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NURKSE’S THESIS OF DISGUISED UNEMPLOYMENT. PREPARED BY : 1064 - PRITPAL KAUR 1104 - ANURADHA 1202 - REENA 1495 - ANURADHA OF BA III Year OF POST GRADUATE.

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Presentation on theme: "NURKSE’S THESIS OF DISGUISED UNEMPLOYMENT. PREPARED BY : 1064 - PRITPAL KAUR 1104 - ANURADHA 1202 - REENA 1495 - ANURADHA OF BA III Year OF POST GRADUATE."— Presentation transcript:

1 NURKSE’S THESIS OF DISGUISED UNEMPLOYMENT

2 PREPARED BY : 1064 - PRITPAL KAUR 1104 - ANURADHA 1202 - REENA 1495 - ANURADHA OF BA III Year OF POST GRADUATE GOVT. * COLL EGE FOR GIRLS, 11

3 REFERENCES Development Economics - T.R. Jain Ragnar Nurkse Papers 1930-1960 - Internet

4 DISGUISED UNEMPLOYMENT  DEFINITION First coined by Mrs.. Joan Robinson. According to her, In context of Developed countries, “ Disguised Unemployment is a situation in which wage workers take to less production jobs, because they lose their regular jobs to cyclical trends in economic activity. “ In context of Undeveloped countries, “ Disguised Unemployment is a situation in which more persons are employed to do a job which can be done with equal efficiency by a less number of workers. “

5 EXPLANATION The situation of Disguised Unemployment in less developed countries arises due to population which grows faster than the rate of capital formation and other means of production. Since more than the required no. Of people work on a particular farm, the marginal productivity of labour reduces to zero oe even negative. If the techniques of production and methods of organization are not changed, total production would remain unaffected even if some person are withdrawn from the farm. This situation of disguised unemployment keeps the agriculture of underdeveloped countries in a continuous state of backwardness. The pressure of population on agriculture keeps on rising continuously causing problem of sub-division and fragmentation of land adversely affecting the level of productivity through reduced availability of the means of production.

6 When ON workers are employed, total output produced is OY. When the no. Of workers is raised from ON to ON’, total output remains same i.e. OY. That means NN’ worker’s contribution to total production is nil or the marginal productivity of NN’ workers is zero. Thus NN’ workers are disguisedly unemployed.

7 FEATURES OF DISGUISED UNEMPLOYMENT Marginal Productivity of labour is zero. Not possible to identify actual unemployed people. In less developed countries, excess population and lack of capital are responsible for disguised unemployment. Generally associated with agricultural families. In less developed countries it’s concerned largely with the agricultural and allied activities. In certain countries, disguised unemployment is confirmed to specific seasons.

8 A.K. SEN’S VIEWS ON DISGUISED UNEMPLOYMENT Beyond OL, total productivity curve becomes horizontal straight line implying marginal productivity of labour becomes zero with OL labour hours and OL 1 no. Of workers. The working hours for each labourer are tan a. But OL 2 no. Of workers actually be working on farms each working for less hours i.e. Tan b hours. Thus, L 1 L 2 workers would be disguisedly unemployed, thus, showing that marginal productivity of labour is zero at point L and of labourers over the range L 2 L is nil. Thus, the marginal productivity of labourer is nil over a wide range and the productivity of labour may just be equal at margin.

9 DISGUISED UNEMPLOYMENT AND SAVING POTENTIAL Lewis Theory According to Prof. Lewis, there are two principal sectors in less developed economies :  Subsistence Sector - People in this sector are primarily engaged in agricultural occupations as due to the pressure of population, there is high degree of disguised unemployment in this sector and also due to low marginal productivity of labour wages which are very low.  Capitalistic Sector - This sector is dominated by the industrial and allied activities because of the intensive use of capital marginal productivity of labour rules fairly high, thus, wages are equally high and are called capitalistic wages. According to Lewis, if workers are withdrawn from subsistence sector and engaged in capitalistic sector, their marginal productivity would increase and if paid lower wages, the capitalists would earn surplus and revisited this surplus becomes a source of capital formation and economic growth.

