LABOUR ECONOMICS by alicejenny


Q2.   Define “Labour Economics”. Explain the nature and scope of Labour
      Economics. Explain the characteristics of Labour?

Ans: - Labour Economics:-

      “Labour Economics may be defined as a study of the organization,
      institutions and behavior of the labour market in an industrising or
      industrial economy”.

      According to Dole Yoder:-

      “Labour economics or manpower economics is primarily concerned
      with efficient utilization and conservation of manpower and
      resources. It studies and seeks to understand the processes by
      which manpower is applied and utilized in modern society. It is
      concerned of natural resources in the land”.

      Scope of Labour Economics:-

      Labour economics has to deal with may be stated as manpower
      planning, labour organization, labour relations and public policy
      wage and employment theory, collective bargaining theory and
      practice of social security and welfare etc.

      According to Dr. G.P.Sinha, the following areas of study may be
      listed to fall under the preview of labour economics:-

    I. Institutional framework of the particular economic system.
   II. Size and composition of the labour force and labour market.
  III. Labour as a factor of production- productivity and efficiency
       condition of work-industrial relation standard of living
 IV. Labour‟s risk and problems.
  V. Trade unionism
 VI. Labour‟s status and position in society
 VII. Labour legislation.

      Another different area of labour economics are:-
    I. Advance theory of labour economics
   II. Labour laws
  III. Principles of personnel management and job evaluation

                        LABOUR ECONOMICS(Page 1)
               Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
IV. Principle and practice of labour welfare
 V. Theory and practice of trade union management.

   Nature of Labour Economics:-

   Labour economics is in the process of development, its definition
   tends to vary and change according to the nature of the economy
   and is supposed to indicate the criteria for delimiting its scope and
   enumerating and classifying the problems.

       I. The theoretical section
      II. The institutional section

   A. The Theoretical Section:-

   The theoretical section of labour economics is concerned with
   building up of models of economic behavior by making different
   sets of assumption.

   B. The Institutional Section:-

   The institutional section of labour economics is concerned with
   studies of labour problems in an institutional historical content.
   The nature of the labour problems changes with the change in the
   institutional framework of the economic systems.

   Characteristics of Labour:-

   According to Dr. Alfred Marshell, labour may be defined as “Any
   exertion of mind or body undergone partly or wholly with a view to
   have some good other than the pleasure derived directly from the

   Characteristics are as follows:-

      1. Labour cannot be separated from the person who labours- In
         other words we can say that labour cannot be separated
         from labourer body and personality. Thus, the environment
         and the working conditions in which the worker has to work
         are of utmost important in the supply of labour.

                     LABOUR ECONOMICS(Page 2)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
2. The worker sells his work services but he himself remains his
   own property: - In the words of Marshell, “The worker sells his
   work but he himself remains his own property. Thus, the supply
   of labour along with other things depends upon the
   forethought and selflessness of those who bring up the

3. Labour is perishable commodity, therefore it does not last and
   cannot be stored for future- If a worker does not work for a
   particular day, that day is lost for ever and he would never be
   in a position to make use of his lost services.

4. As the seller of labour are commonly poor and have no
   reserve fund, therefore they cannot with held labour from the

5. The supply of labour cannot be decreased or increased with
   fall or rise of wage- Hence, a paid adjustment of the supply of
   labour to its demand is not possible.

6. Labour is not mobile as capital: - The difference in
   environments, languages, customs etc at different places is
   hinderences to the mobility of the worker from one place to

7. The marginal productivity of labour is comparatively less than

8. Finally, labour is a living thing and that makes all the

               LABOUR ECONOMICS(Page 3)
      Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q3.   What is meant by the term wages? How would you distinguish
      between „Nominal Wages‟ and „Real Wages‟? Explain the factors
      influencing real wages.

Ans: - Wages:-

      The price paid for the services of labours in production is called
      wages. The labourer is generally paid a certain sum of money per
      day or week or month.

      Beham defined a wage as
      “A sum of money paid under contract by an employer to a worker
      for services rendered”.

      However, in economics, payment made for all kinds of services,
      whether by way of salaries or in any other way is included in wages.

