Bussiness Ideas
Employment is a serious problem in less developed countries, especially in urban areas where the demand for labor is low and the supply is high. According to a study by Michael P. Todaro1, unemployment in less developed countries is caused by the rural-urban migration of workers who are attracted by the higher wages and better opportunities in the modern sector, but face a low probability of finding a job there. The study suggests that the expected income differential between rural and urban areas, rather than the actual income differential, determines the migration decision and the urban labor supply. Therefore, to reduce urban unemployment, policies should aim at increasing the probability of finding a job in the modern sector, or reducing the rural-urban income gap.
In India, Uttar Pradesh (UP) is one of the less developed states with a high population density and a low per capita income. According to a report by the ILO2, UP has an unemployment rate of 9.5% in 1996, which is higher than the national average of 7.8%. The report also states that most urban unemployment in developing countries takes the form of underemployment, in which people are obliged to undertake any available economic activity, however poorly paid and unproductive, because there are no social-safety nets and no alternatives in the form of unemployment insurance or job training for formal sector work.
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