10 Nurkse’s Theory According to Prof. Nurkse disguised unemployment in less developed countries can be exploited as a source of capital formation. Nurkse maintains that productive workers have to spend their prospective savings on maintenance of their unproductive counterparts and these prospective savings are called ‘ Disguised Saving Potential ‘. Nurkse maintains that the withdrawal of disguisedly unemployed would not affect agricultural sector, however, their contribution to output when engaged in capital projects would add to national product. But some problems are also confronted here :  Arrangement of Finances - Nurkse says that people should continue to be dependent on their rural counterparts for financial aids they also supported them earlier when they were disguisedly unemployed.  Problem of Tools - Nurkse suggests use of Labour intensive techniques and simple tools to overcome this problem.

11 LEAKAGE FROM CONCEALED SAVING POTENTIAL Saving Potential in disguised unemployment depends largely on condition that remaining people in the family does not raise their consumption level after disguisedly unemployed are withdrawn. Nurkse suggested various leakages in the saving potential which set limits to it.  If the remaining persons working on a farm raise their consumption, a serious leakage erupts in the saving potential.  If the workers engaged in capital projects tend to raise their consumption level, leakage erupts yet again.  Capital Formation through disguised unemployment is possible when the surplus of food grains is fully transferred from rural to urban areas without involving any cost.

12 SOLUTIONS FOR PLUGGING THE LEAKAGES AGRICULTURAL TAXATION - Remaining persons in the agricultural sector are likely to increase their consumption level after the withdrawal of their counterparts.The government can tax on the surplus in terms of food grains and give same to those engaged on capital project. TO COLLECT RENT IN THE FORM OF FOOD GRAINS - The government can collect rent in terms of food grains. COMPULSORY SALE OF SURPLUS PRODUCE TO THE GOVERNMENT - T he government can compel the farmers to sell their surplus produce at some fixed price. COMPLEMENTARY SAVINGS - In order to effectively exploit disguised unemployment as a source of saving, it is essential that some complementary savings are raised via internal / domestic sources and external sources to compensate for the inevitable leakages.

13 CRITICISM LEAKAGES - Nurkse ’ s Hypothesis depends upon the condition that there are no leakages from subsistence fund but practically it is not possible. DIFFERENCE IN THE NATURE OF LABOURERS - Nurkse does not distinguish between the farming workers and those working on capital projects as one are unskilled and others are skilled. But acc. To Prof. Kurihara if unskilled workers are employed on capital projects, their contribution is meaningless. IDENTIFICATION OF DISGUISED UNEMPLOYMENT IS DIFFICULT - It is impossible to transfer the farming workers to capital projects as identifying the disguised unemployed is difficult and need to be offered higher wages to draw them. LESS COMPENSATION - Acc. To Nurkse disguised unemployment can be exploited as a source of potential savings only if remaining workers do not raise their consumption which is rare. INCREASE IN POPULATION - It may more than off set the stimuli of capital formation emanating from disguised unemployment which may then aggravate over time. NOT PRACTICABLE IN DEMOCRATIC STATES - It is very hard to mobolise domestic resources for capital construction without resorting to coercive methods.

14 CRITICISM DIFFICULTIES IN THE MOBILITY OF LABOUR - Nurkse ’ s Hypothesis pre supposes perfect mobility of labour but workers may not leave for urban occupation INCREASE IN THE LEVEL OF CONSUMPTION - Nurkse himself agrees that working on the capital projects, the rural migrants are not likely to maintain their old subsistence level of living. LACK OF COMPLEMENTARY SAVINGS - It helps in tapping saving potential through disguised unemployment but due to lack of complementary savings due to low level of income in less developed countries, it is not possible. INCREASE IN PRICES - Wages are paid to the migrant workers as and when they start working, but output from cpital projects flows only after some time lag, thus, demand tends to exceed the available supply of goods in the market, rising price level and owing to increase in prices, workers may demand increased wages. TECHONOGICAL NEUTRALITY - Concealed saving potential hypothesis implies that country can progress by maintaining technoogical neutrality but a lot of expenditure is to be incurred for this. LESS PRODUCTIVITY IN AGRICULTURE - In less developed contries primitive technology is used in agricultural sector which is highly labour intensive, so that, if workers are withdrawn from agriculture, output may suffer.

15 CONCLUSION In short we can say that, Though Prof. K.N. Raj does not find any essence in Nurskes’s concealed saving potential hypothesis and Prof. Kurihara’s belief that disguised unemployment is not a stimuli but deterrent force in the process of capital formation and economic growth. But in case of less developed countries as unemployment is confined largely to agriculture sector homing disguised unemployment, it can be as a potential source of saving and capital formation in these countries.

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