      Differences between Nominal wages and Real wages:-

      Nominal Wages:-

      The amount of money that a labourer gets in exchange of his
      services is called money wages or nominal wages. If a labourer gets
      Rs.200, a day for his work, his money or nominal wages will be Rs.
      200. However, mere money payment does not reflect the real
      earnings of the labourer. They do not reveal the standard of living or
      the goods and services which labourer can buy and consume.

      Real Wages:-

      The amount of goods and services that labourer can get with his
      nominal wages is called real wages. Real wages refer to the goods
      and services, which the money wages can buy, and advantages
      and disadvantages associated with the jobs. Labourer is not so
      much interested in money wage as they are in real wages because

                          LABOUR ECONOMICS(Page 4)
                 Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
their standard of living depends on real wages. According to
Wicksell, real wages means real income.

Real Income= Money income/Price Level

                 LABOUR ECONOMICS(Page 5)
        Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   Following are the factors or items that are generally taken into
   account while calculating „Real Wages‟ of a worker as compared
   to his nominal wages.

1. Purchasing power of money:-
   Real wages (i.e. wages in terms of goods and services) depend on
   purchasing power of money, which means on the prevailing price
   level at particular place where a worker is working and living.

2. Incidental advantages and benefits:-
   While calculating real wages, extra benefits or advantages a
   worker may be getting must be taken into consideration. These
   extra benefits may take the form of free or subsidized transport
   These incidental benefits generally known as „Fringe Benefits‟ or
   „Perks‟ if available must be added while comparing and
   calculating real wages

3. Working Conditions:-
   While considering real wages, working conditions must be
   considered. By working conditions are meant number of working
   hours per day, healthy atmosphere free from pollution, availability
   of facilities like drinking water and rest house etc.

4. Possibility of extra earnings:-
   Possibilities of extra earnings must be taken into account while
   calculating and comparing real wages of workers. Some jobs (like
   professors and teachers) enjoy the opportunities of making extra
   income by writing books, undertaking tuitions etc.

5. Nature of jobs:-
   While considering real wages of a worker nature of job must be
   taken into account whether the job is injurious to health, whether
   there exists great hazards, whether it involves frequent traveling etc.

6. Possibilities of promotion and success:-
   Possibility of quick promotions, foreign tours etc. must be taken into
   account while calculating real wages.

7. Social prestige and status:-
   For example, some jobs carry higher social status and prestige than
   some other. This must be taken into account while calculating real

                     LABOUR ECONOMICS(Page 6)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   wages of workers and comparing real wages of two workers doing
   two jobs in different occupations.

8. Training expenses:-
   Training expenses involved in the case of different jobs must be
   taken into account while calculating real wages and especially
   while real wages of two jobs.

9. Trade and office expenses:-
   Some jobs like doctor‟s and pleader‟s involves trading expenses like
   maintaining an office and a clerk etc. while certain jobs do not
   involves such expenses. This must be taken into account while
   determining and comparing real wages.

                     LABOUR ECONOMICS(Page 7)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q4.   What do you understand by the term „Wage differentials‟? How do
      you account for wage differences in different industries and
      occupations and in the same industry? Why do wages differ
      between male and female labour?

Ans: - Wage Differentials:-

      In the real world however, it is seldom seen that uniform level of
      wages is established even in long run. On the contrary, one
      witnesses apparently permanent differences in the wages paid in
      different occupations with hardly any significant movement of
      labour form low paid occupations to highly paid ones.
      Wage difference is also found between male and female workers.
      Wage differences may be horizontal and vertical. Horizontal wage
      difference is found among workers who have the same amount of
      skill training and efficiency. Vertical wage differences on the other
      hand denote the differences (in wages) in different grade of an

      Wage difference between different industries and occupations
      because of many underlying factor:-

   1. Difference in skill and efficiency:-
      Where different skill and efficiency norms are involved in different
      industries wage must be different.

   2. Trade Unions:-
      Where powerful trade unions exist in some industries wages in those
      industries will be higher than in others where such trade unions do
      not exist.

   3. Profitability of the Organization:-
      In those industries, which have high profitability in comparison to
      those industries where profitability is lesser, wages will be higher.

