Types of Unemployment in India | Cause, Impact, Measurement

Types of Unemployment in India

We endeavor to make you aware of the unemployment concept in the country. There are various types of unemployment in India which can be noticed when studied.

Know about the types of unemployment and the way of measurement. Explore its causes and impact alongside.

With the average unemployment rate of 7.3%, it is a matter of grave concern for the country.

The rate has been the highest since 2016 September and manipulating to the nearby figures only.

What is Unemployment?

Unemployment refers to the status of individuals who are unable to find a job. In this situation, a person is physically and mentally capable of working and actively searching for a job.

Also, unemployment is often implicated as the measure of the health of the economy. It is most frequently measured through the term ‘unemployment rate’.

The rate is calculated by taking the ratio of the number of unemployed persons to the number of persons in the labour force.

The unemployment rate serves as an indicator of the labour market conditions. Economists use the term to converse regarding the supply and demand for labour.

The unemployment rate provides insights into the performance of the economy and determining the monetary policy.

In simple terms, it is a situation of involuntary unemployment where a person is willing to work at the existing wage rate but is unable to secure a job.

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What are the types of unemployment in India?

Unemployment is of various types. It has been categorized depending on its nature which is as follows:-

Open Unemployment

A large section of the labour force does not get a job that is the source of regular income for them. The number of unemployed individuals significantly increases.

The growth is even faster than the growth rate of the economy. Due to this, the majority of individuals are unable to get work for them.

Disguised Unemployment

This is primarily identified in the agricultural and unorganized sectors of the country. Disguised unemployment is a situation where more persons than the needed are employed. Surplus labour is employed while the marginal productivity is zero.

Voluntary Unemployment

As the name suggests, individuals may not choose to work at the current wage rate. They choose not to work on their will. Individuals are not forced to do so in any situation.

There are several reasons for voluntary unemployment. It can be a wage rate which does not encourage individuals, welfare benefits or income tax rates.

Seasonal Unemployment

Certain industries and sectors have their activities shut during some seasons. They offer employment only during some seasons or a certain time in a year. For the remaining or off-season, the labour force is unemployed.

This occurs at different points over the year. It differs from the nature of the industry working in a particular season.

Examples: Ski instructors, Holiday and travels, Fruit pickers etc.

Cyclical Unemployment

Caused by trade cycles, cyclical unemployment is significantly experienced in capitalist economies as they are subject to trade cycles.

Workers lose their job due to business cycle downturns or the aggregate demand.

When the decrease in aggregate demand is persistent, it leads to long-term unemployment. This situation is termed a Demand Deficit, Keynesian, or General Unemployment.

When there is an economic downturn, it results in a shortfall of demand which leads to a lack of jobs available for the individuals.

Businesses lay-off or employ lesser individuals to deal with the prevailing situation.

Educated unemployment

Various educated people are looking for a job but fail to secure one due to being under-qualified.

This unemployment among the educated population in India is due to a lack of skills, faulty education systems, etc.

Educated unemployment can be categorized as either underemployment of open unemployment.

Structural unemployment

There are drastic and structural changes in the market conditions and the economies over the long term. This affects the supply and demand factors to a certain extent.

Closure of a sector leaves individual unemployed. They are unable to secure jobs in other sectors due to lack of relevant or adequate skills.

Technological unemployment

Technologies have been rapidly changing year after year. This owes a threat to the manual labour and under-skilled labour force.

Unemployment caused due to the changes in technology and production techniques is termed as technological unemployment. 

Frictional unemployment

The situation when individuals, after losing their job, are searching for other jobs or employment opportunities. This is also termed as search unemployment.

It is short-term unemployment which occurs due to seasonal work nature, labour immobility and lack of information etc.

Classical unemployment

This refers to a situation when wages are higher than the laws normally dictated by supply and demand. This is caused by situations of too high wages.

In earlier times, the workers demanded high wages for working. They were blamed for not accepting lower wages.

This type of unemployment dominated the economic theory before the 1930s.

It is also known as induced unemployment and real wage unemployment.

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What is the measurement of unemployment?

The National Sample Survey Organization has developed ways to measure the different types of unemployment in India.

There are three methods or measures of unemployment which are as follows:-

Usual Status Approach

This estimate measures the number of individuals who have no gainful work or an income yielding job for a major part during the 365 days preceding the date of the survey.

This is also referred to as chronic or open unemployment.

Weekly Status Approach

This method uses seven days preceding the date of the survey as the reference period.

Under this method, an individual is considered employed if s/he pursues any gainful activity for at least one hour on any day during the reference week. If not, s/he is entitled as unemployed.

For classification under this approach, a priority-cum-major rule is adopted.

If a person states him or her as neither working not seeking a job, s/he is deemed outside the labour force.

Daily Status Approach

Under this approach, the current activity status of the person concerning whether employed or unemployed outside the labour force is recorded for each day in the given reference week.

This estimate considers half day as a unit of measurement for determining the employment or unemployment status.

What are the causes of unemployment in India?

There can be several reasons for unemployment which are as follows:-

Rapid Population Growth

India has a huge population which leads to greater unemployment among the individuals. Opportunities are not equally available due to the extremely large proportion of the workforce.

Defective Education System

The Education system in India does not focus on grooming the skills required from an early age. People have to develop their skills additionally.

Seasonal Occupations

The seasonal nature of certain sectors a prominent share of the labour force jobless in the off-season. This improves the unemployment rate.

Rate of Economic Growth

Slow economic growth results in less job or work opportunities for individuals. People are either laid off or forced to work at lower wage rates.

Slow Industrial Growth

Recession in industrial growth requires industries to cut their costs. For this, the first significant step taken is the laying of the employees.

Economic Underdevelopment

Underdevelopment poses a direct risk to economic growth. It ultimately leads to underdevelopment or failure of all the sectors of the economy.

Lack of Resources and Technology

Inadequate availability and access to sufficient resources and technologies make the individuals fall behind from attaining skilled jobs.

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What is the impact of unemployment?

Unemployment serves as an indicator of the economic growth of a country. It has a crucial role to play in the economic growth of the country.

Unemployment has several impacts which are as follows:-

Poverty

Having work or job serves as an income source. Due to unemployment, this income is dismissed and lead to increasing poverty in the country.

Ultimately, poverty has affects economic development and growth.

Increased Crime Rate

When people will not have any source of income, they might indulge in criminal or wrong activities to generate a source of living for them.

This gives rise to harmful elements in the society.

Outrage

Unemployed individuals depend on the government for job opportunities or remedies to combat their situation.

Prolonged unemployment leads to outrage amongst the people and gives rise to several anti-social activities and elements.

Loss of Human Resource

Owing to unemployment, individuals can indulge and develop bad habits such as drug or alcohol addiction and even attempt suicides.

This leads to a loss of the valuable workforce as they could have gained some opportunities in the future.

Declined Economic Condition

The unemployed workforce could have been used to generate resources.

Now, they depend on the remaining workforce and increase the socio-economic costs for the state.

Social Effects

Unemployment can lead to several harmful social effects. Unemployed individuals can be easily provoked by anti-social elements.

This leads to them losing faith in the democratic values of the country.

Conclusion :-

We had tried to explain about types of unemployment in India in brief. If in case you need a detailed explanation of various aspects of the topic to be covered, please let us know in the comment section.

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