Unemployment – Concept, Definition, and Types

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types-unemployment
Types of unemployment
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People are willing to work for a salary but are not able to find a job. This is the simple definition of unemployment. In this post, you will understand Unemployment, what it means, and the types of unemployment.

What is Unemployment?

People are willing to work for a salary but are not able to find a job.

Remember-

  1. Unemployment is not permanent in nature
  2. The definition applies only to mentally and physically fit people aged between 15-60*
  3. If people are not willing to work they are not considered unemployed

In an economy, all those who are involved in economic activity are called workers.

Now you may ask-

What is an Economic Activity?

Any kind of productive activity which contribute to national income is an economic activity.

Concept of National Income – GDP, GNP, NNP, Reall vs Nominal

Type of Unemployment

types-unemployment
Types of unemployment ©Indiashastra

Structural Unemployment

Jobs are available but there is a serious mismatch between what the company needs and what employees can offer. Technology, competition, and policies are the main reasons behind structural unemployment.

For example- In the future, AI can lead to the loss of jobs.

This is long-lasting and harmful to the economy.

Frictional Unemployment

This is voluntary and temporary. Generally unemployment period between two jobs.

This can be desirable for the economy. Suppose you are doing a job, you took a gap and decided to upskill. And again apply for a better job.

Ex. You take leave to prepare for CSE Mains Examination.

This is likely to increase productivity. However, a higher rate of this can harm the Economy.

Cyclical Unemployment

GDP decreases –> Demand decreases –> Consumption decreases –> Cost Cutting from Prouction side

When firms are losing on the profit they tend to reduce employee salaries or terminate them.

So unemployment depends on Market Demand and Supply

Under Employment

It is a situation where people are working less than they are willing to work or they do not get wages according to their skills.

For example – When an engineer is working as an Ola driver or Zomato delivery guy.

Disguised Employment

When there is a redundant worker. Surplus workers with zero productivity.

Employment does not mean working only, your work must add value.

eg. A village Family doing subsistence agriculture in India. When 4 family members were working, output was X. Now 6 family members are working still output is X.

Seasonal Unemployment

Agriculture is seasonal in nature. During harvesting season there is a demand for labor. For the rest of the period, labor may seat idle. This is a type of structural unemployment since it is seasonal in nature – called Seasonal Unemployment.

To tackle such problems government introduced the MGNREGA scheme.

Open Unemployment

A person is willing to work, and is skilled enough but is unable to get a job or work.

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