Poverty & Employment — PPSC previous year questions

A downturn in the business cycle causes cyclical unemployment. In a recession demand falls, so firms cut workers. Frictional unemployment happens while workers move between jobs. Seasonal unemployment follows seasonal work such as farming. Disguised unemployment means more people work than are needed, with zero marginal product.

Disguised unemployment exists when more people work at a task than it needs. The extra worker's marginal productivity is zero, so taking him away leaves total output unchanged. It is typical of Indian agriculture, where a family plot that needs five workers is tilled by eight. Open unemployment is a person willing and able to work but with no job at all. Frictional unemployment is the short gap between jobs. Seasonal unemployment arises in off-season months.

Statement 1 is wrong. Being without work for some months because of the crop cycle is seasonal unemployment. Disguised unemployment is when a farm has more workers than it needs, so the marginal productivity of the extra workers is zero. Statement 2 is correct. Educated unemployment shows a mismatch between the skills produced and the jobs available, that is poor human-resource management. Statement 3 is correct too. The official unemployment rate is low because most Indians cannot afford to remain idle and take up low-paid or part-time work. So 2 and 3.

A person willing to work at the prevailing wage rate but unable to find work is involuntarily unemployed. This is the standard Keynesian definition of unemployment. Voluntary unemployment means people who choose not to work at the going wage. Seasonal unemployment arises when work is available only in certain seasons, as in agriculture.

The Labour Force Participation Rate (LFPR) is the labour force (employed + unemployed persons willing to work) divided by the total working-age population. In India the Periodic Labour Force Survey (PLFS) of the NSO reports LFPR; the working-age population is usually taken as 15 years and above. Option (a) describes the Worker Population Ratio (WPR), a different indicator.

The Code on Social Security, 2020 defines a gig worker as one who earns outside the traditional employer–employee relationship, and divides such work into platform-based (app-mediated, e.g. cab and delivery apps) and non-platform-based work; together they form the gig economy. The silver economy relates to the elderly, the orange (creative) economy to arts and culture, and a command economy is one directed by the state.

An unemployment trap is also called the welfare or poverty trap. In it, an unemployed person has little reason to take up work. After losing benefits and paying tax, the income from working is no more — or even less — than the money received while unemployed. So the opportunity cost of going to work is higher than the income earned. Option (a) only describes rising unemployment. Option (b) confuses frictional unemployment with sectoral migration of labour. Option (c) describes net job loss. None of them is the trap.

All three pairs are correct. The Suresh Tendulkar Committee (report 2009) revised the poverty line and the methodology for estimating poverty; the N.C. Saxena Committee (2009) recommended a new methodology for the rural BPL census; and the S.R. Hashim Committee (2012) worked out the criteria for identifying BPL families in urban areas.

Disguised unemployment exists when more people are employed than are actually needed, so that the marginal productivity of the extra workers is zero and they could be withdrawn without reducing output. Such surplus labour, typical of Indian agriculture and family enterprises, appears to be working and is not captured in official unemployment figures. All three statements describe the concept, so (d) is correct.

The Lorenz curve plots the cumulative share of income against the cumulative share of population; the further it bows away from the 45-degree line of perfect equality, the greater the inequality. The Gini coefficient is the number derived from it, the area between the curve and the line of equality as a fraction of the whole triangle, running from 0 to 1. 'Gini-Lorenz curve' in option (d) is the paper's own label for this pair, not a standard term. The Phillips curve links inflation with unemployment, the Engel curve links spending on a good with income, and an indifference curve shows equally preferred consumption bundles.