Category Archives: Business

The Truth Behind Unemployment

Hey folks, welcome to another new post. In this post we will have a look at the reasons behind unemployment.

GDP : You might be wondering how GDP is affecting employment, aren’t you ? Well, GDP doesn’t cause unemployment but the ratio of a particular sector in the total GDP can say a lot about unemployment. For example, if majority of GDP is coming from a sector that requires less human resource, the jobs generated would be very less, even though the wealth generation is high.

Demographic Dividend : A huge number of working age population sounds pretty cool and it may reflect the prosperity of a nation but if the demographic dividend isn’t diversified and if it is concentrated only to few sectors then it would mean that there would be more people competing for few jobs. And the result of this takes us back to Darwin’s words “Survival of the fittest”. The best among the competent would get a job and the rest go unemployed.

Digital Inequality : The fruits of development is often concentrated only to urban areas. To those living in the foothills of a mountain range 50mbps data is still a distant dream.

Mental Construct : If an 18 year old living in a middle class family goes to her / his parents and talks about her / his ambition to become an entrepreneur, then the reply wouldn’t necessarily be a green signal and the standard reply would be to get a government job or get into one of those professional courses and get a decent paying job. Another important thing to note here is quite often one’s career is decided by one’s relative or neighbours. If relative’s offspring is getting into a particular course then there is some sort of pressure on an individual to get into the same course and this can happen with various other permutation. This leads to concentration of human resource in only few sectors and when the supply is more than the demand… You know what happens, don’t you?

Quality : Quality education is a luxury to many and on the other side there are people who don’t understand how fortunate they are and henceforth they miss classes and post stories such as ‘First day first show’. Deterioration in the quality doesn’t fetch anything. For example, people are ready to pay premium price for certain units of vegetable but nobody accepts vegetables of poor quality even if they are given for free.

Ease of Business : Red-tapism has been reduced in the recent years. However, e-tapism is the new buzzword. Keywords like server down, please try again later etc. are pretty painful for newbies and can slow down the adrenaline.

However, we are still in the beginning stage and in the years to come things might get pretty simple. This can be justified with the following example, few years back when there was no mobile banking or Unified Payments Interface stock traders had to rely on RTGS and NEFT and had to pay INR 9 for every transaction and it would take pretty long for the money to reflect in trader’s account. But today UPI payments are free and it just takes few seconds to deposit money.

Out of the Box Thinking : Most people lose this even before graduating from school. And one reason for this is lack of reward for out of the box thinking. Plagiarism is bad but if one doesn’t write the exact same thing that was written in her/his class notes during the exam, then she/he mayn’t fetch any marks for the answers. This often leads to behaviour wherein students end up mugging up class notes along with punctuation. And when this happens in a subjective subject the thinking capacity is hampered.

Gestation Period : It takes time for a firm to establish well and yield dividends. For those who wish to be entrepreneurs this can be a downside. This prevents them from carrying out their passion and makes them move towards the regular 9 – 5 job.

Cut Throat Competition : The outside world doesn’t work in the way we are thought in schools. The competition is red hot in every sector and when people forget to notice this, they get wiped out. People who understand this truth try to play safe and are often satisfied with under employment.

In fact the real problem that many face is under employment and not unemployment. For a person with fancy degree it is quite easy to get employment but the employment mayn’t be to the real potential of an individual.

To those who found it hard to interpret the above paragraph, here is a small example. Every day, I go to a particular tea shop. If I ask the owner of the tea shop regarding vacancy in his firm and if I furnish the details of my degree, there is a high chance that I might get a job. But my full potential is not realised when I decide to work in the tea shop and the reason is, Laplace Transform and Fourier Series mayn’t be of much use in the tea shop. Also I mayn’t get a fancy pay packet. This condition is called under employment.

Well folks, it’s a wrap for this post, see you next time. Have a great day 🙂

Why is that Cappuccino so expensive ?

Well, most of us have wondered as to why the coffee is so expensive at good coffee shops, haven’t we ?  You don’t have to wonder anymore as the answer to this question is answered to a certain extent in this post.

To begin with, you might have noticed that all expensive coffee shops are located in posh areas or fancy malls. Well this implies a heavy rent on real estate. For example, assume the rent for a 1000 sq. ft. coffee shop in a good location to be 1 lakh INR per month. Which further implies that it costs rupees 100 per sq. ft. for 30 days. For one day the cost per sq. ft. would be INR 3.33. Assuming that the coffee shop functions 12 hours in a day, the cost of 1 square feet per hour would be 0.27 INR. Assuming that an average coffee table along with two chairs, occupies an area of 5 sq. ft. The cost per table for an hour would be INR 1.35.

You can’t run a coffee shop without staff, right ? Let’s assume that there are 5 workers in the coffee shop and the average salary per head to be INR 10000. So for 5 workers the total salary will be INR 50000. That’s INR 1666.66 per day for 5 employees. Per hour the salary for 5 employees would be INR 138.88, assuming that they work for 12 hours.

On top of this, in order to produce coffee you need raw materials which adds to the cost. And then there is tax that again adds up the cost. Good coffee shops are known for their ambience along with their excellent coffees, and maintaining a good ambience isn’t free of cost, the air conditioners, the complimentary Wi-Fi etc. all adds up the cost. Then there is the brand value, the heritage and history, and all that can make the price go up. And now the most important of them all, the PROFIT, nobody sells a product without some profit, and this in turn adds up the final cost of the Coffee.

From the second paragraph of this post we understand that you pay for real estate too. You might have noticed that most love birds spend more than an hour in the coffee shop with just two cups of coffees. And the staff do not shoo them away post their coffee cup is empty. Yes, this implies that if the love birds are spending their time in the shop for say two hours, the cost of real estate is now calculated for two hours. And this implies that coffee shops aren’t just selling coffee, they are selling temporary floor space in a prime location, along with good ambience. Has anyone wondered how much it would cost for renting comfy furniture for two hours ? (and yeah don’t forget the profit in this case too).

Now let’s move to the quality aspect, the coffee in the pro coffee shops tastes the same on all the 365 days in the calendar, and maintaining the same taste isn’t easy. The coffee machine may be same but the contents in water, the coffee beans and all the raw materials involved in production too must be the same to achieve this, and that isn’t an easy task. And the cost of raw materials is subjected to inflation along with time.  Moreover, if a new variant of coffee is launched, there would be some money spent on R&D too (and this has to be recovered along with profit). Starting a business requires licenses, permits, renewals etc. and this too can affect the price of the product sold by the company.

These are some of the reasons that makes the coffee expensive.

Note : The facts and figures used in this post are for understanding purpose only. In real scenarios the numbers vary by a huge margin and there are lot of other factors that affect the price of coffee.