   4. Status of the Organization:-
      Wages are normally higher in organization, which have a higher
      status. Foreign companies and multinational corporations normally
      pay higher wages merely because of status norm.

   5. Nature of Work:-

                         LABOUR ECONOMICS(Page 8)
                Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Wages also differ based on nature of work. Risky employments
normally involve higher wages or compensations in comparison to
less risky jobs.

                 LABOUR ECONOMICS(Page 9)
        Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
6. Ignorance:-
   When workers suffer from ignorance, they suffer from lower wages.

   Wage differs between male and female labour:-

   Female labourer is paid much less than male workers. The reasons
   for this disparity are-

1. In certain occupations, there is an over crowding of female workers.
   For instance, jobs such as teaching, domestic servants, nursing etc.

2. Owing to lower physical strength and other factors, the productivity
   of female labourers is believed to be low.

3. The trade union movement is not very strong and has not taken
   deep roots in case of female labour.

4. It is believed that the necessity for the earnings by man is greater
   than that of a woman. Generally, females are not sole breadwinner
   of the family.

5. The mobility of female worker is also low because of family ties and
   domestic responsibilities. Female workers would not like to change
   jobs even if a change of job has better prospectus for them.

   Differences in wages based on differences in sex are not justified.
   Many countries have tried to eliminate them based on principle of
   “Equal pay for equal work”. The international labour organization
   had laid down in its constitution that men and women should
   receive equal remuneration for equal work.

                    LABOUR ECONOMICS(Page 10)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q5.      Give an idea about different concepts of „Wages‟.

Ans: -                              Wages

         The price paid for the services of labourers in production is called
         wages. The labourers are generally paid a certain sum of money
         per day or week or month.
         Benham defines a wage as:-
                     “A sum of money paid under contract by an employer
         to a worker for services rendered.” Benham definition covers only
         the payment made for the use of manual labour. It does not
         include the payment made in the form of salaries to individuals
         working as clerks, accountants and white colored workers.

         Different concepts of wages:-

    Minimum Wage
    Living Wage
    Fair Wage

         The problem of wage is the most controversial subject in industrial
         relations. The reason of its significance is that wages provide worker
         with certain standard of living and they form a high proportion of
         the employers cost of production.

    Minimum Wage

         The concept of “Minimum Wage” stands for different standard of
         different countries. The fair wage committee in India has observed
         that in India the level of the national income is so low at present
         that it is generally accepted that the country cannot afford to
         prescribe by law a minimum wage must provide not merely for the
         bare sustenance of life but for the preservation of the efficiency of
         the worker.
                      Thus, a minimum wage is one, which may be sufficient
         to enable q worker to live in reasonable comfort having regard to
         all obligations to which an average worker would ordinally be

                          LABOUR ECONOMICS(Page 11)
                  Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   The objective of minimum wage

1. To prevent explanation of workers and secure a wage equal to
   work load.

2. To raise the wages in the industries where they are low, thus prevent
   sweating in industry.

3. To promote peace in industry by guaranteeing a wage rate this will
   enable them to meet their minimum requirements.

4. Raise the standards of living and efficiency of workers.

 Living Wage

   According to the committee in fair wages,
                 “The living wage represented the higher level of wage
   and it would include all amenities which a citizen living in a modern
   civilized society could afford. After considering various observations
   made by Indian authorities, the committee on Fair wages observed,
   the living wages should enable to male earner to provide for himself
   and his family the bare essential of food, clothing and shelter but a
   measure of frugal comfort including duration for the children,
   protection against ill health requirement of essential social needs
   and a measure of insurance against the more important misfortunes
   including old age.

 Fair Wage

   To bring improvement in the relations between labour and
   management the industrial truce resolution was passed in 1947,
   which provided for the payment of fair wages of labour, govt. of
   India appointed a Fair wages committee in 1948, and the
   committee report was published in 1949.
         Marshell and Pigou have defined fair wages. Marshell Says,
   “In any given industry wages are fair relatively to wage in industry in
         Lower limit of fair wages must be the minimum wage for
   workers and upper limit will be the industry capacity to pay.
   However, between these two limits following factors have to be

                    LABOUR ECONOMICS(Page 12)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   The productivity of labour
   The prevailing rate of wages in the same or neighboring locality
   The place of the industry in the economy
   The level of national dividend and its distribution

                     LABOUR ECONOMICS(Page 13)
             Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
The concepts of minimum, fair and living wages should not be
treated as water tight compartments, “As the level of wages
actually prevailing a country would depend largely on the level of
economic development. Yet the task of wage regulating and
wage fining machinery can go a long way to evolve a wage
structure which is fair and also commensurate with the level of
economic activity in the country.”

