Unemployment is a circumstance in which a person who is actively looking for a job is unable to find work. Unemployment is seen as a significant indicator of the economy's health. Types of Unemployment are Frictional, cyclical, structural, voluntary, seasonal, disguised, open and underemployment. This article discusses the types of unemployment that are essential for UPSC aspirants.

Types of Unemployment

Unemployment can be grouped into various types based on the nature of work, the structure of the economy, the nature of the seasons, technological advancements in an economy, etc. Various types of unemployment are discussed below.

Frictional Unemployment

• It is when there is the least amount of unemployment prevailing in an economy due to workers quitting their previous jobs and searching for new jobs.
• One of the major causes of occurrence of frictional unemployment is lack of information about the availability of jobs and non-willingness of mobility on the part of workers (it means workers are not willing to travel to a distant place or a new state for employment).
• A frictionally unemployed person remains unemployed for a very brief period of time.

Cyclical Unemployment

• It occurs during the cyclical trends of booms and recessions of a business cycle.
• This type of unemployment occurs mainly due to either deficiency or fall in effective demand from consumers which in turn leads to a fall in production and low demand for labor.
• This type of unemployment occurs for a long period of time and workers remain unemployed during the entire phase of slowdown.
• The unemployment crisis due to the 2008 financial crisis is an example of

Voluntary unemployment

• It is when workers are either not seeking work or are in transition from one job to another.
• Voluntary unemployment is present all the time in an economy.
• As there will always be some workers, who quit their previous jobs in search of new ones

Involuntary unemployment

• It is when workers are actively seeking employment and are willing to work but are unable to get work.
• Involuntary unemployment happens in an economy during the time of depression and decreases in aggregate demand for goods and services.

Structural unemployment

• It refers to a situation that arises as a result of a change in the structure of the economy.
• For instance, when an economy transforms itself from a labor-intensive to a capital-intensive economy, structural unemployment happens due to the mismatch of skills.
• As a result, workers who do not know how to operate the new and advanced technologies will be removed.
• This type of unemployment happens as the current workers do not have the skills required by their employers.

Seasonal unemployment

• This happens during specific seasons of the year. It is more prevalent in sectors and occupations such as agriculture, holiday resorts etc., where production activities take place only in some seasons.
• Therefore, they offer employment for only a certain period of time in a year.
• People engaged in seasonal activities may remain unemployed during the off-season

Open unemployment

• It is a condition where people have no work to do. It is also known as naked unemployment.
• Here individuals are able to work and are also willing to work but there is no work for them.
• It is frequently found in larger cities and is less frequent in villages. Most of such individuals come from villages in search of jobs or might originate in cities themselves.
• Such employment can be seen and counted in terms of the number of such persons. Hence it is called open unemployment..

Under-employment

• It is a scenario where employed people are contributing to production less than they are capable of.
• It can be estimated in terms of time, which is visible under-employment or type of work, which is invisible under-employment. Part-time workers come under this category.

Disguised Unemployment

• It occurs when a person is the one who seems to be employed but actually, he is not. His/Her contribution to the total output is either zero or negligible.
• When more individuals are engaged in a job than the number actually required it leads to a state of disguised unemployment.
• It is mostly seen in rural areas such as in agricultural activities

Vulnerable Employment

This means, people, working informally, without proper job contracts and thus get deprived of any legal protection. These persons are regarded as unemployed since records of their work are never maintained. It is one of the main types of unemployment in India.

Technological Unemployment

• It is unemployment that occurs as a result of the loss of jobs due to changes in technological developments.
• According to World Bank data, the proportion of jobs threatened by automation in India is 69% on a year-on-year basis.

Conclusion

Unemployment can be caused by various reasons ranging from changes in seasons, the structure of the economy to changing technological advancements. Unemployment caused due to seasonal nature can be temporary and have less impact on the economy, however, unemployment caused due to the structural nature of the economy can have a more permanent character.

FAQs

MCQs

1. Which type of unemployment is caused by economic downturns?

A) Structural
B) Frictional
C) Cyclical
D) Seasonal

2. Disguised unemployment is commonly found in:

A) Technology
B) Agriculture
C) Manufacturing
D) Services

3. What type of unemployment occurs due to skill mismatches?

A) Seasonal
B) Structural
C) Frictional
D) Cyclical

4. Which of the following is a short-term form of unemployment?

A) Frictional
B) Structural
C) Cyclical
D) Disguised

5. Seasonal unemployment commonly affects:

A) IT sector
B) Retail
C) Agriculture
D) Manufacturing

GS Mains Questions and Model Answers

Q1: Describe the different types of unemployment in India and discuss the economic implications of each type.

Answer: India faces structural, frictional, cyclical, seasonal, and disguised unemployment. Structural occurs due to skill mismatches; frictional is short-term and transitional; cyclical relates to economic downturns; seasonal affects industries like agriculture; and disguised involves excess workforce. Each type impacts productivity, economic growth, and living standards, requiring targeted policy interventions for improvement.

Q2: How does structural unemployment affect the labor market? Suggest measures to reduce its impact in India.

Answer: Structural unemployment occurs when skills do not match job requirements, often due to technology or economic shifts. This mismatch results in long-term joblessness, affecting workers and economic productivity. Addressing it requires skills training, education reforms, and policy adjustments to align workforce skills with industry demands, supporting a balanced labor market.

Q3: Analyze the role of government programs in tackling unemployment in India. Provide examples of successful initiatives.

Answer: Government programs like MGNREGA provide rural employment, while PMKVY promotes skill development, tackling both disguised and structural unemployment. Other schemes like Startup India encourage self-employment. These initiatives address various unemployment types, yet challenges remain, highlighting the need for tailored programs for urban and educated unemployed.

Previous Year Questions on Types of Unemployment

1. UPSC CSE Prelims 2021:

Question: Disguised unemployment is commonly found in which sector in India?

A) IT
B) Agriculture
C) Manufacturing
D) Real Estate

Answer: (B)

Explanation: Disguised unemployment is prevalent in India’s agricultural sector, where excess workers do not increase productivity.

2. UPSC CSE Mains 2019 (GS Paper 3):

Question: "Discuss the causes and effects of structural unemployment in India. How can skill development programs help mitigate this issue?"

Answer: Structural unemployment stems from skill mismatches due to economic shifts. It affects productivity and economic growth. Programs like PMKVY and Digital India address these gaps by aligning skills with industry needs, supporting employment in modern sectors.