Friday, 18 July 2014 07:56




Unemployment, as defined by the International Labour Organization, occurs when people are without jobs but are willing and able to work for pay and have actively searched for work.

Types of unemployment in India:

1. Frictional Unemployment

Frictional unemployment occurs when a person is out of one job and is searching for another. It generally requires some time before a person can get the next job. During this time he is frictionally unemployed.  It is sometimes called search unemployment and can be voluntary based on the circumstances of the unemployed individual. Frictional unemployment exists because both jobs and workers are heterogeneous, and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, work-time, location, seasonal industries, attitude, taste, and a multitude of other factors.

2. Structural Unemployment

Structural unemployment occurs when a labour market is unable to provide jobs for every person who wants one because there is a mismatch between the skills of the unemployed workers and the skills needed for the available jobs. Structural unemployment arises when the qualification of a person is not sufficient to meet his job responsibilities. Structural unemployment may also be due to a change in the tastes and preferences of the consumers. Certain goods or services may not be in demand due to technological advancements

3. Under-Employment

Underemployment can refer to:

• "Overqualification" or "overeducation", or the employment of workers with high education, skill levels, and/or experience in jobs that do not require such abilities. For example, a trained medical doctor who works as a taxi driver would experience this type of underemployment.

• "Involuntary part-time" work, where workers who could (and would like to) be working for a full work-week can only find part-time work.

• "Overstaffing" or "hidden unemployment" (also called "labour hoarding"), the practice in which businesses or the entire economy employ workers who are not fully occupied e.g. workers currently not being used to produce goods or services due to legal or social restrictions or because the work is highly seasonal.

4. Disguised unemployment

Disguised unemployment exists where part of the labor force is either left without work or is working in a redundant manner where the worker’s productivity is essentially zero. An economy, where productivity is low and where too many workers are filling too few jobs, demonstrates disguised unemployment. Disguised unemployment exists frequently in developing countries whose large population creates a surplus in the labour force. Where more people are working than is necessary, the overall productivity of each individual drops. Disguised unemployment is characterized by low productivity and frequently accompanies informal labour markets and agricultural labour markets, which can absorb substantial quantities of labour.

For example: An agricultural field requires 4 labourers but people engaged in this activity are 6. Then the unemployment for the 2 extra labourers is of disguised nature.

5. Cyclical unemployment

It is a factor of overall unemployment that relates to the cyclical trends in growth and production that occur within the business cycle. When business cycles are at their peak, cyclical unemployment will be low because total economic output is being maximized. When economic output falls, as measured by the gross domestic product (GDP), the business cycle is low and cyclical unemployment will rise. Economists describe cyclical unemployment as the result of businesses not having enough demand for labour to employ all those who are looking for work. The lack of employers’ demand comes from a lack of spending and consumption in the overall economy.

6. Seasonal Unemployment

Seasonal unemployment is the outcome of the fluctuations in demands for labour in convinced industries because of the seasonal nature of production. In such industries there is a recurring model in the demand for labour. During the period when the business is at its peak there is a high quantity of seasonal employment but during the off-peak period there is a high recurring unemployment. This is due to seasonal variation in the activities of particular industries caused by climatic changes in fashions or by the inbuilt nature of such industries. The ice factories are blocked in winter throwing the workers out of their jobs because there is no demand for ice during winter season. Likewise the sugar industry is recurring in the sense that the crushing of sugar-cane is done only in an exacting season. Such seasonal industries are bound to give rise to seasonal unemployment.