                LABOUR ECONOMICS(Page 14)
        Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q6.   Define Labour market. What are the main characteristics of labour
      market? Explain the major imperfections in labour market.

Ans: - Labour Market:-

      Labour market may be defined as “A process by which supplies of
      particular type of labour and demands for that type of labour balr
      seek to obtain a balance”.
      The labour market is the place for operation of this process. It is the
      only device for sorting out worker with varying skills and interest
      among the multitude of different jobs in the economy. The labour
      market is also an area or place where relative wage levels for
      different plants, industries occupations and d regions are

      Characteristics of Labour Market:-

      Main characteristics of labour market are as follows:-

   1. Unlike a commodity market, relationship between a buyer and
      seller in a labour market (expecting a casual labour market) is not
      temporary and is expected to continue for some limit.

   2. Labour market is essentially local in character: - The concept of
      labour market stands for the buyer and sellers of labour who are in
      contact with each other for the purchase and sale of workers
      services. Thus, labour market is normally local markets in the sense of
      the demand for the supply of labour being confined to a particular

   3. Lack of mobility: - Lack of mobility is an important characteristic of
      a labour market owing to various reasons. Labour obviously cannot
      move with the same ease and facility with which commodities are
      transported from place to place and the buyers of labour as well.

   4. A labour market is essentially an imperfect market: -   Labour
      market is an imperfect market where one does not find a normal
      wage rate to which the market rate naturally tends. There is a
      diversity of wage rate in a labour market for the same types of work
      different wage are paid: a feature, which may last for a long period
      and may even be regularized.

                       LABOUR ECONOMICS(Page 15)
               Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
5. Monopoly:- Monopoly in labour market is extremely rare excepting
   when the skill of a particular type of extremely rare or when a very
   powerful trade union exercise a complete control over the supply of
   labour in a given industry or in a given area.
6. Most of the labour markets in the world do not justice to the workers
   in the matter of the division of the proceeds of industry as between
   the employers and workers. In other words, the labour markets are
   usually the buyers market.

   Imperfections in the labour market:-

   There are certain peculiarities of labour market, which distinguish it
   from the market of other commodity. These peculiarities also make
   labour market imperfect

1. No equilibrium between demand for and supply of labour: -
   In the markets of other commodities prices keeps on changing till
   demand is equal to supply. In other words, the other markets are
   normally cleared. However, in labour market wages are not freely
   flexible. Therefore, as Hicks pointed out, the effect of incre3ase in
   demand for labour on wage rate is felt only after a long passage of

2. Wage differentials:-
    In a perfectly competitive market for a commodity, all units of the
commodity are homogeneous and price tends to be uniform. In fact,
George Stigler defined the mar4ket of a commodity as all those places
where the price of that commodity tends to be uniform after
allowance for transport cost. However, in the actual market the wage
differentials are often due to imperfections in the labour market.

a) No perfect knowledge: - Worker and employers do not have
   perfect knowledge about the conditions in the labour market.
   Therefore, the wage differences prevail.

b) Lack of perfect mobility of labour: - There is no perfect mobility of
   labour from one industry top another or from one locality to

c) Barriers to the entry of labour: - There are barriers to the entry of new
   workers in specific occupations and so the artificial storage of such
   workers is maintained and so the wages of such workers continue.

                    LABOUR ECONOMICS(Page 16)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
d) Employer‟s monopsony: -    The labour market may have
   monopsony employer of labour power and he can follow the policy
   of wage discrimination by paying different wages to different
   workers for the same work.

e) Institutional forces in determining wages: - In the market of the
   other commodities, mainly the market forces of demand and
   supply determine the price. Therefore, there cannot be an
   economic explanation of wage rates based purely on demand
   and supply conditions.

