Meaning and Types of Unemployment


Meaning and Types of Unemployment- Any country's population is made up of two parts:

  1. Labor force and 
  2. Non-labor force. 
The labor force includes both individuals who are working (i.e. engaged in economic activity) and those who are not working but are looking for or available for work at the present wage rate. It signifies that the labor force includes both employed and jobless individuals. Non-Labor Force refers to the population component that is not a member of the labor force. It covers everyone who isn't working and isn't looking for or available for work.

Read- 6 Type of Unemployment 

What is Unemployment?

Unemployment is defined as a state of being jobless for a person who is physically fit and willing to work at the present wage rate. It is a state of involuntary, rather than voluntary, idleness. Simply put, a jobless individual is someone who is in the labour force and is looking for work but is unable to find it. In the situation of voluntary unemployment, a person is out of work on his or her own or choice and does not work for the standard or required salary. Either he wants more money or he doesn't want to work at all. Involuntary unemployment, on the other hand, is a scenario in which a person is separated from remunerative labour and without compensation, despite the fact that he is capable of earning his earnings and is eager to do so. Unemployment is defined as involuntary inactivity. There are several types of unemployment: cyclical unemployment, seasonal unemployment, structural unemployment, frictional unemployment, natural rate of unemployment, disguised unemployment, and underemployment.

1-Cyclical Unemployment- When the economy requires a large number of workers, this is referred to as cyclical or demand deficient unemployment. When there is a reduction in aggregate demand for products and services across the economy, employment falls and unemployment rises. Cyclical unemployment is most common during a recession or depression.

Because unemployment varies with the business cycle, this type of unemployment is frequently referred to as cyclical unemployment. For example, during the recent global slowdown in late 2008, many workers all around the world were laid off.

2- Seasonal Unemployment- This sort of unemployment occurs at a specific time of year or season, and is thus referred to as seasonal unemployment. Seasonal work is most popular in businesses such as agriculture, tourism, hotels, and catering, among others.

3-Structural Unemployment- Structural unemployment occurs when a person's qualifications are insufficient to meet his job requirements. It occurs as a result of a long-term shift in demand patterns that alters the fundamental structure of the economy. The individual is unable to learn new technology used in rapidly increasing economic sectors, and as a result, they may become chronically unemployed. For example, when computers were introduced, many workers were displaced due to a mismatch between their previous abilities and the job requirements. Despite the fact that jobs were plentiful, there was a desire for a new type of skill and qualification. As a result, those with outdated skills have been unable to find work in the new economic regime and continue to be unemployed.

4-Frictional Unemployment-Frictional unemployment happens when a person is out of one job and looking for another for a variety of reasons, such as pursuing a better job, being fired from a current job, or willingly quitting a current job. It usually takes some time before a person can move on to the next employment. During this time, he is unemployed on the surface.

5-Natural rate of the unemployment-The natural rate of unemployment is defined as the sum of frictional and structural unemployment.

6-Disguised Unemployment-Unemployment that is not obvious is referred to as concealed unemployment. It occurs when a person does not contribute to the result although obviously working. This occurs among family laborers, particularly in agriculture, who work on the land but do not contribute to the specified level of productivity. As a result, their marginal productivity is zero.

7- Underemployment-When a person engages in economic activity but does not receive compensation commensurate with his qualifications and efforts. Thus, it is a circumstance in which an individual is employed but not in the capacity for which he or she is qualified and experienced, whether in terms of salary, hours, or level of ability and expertise. While the underemployed are not officially unemployed, they frequently fight for available jobs.


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