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Meaning and types of unemployment

The term unemployed refers to an individual who is capable to work and willing to work, but doesn’t get an opportunity to work. Unemployment can take many forms like:
  • Voluntary unemployment: It refers to that situation where people do not work either because they get a continuous flow of income from their property, etc or simply because they do not want to work at the prevailing wage rate.
  • Frictional unemployment: It is a temporary phenomenon which occurs when some workers are temporarily out of work either while changing jobs or when the work is suspended due to strikes or lockouts.
  • Casual unemployment: This type of unemployment occurs in industries such as construction, catering or agriculture where workers are employed on a day-to-day basis and hence, terminable any time.
  • Seasonal unemployment: There are some industries and occupations such as agriculture and tourism, which are seasonal in nature. They offer employment only for a certain period of time in a year.
  • Structural unemployment: When an economy develops due to new innovation and introduction of new products, the existing products demand declines and this leads to decrease in employment in that sector. In a developing economy like India, most of the unemployment is structural in nature.
  • Technological unemployment: It’s true that technology replaces human labour. Some workers may get replaced by machines due to the introduction of better machinery, improvement in the methods of production, etc. This is known as technological unemployment.
  • Cyclical unemployment: Cyclical unemployment is a temporary phenomenon. This is caused due to trade cycles. Generally, the recessionary and depression phase in a trade cycle causes cyclical unemployment. During the contraction phase of a trade cycle, aggregate demand falls in an economy and this leads to disinvestment, decline in production and unemployment. Cyclical unemployment can be overcome by increasing total expenditure and pushing up effective demand, easy money policy and deficit financing.
  • Chronic unemployment: When unemployment is a long term feature of a country, it is known as chronic unemployment. This type of unemployment is mainly found in the underdeveloped countries as a result of the vicious cycle of poverty, lack of developed resources and their underutilization, high population growth, etc.
  • Disguised unemployment: It refers to a situation with surplus man-power in which some workers have zero marginal productivity. This means that labour is underemployed. The fraction of india’s workforce being disguisedly unemployed is one-third.

If only two people are required to operate a machine, but there are 4 people operating it, it means that though the other two people are employed, they are not gainfully employed and their removal will not affect the output. This situation is mainly found in the rural sectors and countries which have a huge population.


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