                   LABOUR ECONOMICS(Page 17)
           Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q7.   Discuss the factors influencing demand for and supply of labour.

Ans: - Demand For Labour:-

      In labour market, demand for labour is made by individual firms,
      which want to employ labour to carry out their production. It means
      a firm is a buyer in the labour market. Unlike demand for consumer
      goods, demand for labour is a derived demand.

      Demand for labour by firms depends on the following factors:-

  1. Demand for commodities produced by labour:-
     When demand for commodities increases, firms wants to sell more,
     for which they have to increase production. In such cases, they
     need labour as a factor of production.

  2. Availability of Capital:-
     Largely capital and labour are complementary factors of
     production. If more capital is available, private firms want to invest
     more. When they increase investment and set up new production
     units, they need more labour and so demand for labour increases
     because of increase in supply of capital.

  3. Substitution between labour and machinery:-
     Labour and capital can also be substituted for each other. If work
     done by labour can also be performed by machinery i.e. capital, it
     means producers have choices between labour and machinery.

  4. Motives of the firms:-
     In modern economy, private firms are joint stock companies. They
     are run by professional managers. The management follows many
     different motives. Sometimes firms have motives of maximum
     growth rate. To achieve this goal they keep investment and
     producing more. It creates larger demand for labour.

  5. Labour productivity:-
     Just as demand for a commodity by a consumer depends on its
     utility, demand for labour as a factor of production depends on the
     productivity. If labour productivity is low, it becomes costlier to
     employ labour and so it is not profitable to increase demand for

                       LABOUR ECONOMICS(Page 18)
               Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
6. Wage rate:-
   Price of labour is nothing but wage rate per unit of labour. Normally
   there is inverse relation between wage rate and demand for
   labour. The inverse relation between wage rate and demand for
   labour until marginal product is equal to wage rate.

   Supply of Labour:-
   Supply of labour refers to the number of labour units offering
   themselves for work. Supply of labour is normally measured as the
   number of person-hours (or person-days) which workers are willing
   to offer at the market wage.
   Factors, which influence the supply of labour in a country or to the
   economy as a whole:-

1. Size of population:-
   Potential labour force in a country depends upon the size of the
   population and its growth. Thinly populated countries like Canada,
   Australia have less supply of labour.

2. Rate of working population to total population:-
   Though supply of labour depends primarily on the size of population
   of the country. We must also remember that not all people are
   available for work.

3. Sex Rate:-
   The ratio of males to females in the working age group is
   determining factor in the supply of labour.

4. Working Hours:-
   Workers can give continuous and sustained work only if the working
   hours are reasonable. Unreasonable long working hours means
   fatigue and inefficient work.

5. Age of Retirement:-
   Workers retire at a certain age. In some cases, the retirement age is
   55 years. In some other places, it is 58 to 60 years of age.

6. Social Attitude:-
   In certain occupations, sex and caste are taken into consideration.
   This restricts the mobility and availability of labour.

                    LABOUR ECONOMICS(Page 19)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
7. Wage Level:-
   Labour supply is related to the wage level in a country. High wage
   level contracts the supply of labour and lower wage level forces the
   worker to work more due to economic compulsions.

8. Potential Desire to Work:-
   The actual labour supply depends not only on how many workers
   are there in the working age group. However, it also depends on
   their enthusiasm towards work.

9. Training Period:-
   If labour is educated and trained then the period of education and
   training will be an important factor in influencing supply of labour.

                    LABOUR ECONOMICS(Page 20)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q8.      What is mobility of Labour? Discuss the factors hindering mobility of

Ans: -                       Mobility of Labour:-

         „The ability and willingness of a worker to move from one place to
         another place or from one occupation to another occupation to
         get a job is called mobility of labour‟.

                      Importance of mobility of labour:-

         Mobility is of great advantage to the worker himself. It is
         advantageous to them to move from the place of less demand to
         place where their services are mere demanded or opportunities
               Mobility of labour is advantageous from the point of view of
         the industrial structure. Industrial structure has undergone lot of

         Example: - From agriculture, we reached to industrial stage. In
         industrial field too from traditional industries to modern and now
                Unemployment is kept at bay by the mobility of labour. A
         labour move from place where it is not demanded is there.

