2. Unemployment

Unemployment is a situation in which individuals are ready and willing to work at the prevailing rate of wages but cannot get the work. According to the NSSO, unemployment is a situation in which all those who, owing to lack of work, are not working but either seek work through employment exchanges, intermediaries, friends or relatives or by making applications to prospective employers or express their willingness or availability for work under the prevailing conditions of work and remunerations

Number of unemployed = Labour Force - Work force

Where, workforce = working or being engaged in economic activity and labour force = work force + not engaged in economic activity and either making tangible efforts to seek work or being available for ‘work’ if the work is available.

2.1. Types of Unemployment

a) Cyclical unemployment: This kind of unemployment occurs when all those who want to work cannot be employed because there is not enough demand in the market for their work. It is called as cyclical unemployment because it varies with the trade cycle. For example, when the economy is doing well there would be greater demand for the goods, but the opposite is true for the years when the economy slows down. For example: In the aftermath of the US subprime crisis, many people lost their jobs.

b) Frictional Unemployment: This kind of unemployment occurs when a person leaves/loses a job and starts looking for another one. This search for a job may take a considerable amount of time resulting in frictional unemployment. Frictional unemployment tends to be on a high when an economy is not doing so well. This kind of unemployment may also be high in an economy if people change jobs frequently due to high level of dissatisfaction with the working conditions in the economy.

c) Seasonal Unemployment: This kind of unemployment is expected to occur during certain parts of the year. For example, tourism related jobs at a hill station may experience seasonal unemployment during the winter months . Another example could be the seasonal unemployment in agriculture depending upon the success of monsoon. Similarly if

irrigation facilities are missing, only one crop may be produced in a year, rendering the farmer unemployed for the rest of the year.

d) Structural Unemployment: This kind of unemployment happens when the structure of an industry changes. For example, as the country is tending to move from use of bicycles to motorcycles, the demand for labor in the cycle industry continuously falls. Therefore, structural unemployment essentially occurs when there exists a mismatch between the skills of the unemployed and the skills needed for the job. Changes in technology and changes in tastes are two big reasons for the occurring of structural unemployment in the economy. One of the reasons why NITI Ayog focuses on skill development is to address the problem of structural unemployment in the country.

e) Underemployment: This term can be used in multiple connotations but one of the primary usage is to showcase a situation where a person with high skills works in low wage and low skill jobs.

f) Disguised Unemployment: Such type of unemployment is quite common in the agricultural sector in India. It occurs when people are employed in a job where their presence or absence does not make any difference to the output of the economy. Because of large families in the rural areas several people work on farms and at times the work of 2- 3 people is done by 4-5 people.

g) Open unemployment – this refers to a situation where there are some workers who have absolutely no work to do. They are willing to work at the prevailing wage rate, but they are forced to remain unemployed in the absence of work. These workers are completely idle. Such unemployment is clearly visible as the number of such person can be clearly counted and therefore it is known as open unemployment. It is found largely in cities and to a limited extent in rural areas. Frictional, structural and cyclical are different types of open unemployment.

h) Natural unemployment – Unemployment ranging between 2 to 3% in the country is considered natural and inevitable. This minimal percentage of unemployment cannot be eliminated at all. It is called natural unemployment.

Full Employment: It is a situation when every able-bodied adult works the number of hours considered normal for a fully employed person.