers in the form of insurance and other monetary aid which is mandatorily funded by the Government.


Conclusion

Unemployment is a serious concern in almost all parts of the world. It is the root cause of all social, economic and legal issues that the world is currently facing. Thus, it is concluded that productive efforts shall be made to at least decrease the rate of this social evil if not eradicate at all.


References

1. Lawrence H. Summers on “Unemployment” retrieved from ‘The Library of Economics and Liberty’ www.econlib.org

2. Rajnish Hooda on “Effects of unemployment and its relationship with crime” Volume 4; Issue 2; March 2018; Page No. 301-303 retrieved from ‘International Journal of Law’ www.lawjournals.org

3. Jim Chappelow on “Guide to Unemployment” reviewed by Brian Barnier retrieved from ‘Investopedia’ www.investopedia.com

4. Kimberly Amadeo on “Fictional Unemployment explained” retrieved from ‘the balance’ www.thebalance.com

5. Kimberly Amadeo on “Cyclical Unemployment: Causes and Effects” retrieved from ‘the balance’ www.thebalance.com

6. “Institutional Unemployment” retrieved from ‘Glosbe’ www.glosbe.com

7. Tejvan Pettinger on “Causes of Unemployment” retrieved from ‘Economics Help’ www.economicshelp.org

8. Kimberly Amadeo on “Seven Causes of Unemployment” reviewed by Eric Estevez retrieved from ‘the balance’ www.thebalance.com

9. Tess Hinteregger on “A Global Dilemma: How Unemployment Creates Poverty” retrieved from ‘Borgen Magazine’ www.borgenmagazine.com

10. “Poverty and Unemployment: Exploring the Connections” retrieved from ‘Teaching Tolerance’ www.tolerance.org

11. Mary Corcoran and Martha S. Hill on “Unemployment and Poverty” Vol 54, No. 3 (Sep., 1980), pp. 407-413 published by ‘The University of Chicago Press’ retrieved from ‘JSTOR’ www.jstor.org

12. David Fryer and Rose Fagan on “Poverty and Unemployment” under ‘Poverty and Psychology’ pp. 87-101 retrieved from ‘Springer Link’ www.link.springer.com

13. Gaurav Shukla, Gloria Lotha and Aakansha Gaur on “Poverty” retrieved from ‘Encyclopaedia Britannica’ www.britannica.com

14. “History of Social Security” retrieved from ‘History of Social Security in Switzerland’ www.historyofsocialsecurity.ch

15. “Unemployment and Mental Health” retrieved from ‘Institute of Work and Health’ www.iwh.on.ca

16. Horst Entorf and Philip Sieger on “Does the link between Unemployment and Crime depend on Crime level? A Quarantile Regression Approach” IZA DP No. 8334 published in July 2014 retrieved from ‘IZA’ www.ftp.iza.org

17. Kangoh Lee on “Crime and Unemployment” retrieved from ‘Encyclopaedia of Law and Economics-Springer Link’ www.link.springer.com

18. Mathew D. Mellick from Illinois Wesleyan University on “The Relationship between Crime and Unemployment” Vol 11, Issue 1, Article 13 published in 2003 retrieved from ‘The Park Place Economist’ www.digitalcommons.iwu.edu

19. Belton Fleisher on “The effect of Unemployment on Juvenile Delinquency” Vol 71, 543 published in 1963 retrieved from ‘The University of Chicago Press Journals’ www.journals.uchicago.edu

20. Zhao (Jim) Zhang of University of Illinois under the supervision of Hassan Arvin Rad on “Unemployment and Juvenile Delinquency” retrieved from www.economics.illionois.edu

21. “Unemployment continues to remain biggest worry for Indians: Survey” edited by Chitranjan Kumar retrieved from ‘Business Today’ www.businesstoday.in

22. Subho Mukherjee on “6 causes of Unemployment in India” retrieved from ‘Economics Discussions’ www.economicsdiscussion.net

23. T.N. Srinivasan on “Employment and Unemployment since the Early Seventies” JEL Codes: J21, J64 published on November 30, 2006 retrieved from ‘Stanford: Center for International Development’ www.kingcenter.stanford.edu

24. Prashasana Srivastava on “Crime, Unemployment and Society in India: Insights from Rape Data” Vol. 15, Issue 1, Article 17 retrieved from ‘Undergraduate Economic Review’ www.digitalcommons.iwu.edu

25. “Unemployment, economic crisis could trigger spurt in crimes: Criminologists” retrieved from ‘The New Indian Express’ www.newindianexpress.com

26. “Unemployment Insurance Fraud” retrieved from ‘EDD: State of California’ www.edd.ca.gov

27. “Unemployment Insurance Fraud” retrieved from ‘Department of Employment Services’ www.does.dc.gov

28. “Unemployment Benefits” retrieved from ‘Employment Security Department’ www.esd.wa.gov

29. Article 14 of the Indian Constitution

30. Article 15 of the Indian Constitution

31. Article 16 of the Indian Constitution

32. Article 19(1)(c) of the Indian Constitution

33. Article 23 of the Indian Constitution

34. Article 24 of the Indian Constitution

35. Article 38(1) of the Indian Constitution

36. Article 38(2) of the Indian Constitution

37. Article 41 of the Indian Constitution

38. Article 42 of the Indian Constitution

39. Article 43 of the Indian Constitution

40. Article 43A of the Indian Constitution


[DISCLAIMER: This article is for general information only. We have tried to include as much information as possible but there are chances that some important information may have been missed .It is NOT to be substituted for legal advice or taken as legal advice. The publishers of the this article shall not be liable for any act or omission based on this note].

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