                      Factors hindering mobility of labour:-

         Among all factors of production, labour is least mobile. Land is
         geographically immobile and in an exception. Capital may be
         money or machine. It is a life less they and is transported to the
         place where required which much ease and less difficulty.
         However, in case of labour, it is different. He is not merely actuated
         by economic or monetary consideration. He has practically a fixed
         place in the society and does not liked to be rooted out from the
         known surroundings. Hence it is rightly remarked that among all sorts
         of luggage, man is the most difficult to be transported.

                The factors, which hinder or inhibit the mobility of labour, can
         be listed as follow:-

   1. New Climate
   2. Cost of Transport and Conveyance Facilities

                          LABOUR ECONOMICS(Page 21)
                  Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
3. Problem of accommodation
4. Language barriers
5. Admission of children to schools or colleges.
6. Diet and food habits
7. Age and time of transfer and psychological conditions.
8. Adjustment with new environment and surroundings and locations
9. education and training
10. Political, social disturbance
11. Cost of living
12. Racial differences
13. Family attachment
14. New customs and rituals conventions
15. Wages/pay scale
16. Problem of adjusting with new culture and surroundings,
    atmosphere etc.

                   LABOUR ECONOMICS(Page 22)
           Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
Q11. What do you understand by the term „Efficiency of Labour‟? Explain
     the factors affecting labour efficiency. Suggest the measures to
     improve efficiency of labour.

Ans: -                Meaning Of Efficiency Of Labour

         Normally though efficiency of labour means the ability or4 fitness of
         a worker to produce goods and services in proper quantity and of
         the right quality which is a given period. The ability can be
         measured in terms of number of units of a commodity produced by
         a worker with in a given period. Thus, one factor worker producing
         more number of a commodity with in a given time than the other
         worker is considered more efficient.
               Efficiency of labour is thus an important determinant of the
         study of labour in a productive sense. It determines the size of real
         productive labour force in a country. A country labour supply will be
         substantially augmented if it possesses a relatively small labour force
         possessing a high degree of efficiency.

         Factors affecting the efficiency of labour are as follows:-

   1. Racial Stock: -    Man acquires some physical qualities from the
      racial stock to which he belongs. The Sikhs and Jats are very strong
      and are capable of hard work.

   2. Wages: -       If a labourer get a low wage, he can‟t maintain his
      efficiency, if wages are low, labour productivity will also be low.

   3. Climate: - In temperate and cold climate, people can work hard.
      Hot climate is not conductive to very hard work. In hot climate,
      labourers cannot work as hand as labourer in cool climate can.

                          LABOUR ECONOMICS(Page 23)
                  Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
4. Hours to Work: -  The efficiency of labour is affected by the
   working hours. If a labourer works for long hours, work becomes
   monotonous and the labourers worse only half heartily. He cannot
   give the best.

5. Working Conditions: -           If the factory building is dirty and not
   well-ventilated workers cannot hard work. However, if factory
   building is clean and well ventilated and if the atmosphere is
   pleasant, workers like to work hard.

6. Education and Training: -      Education and Training impact
   technical knowledge, sense of responsibility and improve the
   efficiency of labour. Trained labourer can use modern machinery

7. Welfare Activities: -     Social security measures like medical
   facilities and maternity benefits help laborer to maintain their health
   and efficiency.

   Measures to improve efficiency of labour:-

   Efficiency of labour can be improved by eradicating the cause of
   low efficiency. This can be done particularly through proper
   education, training improvement in machines and betterment in
   working living conditions.
          Thus, labour efficiency can be improved with respect of
   following points:-

1. By linking about labour efficiency and by wages and incentive
   bonus, it is possible to motivate labour.

2. Labour efficiency can be raised by mutual argument between
   management and workers regarding distribution of benefits of
   raising labour productivity.

3. Improving industrial relations can raise labour efficiency.

4. Comprehensive planning and introducing input is creating quality
   consciousness in production and in cost control, that efficiency can
   be raised.

