Types of Unemployment

Unemployment means when someone actively searches for work but is unsuccessful. Different types of unemployment are explained in this article.

Unemployment is a major economic criterion for defining a nation’s economic health because it shows the capability (or incapability) of healthy, educated, and willing individuals to gain a livelihood.

This does not include people who are unable to work due to retirement, a disability, higher education pursuits, etc.

In short, a higher unemployment rate indicates lesser economic growth and productivity.

Types of Unemployment

Unemployment in India is a multifaceted issue that poses significant economic development and social stability challenges. It includes various forms of joblessness and is driven by a mix of structural, cyclical, and demographic factors.

Unemployment refers to the condition of being without work while actively seeking employment.

In India and globally, different types of unemployment arise due to economic, structural, and seasonal factors.

Here are some of the main types:

Open Unemployment

Open unemployment occurs when a significant portion of the labour force is unable to find a position that may provide them with a stable source of income.

Reason: The labour force is growing Bigger than the pace of economic expansion. Therefore, not everyone finds employment.

Disguised Unemployment

In this case, more individuals are working than is truly necessary. Production is not harmed even if some are pulled. In other words, it refers to a situation in which there is an excess of labour and certain workers have zero marginal output.

Reason: The main causes of disguised unemployment in India may be related to overcrowding in agriculture brought on by the country’s fast population increase and a lack of alternative employment opportunities.

In India, it is mainly found in the agricultural and unorganised sectors.

Seasonal Unemployment

This type of unemployment happens at different times of the year. Production activities only happen during certain seasons in several sectors and professions, such as agriculture, holiday destinations, ice manufacturers, etc.

As a result, they only offer jobs for a limited time each year. People who participate in such activities run the risk of not finding work during the off-season.

Unemployment is a major economic criterion for defining a nation’s economic health because it shows the capability (or incapability) of healthy, educated, and willing individuals to gain a livelihood.

Vulnerable Unemployment

People who work informally, without adequate job contracts or other legal protection, are said to be in vulnerable employment. Since no records of their employment are ever kept, these people are considered to be “unemployed.

It is one of the primary categories of unemployment in India.

Structural Unemployment

This kind of unemployment develops as a result of substantial adjustments made to a nation’s economic structure. These adjustments may have an impact on a production factor’s demand or supply.

Structural employment is a natural byproduct of the tremendous global economic growth, technical innovation, and advancement that is occurring in every area.

For example: Unable to get a job due to a lack of required skills or poor education level or lack of advancement.

Cyclical Unemployment

It is brought on by trade cycles, which happen periodically. Typically, trade cycles are a feature of capitalist economies. Unemployment is caused by a decline in business activity. Typically, cyclical unemployment is a short-run situation.

The figure for Cyclical unemployment in India is almost negligible.

Technological Unemployment

It is the outcome of some technological advancement in production methods, which could not need a lot of labour. Because it is capital intensive, modern technology uses fewer workers and that leads to this type of unemployment.

In 2016, World Bank data said that year by year the proportion of jobs threatened by automation in India is 69%.

Frictional Unemployment

Unsuccessful labour market adjustments between supply and demand lead to frictional unemployment.

This sort of unemployment is brought on by the labour force’s inactivity, a lack of accurate and timely information, the seasonal nature of employment, etc. It is also called search unemployment.

It is sometimes considered voluntary unemployment because it is not caused because of any shortage of jobs, opposite to that, the workers themselves either quit or choose not to get jobs at a point in search of better opportunities.

For Example: the time lag between jobs when an individual is searching for a new job.

Educated Unemployment

In addition to open unemployment, many educated people are underemployed since their qualifications do not fit the position. The main causes of unemployment among educated young people in India are the country’s flawed educational system, mass production, desire for white-collar work, a lack of employable skills, and a decline in regular salaried employment.

Open unemployment or underemployment may both apply to educated people.

Underemployment

People who are employed are in a circumstance where they are not contributing as much as they could. In such a scenario, people take up a position that needs less educational qualification. that means people are unable to untap their potential and settle for lesser work because of the lack of employment opportunities.

Chronic Unemployment

Chronic unemployment is defined as persistent unemployment over an extended period. The primary reasons for long-term unemployment are population expansion that is out of control and an inadequate degree of economic development as a result of poverty’s vicious circle.

Casual Unemployment

Casual unemployment can happen when a person is not regularly or on a day-to-day basis because of short-term contracts, a lack of raw materials, a decline in demand, a change in ownership, etc.

Reasons for Unemployment

• Skill Mismatch: India’s educational system, particularly in rural areas, often doesn’t provide adequate vocational or technical training aligned with market demands, leading to employability gaps among young adults.
• Slow Industrial Growth: India’s industrial and manufacturing sectors have not expanded fast enough to absorb the growing workforce. Despite initiatives like “Make in India,” regulatory challenges and infrastructure gaps have hindered substantial job creation.
• Informal Economy Dominance: The majority of India’s workforce is employed in the informal sector, which lacks stability, job security, and social benefits. This leads to underemployment, where people are employed in jobs that don’t utilize their full skill set or offer adequate income.
• Low Female Labor Force Participation: Cultural and social constraints, combined with a lack of access to safe workplaces and childcare, resulted in low labour force participation rates among women, further impacting household income and national productivity.

Statistics and Trends

• According to the Centre for Monitoring the Indian Economy (CMIE), India’s unemployment rate was around 8-10% in 2023, with significant regional disparities. Urban areas tend to have higher unemployment due to higher expectations for skilled jobs, whereas rural areas are marked by high underemployment.
• Youth unemployment remains a critical issue, with graduates facing significant job market entry barriers. A large portion of the unemployed population is under 30, indicating that educational reforms and employment programs targeting youth are crucial.

Government Initiatives and Solutions

• Skill India and Pradhan Mantri Kaushal Vikas Yojana (PMKVY): These programs aim to enhance skill development across sectors, particularly in high-demand areas, to improve employability.
• Make in India and Atmanirbhar Bharat: By promoting domestic manufacturing, the government aims to create jobs in various sectors, including manufacturing, defence, and technology.
• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Provides rural employment through guaranteed wage labour, helping alleviate rural unemployment and underemployment issues.
• National Career Service (NCS): This portal connects job seekers with employers and provides career counselling to enhance job matching and career planning.

Recommendations

• Improve Quality of Education: Revamping the education system to focus on job-oriented skills and critical thinking could reduce the skills gap. Strengthening technical and vocational education, especially in rural areas, is essential.
• Formalize the Informal Sector: Introducing measures that provide social security, job security, and access to credit in the informal sector can help stabilize employment for a significant portion of the workforce.
• Encourage Women’s Participation: Policies like flexible work options, safe public transportation, and better maternity leave can encourage more women to join and stay in the workforce.
• Foster Entrepreneurship: Supporting startups and small businesses through easier credit access, simplified regulations, and mentorship programs can create new employment opportunities.

Addressing unemployment in India requires a multi-pronged approach that combines skill development, structural reforms, and targeted employment schemes to ensure sustainable job creation and inclusive economic growth.

Read: Employment Generation Schemes in India

Article Written By: Priti Raj