Unemployment in Goa

Goa Taxi Regional Employment Case Study

Due to the halt in mining activity in the Goa-Karnataka region there has been an increase in unemployment. The government is attempting to reduce the unemployment from the mining market by introducing more tourist taxis in the region to go to the Dudhsagar Waterfalls due to its increasing popularity in India.

Analysis:

Unemployment is defined as: People who are out of work but actively seeking work at the current wage rate.

To decrease the unemployment the government has chosen to intervene by increasing the supply of labour in the taxi market to meet the demand by tourists. This will counteract the unemployment that occurred due to the halt of the mining activity in the region; the idea is that those who lost their jobs will be able to become tourist taxi drivers. Taxi driving in the region could support similar salaries to the workers, as their salaries are based upon how many customers they receive as they are paid a cut of their fee.

Unemployment in the Mining Market:

Picture1

The quantity of labour demanded has decreased due to the halt of mining activity, since there has been no effect on the quantity of workers there is the presence of a surplus. A surplus in this sense represents the existence of unemployment in the market. There is a considerable gap in the quantity of labour demanded versus the quantity of labour supplied; this gives the miner several options. The miners could offer to work at the equilibrium price even though the demand for labour has dropped thereby increasing the price. The other more likely option is to simply leave the market and seek employment elsewhere, preferably at a similar wage rate and working conditions. This alongside the governments support is what transfers the now underutilised human capital and places this in the tourist taxi market, having the following effect.

Picture2

From the graph above it can be noted that there is an outward shift in the supply curve as more taxi drivers have entered the market. This has caused a fall in the price of the labour (fall in wages). This has not caused a surplus in the taxi driver market, as the government recognised that there was a shortage of taxi drivers for this tourist destination and has now been able to meet the demand. It should be noted that this increase in supply won’t be instantaneous as it will take time for those that were employed in the mining market to move to the taxi market due to licensing requirements and the expense of a taxi car.

Evaluation:

The government has successfully solved part of the unemployment issues caused by the halt of mining within the region. There are however several possible consequences to the employment boost in the taxi market. These issues can be identified as competition, environmental effect, future unemployment, and a decrease in government revenue.

Due to the increase of taxi drivers there will be greater competition to get customers, especially during off-season times. The taxi driver’s wages will be dependent on how many passengers they will get and the size of the fee. The taxi market can be identified to contain strong elements of perfect competition, as the consumers have extensive choice of supplier especially after an increase in the number of taxi drivers. The consumer also gets the lowest price possible from the drivers as they are looking for as many customers as possible, and the increase in taxi drivers means greater competition. In a sense there is also freedom to enter and exit the market, because once the taxi driver has a car and a license they can choose when to drive or not. This can be favourable at times when it is off-season and there are not as many tourists to meet the supply of taxis. The consequence of this is the possibilities of making low wages in one particular month, taxi drivers may seek out other work, drive their taxi elsewhere, or simply become underutilised and therefore not benefit economy or themselves. There are however factors that represent the monopolistic nature of the market. It is possible for certain taxi drivers to have nicer cars or offer to double up as tour guides, this may give that particular taxi driver market power in the short-run therefore an advantage.

There may be adverse effects on the environment of the local area due to the increase in the number of taxi drivers. It can be argued that the governments halt to mining activity in the region was to solve the environmental externality of mining. The possible effect of increased taxis may be small in comparison to the pollution caused by mining, however a result of more taxis means that there is a bigger flow of human traffic. The report mentions the need to ensure the continued protection of the rare Olive Ridley Turtles who lay eggs within the popular tourist region, the increased presence of people may affect their population. The report also mentions that the road used to get to the tourist destination is through the forest on a dirt road, this means that there may be increased erosion in the area. What makes the region a tourist destination is not only the waterfalls, but also the natural beauty of the surrounding areas. Therefore, increased traffic in the area may provide a boost to the tourism industry but prove to be a risk for the value of the region.

In the long term there may be more unemployment, as it is unlikely that all of those who had jobs in the mining industry will be able to enter the taxi driver industry. The government would need to find another source to create new employment opportunities. There may also be a decline in government revenue as more tourists will use the taxis rather than the train service (government owned) that runs a route from Goa to the popular tourist destination.

The government has effectively solved the unemployment problem that arose from the halt in mining in the region, but in a short-term manner. There may be consequent issues to the solution the government has opted for. This solution very much depends on how successful the region maintains itself to be a tourist destination in the future.

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