                    LABOUR ECONOMICS(Page 24)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   5. Bringing improvement in plan lay out material handling and better
      internal management in a factory has positive effect on labour

   6. By providing modern training course to those in personnel
      department who handle worker such trained personnel will be able
      to create an atmosphere of better effort by workers.

   7. Providing training to workers and taking measures to improve labour

   8. By introducing modern methods of organization, labour efficiency
      can be raised.

Q12. Explain the concept of social security. Briefly review the Social
     security Measures adopted by the government in India.

Ans: -                              Social Security

         Social security as at present understood is one of the dynamic
         concepts of the modern age, which has deeply influenced the
         social and economic policy of many countries in the world. The
         idea of social security is that the state shall make itself responsible
         for ensuring a minimum standard of material welfare to all its cities
         on a basis wide enough to cover all the main contingencies of life.
                             The social security system aims to help individual
         in such times of dependency. The main risk of insecurity, to which
         human life is liable and in relation to which organized society can
         afford relief to the helpless individual are incidents of life occurring
         right from childhood up to old age and death and include mainly
         sickness, maternity invalidity accident and industrial disease
         unemployment, old age, death of bread winner and other such

               Social security measures in India:-

         In an industrial economy, the worker is subjected to periodic
         unemployment due to cyclical fluctuation in business, sickness
         industrial accidents and old age. There is nothing more serious to
         worker to his/her family than unemployment. Sickness suspends
         earning capacity of a worker temporarily industrial accidents may

                          LABOUR ECONOMICS(Page 25)
                  Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
  disable him/her permanently or partially and old age put a stop to
  his/her ability to earn support himself/herself and the family.
                       Naturally, the state has the obligation to help the
  worker and provide them security. In western countries, Govt.
  started various measures to protect workers in time of sickness and
  unemployment and provide relief in case of accident and old age.
  All these measures are collectively known as social security
                       Various security measures adopted in India is
  divided into two categories:-

 Before Independence
 After Independence

               Before Independence:-

  Workmen‟s Compensation act:-

  In 1923, the Govt. of India passed the Workmen‟s Compensation
  Act in      order to provide for compensation to the workers in
  case of industrial accidents and injury. The act now covers workers
  employed in factories, mines plantation, mechanically propelled
  vehicles construction workers and certain other hazardous
  occupations. Under this act, the amount of compensation depends
  upon the nature of the injury and the salary of worker concerned.
         The Act is however not applicable to the persons who are
  covered by Employee State insurance Act, 1948.

  After independence-The employee‟s state insurance act, 1948.

  The employee‟s state insurance act was passed in 1948 with the
  objective of providing compulsory and contributory health
  insurance of workers. The act provides for medical care and
  treatment cash benefits during sickness, maternity and employment
  injury, pension to the dependent on death.

                   LABOUR ECONOMICS(Page 26)
           Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)

       The act of 1948 set up the autonomous Employee‟s state
       corporation, which has the responsibility of administering the body
       of 40 people representing the union and the state Governs, the
       parliament, employees and employer‟s organization and the
       medical profession.

                          Finance and Contribution

       The act of 1948 provided for the setting up of a fund known as the
       Employee‟s State Insurance Fund. The rate of contribution by the
       employer, which was earlier fixed at 4%, has been raised to 4.75%
       and that of employee rose from 1.5% to 1.75% of the wage.
                    The state Govt. share the expenditure on the provision
       of medical care to the extent of 12.5%. Besides the employer,
       employee contribution the central and state Govt. also provides
       grants for the working of the scheme.

Q13.   Write short note on:-

  (4)    Types of Unemployment and Unemployment in India.
  (10)   Factors affecting demand for labour

Ans 13(4):- Type of Unemployment

       Unemployment of some kind has always been a running problem of
       modern societies whether developed or underdeveloped.
       The various types of unemployment may be classified are as

  1.   Voluntary Unemployment
  2.   Frictional Unemployment
  3.   Casual Unemployment
  4.   Seasonal Unemployment
  5.   Structural Unemployment
  6.   Technological Unemployment
  7.   Cyclical Unemployment
  8.   Chronic Unemployment
  9.   Disguised Unemployment

                       LABOUR ECONOMICS(Page 27)
               Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   Brief descriptions of various type of unemployment are as follows:-

1. Voluntary Unemployment
   In every society, there are some people who are unwilling to work
   at the prevailing wage rate and there are some who do not want
   to work. Such type of unemployment in any society is known as
   Voluntary Unemployment.

