Unemployment – Types, Causes, and Trends
🟠 Topic 21: Unemployment – Types, Causes, and Trends
📌 Introduction
Unemployment is a critical indicator of economic health and human development. It not only reflects the state of the labour market but also the level of economic growth, skill development, and social inclusion. In a country like India, with a youth-heavy population, understanding unemployment trends and causes is crucial for effective policy planning.
🔹 What is Unemployment? ⚠️
📖 Definition
Unemployment refers to the condition where individuals who are willing and capable of working at the prevailing wage rate are unable to find suitable employment.
🔎 Key Components of Unemployment
| Component | Explanation |
|---|---|
| Labour Force | All individuals aged 15+ who are either working or actively looking for work. |
| Unemployed Population | Those actively seeking work but unable to find any. |
| Labour Force Participation Rate (LFPR) | Percentage of working-age population that is part of the labour force. |
| Unemployment Rate | Percentage of unemployed individuals within the labour force. |
🔹 Types of Unemployment
1️⃣ Structural Unemployment
- Due to mismatch between workers’ skills and job requirements.
- Common in economies transitioning to technology-driven sectors.
- Example: Handloom workers losing jobs due to automated textile mills.
2️⃣ Cyclical Unemployment
- Caused by economic slowdowns or recessions.
- When demand falls, businesses cut jobs.
- Example: Layoffs during COVID-19 pandemic.
3️⃣ Frictional Unemployment
- Temporary unemployment between jobs.
- Occurs when workers are changing jobs, relocating, or waiting for better opportunities.
- Example: An engineer leaving one job and searching for another.
4️⃣ Disguised Unemployment
- More people are employed than necessary, resulting in zero or marginal productivity.
- Common in agriculture.
- Example: Five family members working on a farm where two would suffice.
5️⃣ Seasonal Unemployment
- Employment available only during specific seasons.
- Common in agriculture, tourism, and construction.
- Example: Farm labourers unemployed between sowing and harvest.
6️⃣ Educated Unemployment
- Educated individuals unable to find jobs matching their qualifications.
- Often linked to poor quality education and skill mismatch.
- Example: Engineering graduates working as delivery agents.
🔹 Causes of Unemployment in India
1️⃣ Population Pressure
- Rapid population growth increases the labour supply faster than job creation.
2️⃣ Slow Industrial Growth
- Manufacturing sector unable to absorb workforce from agriculture.
- Premature deindustrialization due to reliance on services.
3️⃣ Skill Mismatch
- Poor vocational training.
- Mismatch between education curriculum and industry needs.
4️⃣ Informal Economy Dominance
- Over 90% of employment in informal sector with low productivity and income.
5️⃣ Gender Barriers
- Low female labour force participation (LFPR) due to cultural norms, safety concerns, and care responsibilities.
6️⃣ Automation & Technology Disruption
- Job losses due to automation in manufacturing and AI-driven services.
🔹 Current Trends in Unemployment (2023)
| Indicator | Value |
|---|---|
| Unemployment Rate (Periodic Labour Force Survey) | ~6.1% (Urban higher than Rural) |
| Youth Unemployment Rate | ~22% |
| Female LFPR | ~32% |
| Sector-wise Employment | 43% Agriculture, 25% Industry, 32% Services |
🔹 Urban vs Rural Unemployment
| Area | Features |
|---|---|
| Urban | High among youth and graduates; impact of automation. |
| Rural | High seasonal and disguised unemployment in agriculture. |
🔹 Unemployment and Economic Growth
- Jobless Growth: Economic growth without proportional job creation.
- Services sector contributes over 50% of GDP, but employs only ~32%.
- Labour-intensive sectors like textiles, food processing, construction need promotion.
🔹 Government Initiatives for Employment Generation
1️⃣ Rural Employment Programs
- MGNREGA: 100 days of guaranteed employment for rural households.
- Rural Skill Development Programs: Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY).
2️⃣ Urban Employment Initiatives
- National Urban Livelihood Mission (NULM) – Self-employment, skill training for urban poor.
- Smart Cities Mission: Infrastructure projects generating local employment.
3️⃣ Skill Development & Vocational Training
- Skill India Mission
- PM Kaushal Vikas Yojana (PMKVY) – Industry-linked skill training.
4️⃣ Entrepreneurship Promotion
- Start-up India – Startup ecosystem support.
- PM Mudra Yojana – Credit for micro-entrepreneurs.
5️⃣ Sector-Specific Strategies
- Textile Sector Package – Promoting labour-intensive garment industry.
- Tourism and Handicrafts – High employment potential.
🔹 Role of Technology in Job Creation
- Digital Economy: E-commerce, fintech, gig platforms creating new employment opportunities.
- Green Jobs: Renewable energy, climate adaptation sectors emerging as new employment avenues.
🔹 Challenges Ahead
- Skill Mismatch: Urgent need for industry-academia linkages.
- Labour Market Formalization: Shifting workers from informal to formal employment.
- Gender Gap: Boosting female workforce participation through safe workspaces, maternity benefits.
- Climate Change & Jobs: Shift towards climate-resilient employment.
📚 Practice MCQ
1️⃣ Consider the following statements regarding Cyclical Unemployment:
- It occurs due to business cycle fluctuations.
- It is unrelated to structural changes in the economy.
- It typically rises during periods of economic recession.
Which of the above statements are correct?
✅ Options:
(a) 1 and 3 only
(b) 2 and 3 only
(c) 1 and 2 only
(d) 1, 2, and 3
2️⃣ Which of the following types of unemployment is most prevalent in Indian agriculture?
✅ Options:
(a) Frictional Unemployment
(b) Structural Unemployment
(c) Disguised Unemployment
(d) Seasonal Unemployment
3️⃣ Consider the following statements about MGNREGA:
- It provides 200 days of guaranteed employment.
- It focuses only on skilled work.
- It covers both men and women.
- Wages are directly transferred to beneficiaries’ bank accounts.
Which of the above statements are correct?
✅ Options:
(a) 1 and 3 only
(b) 3 and 4 only
(c) 2 and 4 only
(d) 1, 3, and 4 only
4️⃣ Which program supports urban self-employment?
✅ Options:
(a) PM Kisan
(b) NULM
(c) PM Fasal Bima Yojana
(d) Stand Up India
5️⃣ Educated Unemployment is often caused by:
✅ Options:
(a) Labour strikes
(b) Skill mismatch
(c) Agricultural dependency
(d) Urbanization
