Different Types of Unemployment in India

Different Types of Unemployment

Before going to the unemployment types, let us first know what is unemployment?

What is unemployment?

• Unemployment refers to a situation when a person who is actively searching for employment is unable to find work.
• Unemployment rate calculation: Unemployment rate is calculated by dividing the number of unemployed people by the number of people in the labour force.

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Types of Unemployment in India

Open unemployment

• In this type of unemployment, a large section of the labour force does not get a job that may yield them regular income.
• Here, the labour force expands at a faster rate than the growth rate of economy, due to which all people do not get jobs.

Disguised Unemployment

• In disguised unemployment, more people are doing work than actually required.
• In this situation, even if some people are withdrawn, production does not suffer.
• In other words, it refers to a situation of surplus manpower in which some workers have zero marginal productivity.
• In India, the most common example of disguised unemployment is agriculture sector.

Seasonal Unemployment

• Seasonal unemployment occurs during certain seasons of the year.
• In sectors like agriculture, tourism, economic activities take place only in some seasons.
• These sectors offer employment for only a certain period of time in a year, and people engaged in such type of activities may remain unemployed during the off-season.

Cyclical Unemployment

• Cyclical unemployment is the impact of economic recession or expansion on the total unemployment rate.
• Cyclical unemployment relates to the irregular ups and downs, or cyclical trends in growth and production that occur within the business cycle.
• When economic output falls, the business cycle is low and cyclical unemployment will rise.
• Example: Financial crisis in 2008

Technological Unemployment

• It is a type of unemployment where people could not find jobs due to technical change.
• World Bank predicated that 70% of the jobs in India are threatened due to technological advancement.
• Economists, however, disagree with this type of predictions.
• Economists believes that jobs may be lost for the short time but new jobs appear in other areas.

Structural Unemployment

• Structural unemployment arises due to drastic changes in the economic structure of a country.
• Structural employment is a natural outcome of economic development and technological advancement and innovation taking place all over the world.
• This type of unemployment occurs due to a mismatch between the skills workers have, and the jobs that are actually available.

Frictional Unemployment

• Frictional unemployment occurs when workers are jobless and looking for work in a healthy economy. It doesn’t matter if they leave voluntarily or are fired.
• It is a type of unemployment where a worker voluntarily become unemployed while searching for a better job or moving for unrelated reasons.
• Unlike other types of unemployment, frictional unemployment is a component of the natural labour turnover rate and not a sign of an unhealthy economy.

Chronic unemployment

• If unemployment continues for a longer duration in a country, it is called chronic unemployment.
• Causes: Rapid growth of population and inadequate level of economic development.

Underemployment

• Underemployment is a situation in which people who are employed in an organisation contribute less than their capacity to produce.
• Underemployment occurs when workers’ jobs don’t use all their skills, education, or availability to work.
• Types of underemployments: Visible underemployment and invisible underemployment.

Visible Underemployment

• It includes employees who are willing and able to work more hours but cannot get full-time employment.
• They often work two part-time jobs just to make ends meet.

Invisible Underemployment

• The workers often don’t even realize their skills could be better used elsewhere.
• Invisible underemployment includes workers in full-time jobs that don’t use all their skills.
• This type of underemployment is almost impossible to measure.
• It requires extensive surveying that compares workers’ skills to job requirements.

Economy Notes for UPSC

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