2. Frictional Unemployment
   Frictional unemployment is a temporary phenomenon. It may take
   place in various ways. When some workers are temporarily out of
   work while changing job it called Frictional Unemployment.

3. Casual Unemployment
   In industries such as building construction catering or agriculture
   where workers are employed on a day-to-day basis, there are
   chances of casual unemployment occurring due to short-term

4. Seasonal Unemployment
   There are some industries and occupations such as agriculture, the
   catering trade in holiday resorts, some agro-based industries
   activities such as sugar mills and rice mills etc. in which production
   activities are seasonal in nature.

5. Structural Unemployment
   Due to structural changes in economy, structural unemployment
   may take place. Structural unemployment is caused due to a
   decline in demand for the production in a particular industry.

6. Technological Unemployment
   A kind of structural unemployment may take place in an economy
   because of technological improvement. Such unemployment may
   be described as technological unemployment.

7. Cyclical Unemployment
   Capitalist biased, advanced countries are subject to trade cycles.
   Trade cycles, especially during recession and depression phase
   cause cyclical unemployment in these countries. Since cyclical
   phase cannot be Permanente, cyclical unemployment remains
   only as a short-term phenomenon.

                    LABOUR ECONOMICS(Page 28)
            Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
   8. Chronic Unemployment
      When unemployment tends to be a long-term feature of a country,
      it is called “Chronic Unemployment”. Lack of developed resources
      and their utilization.

   9. Disguised Unemployment
      Unemployment may be classified into (i) Open and (ii) Disguised
      The term-disguised unemployment commonly refers to a situation of
      employment with surplus manpower.
             Disguised unemployment in the strict sense implies
      underemployment of labour.

      Unemployment problems in India:-

      In developed countries, unemployment of labour is mostly cyclical
      or frictional in nature. Cyclical unemployment can be cured by
      increasing aggregate demand for goods.

      Causes of unemployment in India:-

   1. Population growth: -   In India during the planning period,
      population has increased at the average rate of 2.5% but
      employment opportunities owe not increase accordingly.

   2. Change in age structure of population: -   It is estimated that when
      population increases by 2.3% per year, the population belonging to
      the working age group increase by more than 4.5% per year.

   3. Increase in labour force participation rate: -   It shows      that
      percent of working population is actually ready to work at existing
      wage rate. It is found that people now want the income as income
      of one person in family is not enough & hence unemployment

Ans 13 (10):-       Factors affecting demand for labour:-

      In labour market, demand for labour is made by individual firms,
      which want to employ labour to carry out their production. It means
      a firm is a buyer in the labour market. Unlike demand for consumer
      goods, demand for labour is a derived demand.
      Determinants or factors affecting demand for labour:-

                        LABOUR ECONOMICS(Page 29)
                Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)
1. Demand for commodities produced by labour: - When demand for
   commodities increases, firms wants to sell more for which they have
   to increase production. In such case, they need labour as a factor
   of production. Thus in growing countries, the demand for labour
   goes on increasing.

2. Availability of Capital: - largely capital  and    labour     are
   complementary factors of production. If more capital is available,
   private firms want to invest more. When they increase investment
   and set up new production, they need more labour.

3. Substitution between labour and machinery: -         Labour and
   capital can also be substituted for each other. If work done by
   labour can also be performed by machinery, demand for labour
   well reduces.

4. Motives of the firm: -         In modern economy, private firms
   are joint stock companies. Professional managers run them. They
   have many different motives. Sometimes firms have motives of
   maximum growth rate. To achieve this goal they keep investing and
   producing more. It creates larger demand for labour.

5. Wage Rate: -            Price of labour is nothing but wage rate
   per unit of labour. Normally there is inverse relation between wage
   rate and demand for labour. If wage rate increase cost of
   employing labour also increases. Hence, firms reduce demand for

                   LABOUR ECONOMICS(Page 30)
           Name : (PL. FILL IN), Enrolment No.( PL. FILL IN)

To top