IAS Gyan

Daily News Analysis


16th March, 2022 Economy


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  • India’s urban unemployment rate jumped to 12.6 per cent in the April-June quarter of 2021, compared to 9.3 per cent in the January-March quarter. - National Statistical Office (NSO) data.


Unemployment rate:

  • Unemployment rate is a ratio between persons who are not currently employed but are actively searching for a job, and the total labour force.


Types of Unemployment in India

  1. Open Unemployment

Open unemployment is a situation where in a large section of the labour force does not get a job that may yield them regular income. This type of unemployment can be seen and counted in terms of the number of unemployed persons. The labour force expands at a faster rate than the growth rate of economy. Therefore all people do not get jobs.


  1. Disguised Unemployment

It is a situation in which more people are doing work than actually required. Even if some are withdrawn, production does not suffer. In other words it refers to a situation of employment with surplus manpower in which some workers have zero marginal productivity. So their removal will not affect the volume of total production. Overcrowding in agriculture due to rapid growth of population and lack of alternative job opportunities may be cited as the main reasons for disguised unemployment in India.


  1. Seasonal Unemployment

It is unemployment that occurs during certain seasons of the year. In some industries and occupations like agriculture, holiday resorts, ice factories etc., production activities take place only in some seasons. So they offer employment for only a certain period of time in a year. People engaged in such type of activities may remain unemployed during the off-season.


  1. Cyclical Unemployment

It is caused by trade cycles at regular intervals. Generally capitalist economies are subject to trade cycles. The down swing in business activities results in unemployment. Cyclical unemployment is normally a shot-run phenomenon.


  1. Educated Unemployment

Among the educated people, apart from open unemployment, many are underemployed because their qualification does not match the job. Faulty education system, mass output, preference for white collar jobs, lack of employable skills and dwindling formal salaried jobs are mainly responsible for unemployment among educated youths in India. Educated unemployment may be either open or underemployment.


  1. Technological Unemployment

It is the result of certain changes in the techniques of production which may not warrant much labour. Modern technology being capital intensive requires fewer labourers and contributes to this

kind of unemployment.


  1. Structural Unemployment

This type of unemployment arises due to drastic changes in the economic structure of a country. These changes may affect either the supply of a factor or demand for a factor of production. Structural employment is a natural outcome of economic development and technological advancement and innovation that are taking place rapidly all over the world in every sphere.


  1. Underemployment

It is a situation in which people employed contribute less than their capacity to production. In this type of unemployment people are not gainfully employed. They may be employed either on part-time basis, or undertake a job for which lesser qualification is required. For example a Post Graduate may work as a clerk for which only S.S.L.C. is enough.


  1. Casual Unemployment

When a person is employed on a day-to-day basis, casual unemployment may occur due to short-term contracts, shortage of raw materials, fall in demand, change of ownership etc.

  1. Chronic Unemployment

If unemployment continues to be a long term feature of a country, it is called chronic unemployment. Rapid growth of population and inadequate level of economic development on account of vicious circle of poverty are the main causes for chronic unemployment.


  1. Frictional Unemployment

Frictional unemployment is caused due to improper adjustment between supply of labour and demand for labour. This type of unemployment is due to immobility of labour, lack of correct and timely information, seasonal nature of work etc.


Consequences of Unemployment In India

 Unemployment is the root of a number of social and economic problems. Some of the vital problems are as under:



  • Poverty is the immediate consequence of unemployment because when a person is unemployed, he earns nothing and becomes poor.


Income Inequalities

  • Unemployment causes income inequalities also.
  • Indian economy is beset with gross economic inequalities. There are inequalities in income, consumption etc.


Under–Utilization of Resources

  • An important economic consequence of unemployment is that a lot of resources available in the country remain under-utilized. India has vast natural resources, but we are unable in utilizing these resources to the desired Extent.


Social Problems

  • Unemployment is the cause of a number of social problems, mainly because of two reasons: firstly, an unemployed person has nothing to do. He has no work to engage with.
  • This situation causes dispute, misunderstanding, quarrels, etc.
  • Secondly, an unemployed person has no source of income.
  • In most of the cases, such persons fail to provide required food, clothes, shelter, medicines, etc. for themselves and their family.
  • It forces them to do what they do not like to do and should not do. It causes crimes of theft, dacoity, robbery etc.


Remedial Measures

  • The measures that can help us in eradicating or minimizing Unemployment:

Expanding Volume of Work

  • Solution to the problem of unemployment lies in enlarging the opportunities for work. This needs to be completed to clear the backlog of unemployment and to provide jobs to the large additions being made to labour-force.
  • The work to be expanded has to be both in the sphere of wageemployment and self-employment.
  • The ultimate avenue of more employment has to be found in the industrial sector, as also in the service sector.


Raising Capital Formation

  • It is also necessary that the accumulation of capital is stepped up.
  • It helps employment expansion in two principal ways: One, it becomes possible to maintain the existing activities, as also to expand the current activities and to set up new ones.
  • Secondly, capital formation directly generates employment in the capital goods sector. This also provides capital goods for the production of consumer goods and services.


Appropriate Mix of Production Techniques

  • It is also necessary to choose such a combination of capital-intensive and labor-intensive technologies of production may generate maximum employment.
  • Labour-intensive activities such as cottage/household activities and also many agricultural operations, provide employment but capital-intensive technologies, are, by and large, more employment-creating, labour when employed in capital intensive industries, give rise not only to capital goods but also generate employment in industries which provide inputs to them.
  • Hence, the right mixes of technologies which may provide maximum employment at a higher wage rate and provide a surplus for further investment.


Special Employment Programmes

  • Till the economy matures to a level where everyone finds the job as described above, it is necessary, as an interim measure, to undertake special employment programmes for those who do not get benefit from this type of growth in the short run.
  • The need for supplement programmes is all the more important for poor people, residing mostly in rural areas and small towns.
  • Specific employment programmes to suit specific group of people and specific areas.