Types of Unemployment

Unemployment is a condition when a person is willing to work at existing wage rate but he is not getting opportunity to work. Unemployment is one of the indicators of economic health of the nation. It can lead to political and economic stability and instability in a country. Unemployment occurs due to various causes, based on reason of its occurrence there are different types of unemployment existing in India.
types of unemployment

Types of Unemployment in India

  1. Structural Unemployment: Structural Unemployment occurs when rate of capital formation falls down i.e. skills, experience, and education of workers do not match the available opportunities of job. It generally happens due to change in economic structure of the country.
  2. Under-Employment: Under-employment refers to the situation when people in workforce are employed at less than their efficiency and capability. The efficiency of workers is underutilised and country fails to exploit the potential of their labourers.
  3. Disguised Unemployment: Disguised unemployment is a kind of unemployment where people seems to working and employed but are actually not contributing anything to the production process. If such labour force is removed from work, there will not be any affect on productivity. The agriculture sector in India is experiencing such kind of unemployment.
  4. Open Unemployment: Open unemployment is a condition when people are willing to work but do not find any work. In India, when people migrate from rural to urban areas and do not get work to fall in open unemployment.
  5. Educated Unemployment: When an educated person does not get work suitable to his qualification, he is said to fall under educated unemployment. The type of unemployment is largely found in developing countries like India.
  6. Frictional Unemployment: Frictional unemployment refers to the period between job transitions. This type of unemployment occurs due to change in market conditions i.e. change in demand and supply. The diversion of equilibrium due to change in demand and supply in market results in unemployment. For example in India, Agriculture is affected due to monsoon. Any deviation in monsoon causes unemployment for the people.
  7. Seasonal Unemployment: Season unemployment occurs when people get unemployed during particular time of year. This occurs due to change in demand because of season variations. For example, the agriculture labourers in India usually get work for 7-8 months in a year and remain unemployed for the rest of the year.

Other common types of Unemployment

  1. Cyclical Unemployment: Cyclic unemployment occurs due to fluctuation in business cycle in economy. During recession in economic cycle, the demand for goods and services reduces. Due to which production need to be reduced, this consequently leads to reduction in demand for labourers. Due to mismatch in supply and demand, unemployment occurs.
  2. Voluntary Unemployment: Voluntary unemployment occurs due to mismatch in expectation of worker towards job parameters. For example when a person does not get expected wage rate, he may choose not to accept the job leading to voluntary unemployment.

Who measures unemployment in India?

The National Sample Survey Organization (NSSO), since its inception in 1950, does the measurement of employment / unemployment in India. According to NSSO latest survey, LFPR stood at 49.8% in 2017-18.

Important Terminology

  • Labour Force Participation Rate (LFPR): The share of population who are either working or available for work.

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