Types of unemployment in Economics

Unemployment refers to the situation in which an individual who is able and willing to work at an existing wage rate does not get work. There are two types of Unemployment in Economics – rural unemployment and urban unemployment.

Types of Unemployment in India

Types of unemployment in Economics

Types of unemployment in Economics #1

Rural Unemployment

The majority of the rural population in India is dependent on agriculture and allied activities for sustenance. Rural areas face unemployment due to the features inherent in agriculture as an occupation.

Rural unemployment can be further divided into two categories—disguised unemployment and seasonal unemployment.

Disguised unemployment

An entire family (or even, an extended family) working on a single farm is a common enough sight in rural India. Even if some of the family members were to be removed from the farm, the agricultural output would not be affected. This suggests that the number of workers engaged in farming is more than what is actually required.

For example, let us say that a piece of land can be cultivated by five people efficiently. However, eight people are engaged in cultivation. Now, if we were to remove three of these people, then there would be no change in the farm produce. In this case, we can say that three of the eight people are in disguised unemployment.

Thus, disguised unemployment refers to the situation in which the number of persons engaged in work is more than what is actually required to complete the work.

In India, disguised unemployment is prevalent due to the following reasons.

  • Joint family system: In a rural joint family system, almost every member of the family is engaged in farming activities on the family farm, irrespective of the requirement. Thus, most of the members remain in disguised unemployment.
  • Lack of alternative employment opportunities: In rural areas, there is a lack of non-farming employment opportunities. As a result, many people remain engaged in agriculture and allied activities even when they do not contribute positively to the output.

Seasonal unemployment

Agriculture is a seasonal occupation. There exists a time lag of approximately 5 to 7 months between the cultivation of two crops. During this time, due to a lack of alternative employment opportunities, farmers remain without any jobs. Similarly, people who engage in post-harvesting activities, find work for only some part of the year. These are examples of seasonal unemployment. Thus, seasonal unemployment refers to the situation in which people are not able to find jobs during certain months of the year.

Types of unemployment in Economics #2

Urban Unemployment

Unemployment in urban areas can be divided into two broad categories- industrial unemployment and educated unemployment.

Industrial unemployment

This type of unemployment refers to the situation in which individuals are willing to work in the manufacturing sector, but are unable to find a suitable job due to a lack of education or technical skills. The following are the factors responsible for industrial unemployment in India.

Rural-urban migration: Very often, people in rural areas who are unable to find gainful employment in the agricultural sector tend to migrate to urban areas in search of better job opportunities. However, the industrial sector fails to absorb such a growing workforce. In such a situation, most migrants either remain unemployed or resort to working in the informal sector.
Adoption of labor-saving techniques of production: Increasingly, modern industries are switching over from labor-intensive techniques of production to labor-saving ones. This implies the use of more machinery and less labor for the production of goods and services. As a result, employment opportunities remain low in the industries.

Educated unemployment

This type of unemployment refers to the situation in which educated people are unable to find jobs. In India, the number of educated unemployed has substantially increased.

Clearly, employment opportunities have not increased at the same rate as the increase in the number of educated persons. The prime reason for the rise of educated unemployment is that the Indian education system is not job-oriented. It fails to provide the kind of practical knowledge and skills that are actually required in jobs. As a result, a large number of educated persons either remain unemployed or are engaged in jobs that are not suitable as per their qualifications.

Unemployment Common in both Rural and Urban Areas

There are certain types of unemployment that are common in rural and urban areas. They are discussed below.

Types of Unemployment #1

Open unemployment

This type of unemployment refers to the situation in which persons willing and able to work do not get work. Such persons remain unemployed the full time. Educated unemployed and those unemployed on account of migration from rural areas to urban areas, fall under the category of open unemployment.

Types of Unemployment in #2

Structural unemployment

This type of unemployment refers to the situation in which individuals are unable to find jobs due to structural changes in the economy. Structural changes can be of two types.

  • Changes in technology: With the development process, the industrial sector in a country tends to switch to modern techniques of production. People who are not able to adapt to these technological changes are rendered unemployed.
  • Changes in demand patterns: Over time, people’s tastes and preferences change with respect to different commodities. In other words, the demand patterns of consumers undergo changes. Industries that adapt to changing market demands and modify their products accordingly are able to survive in the market. On the other hand, industries that are not able to operate in accordance with changing demands are closed down. Consequently, the people engaged in these industries lose their jobs and become unemployed.

Types of Unemployment #3


This refers to the situation wherein individuals are less than fully employed. An underemployed person works for a lesser duration of time than what he actually can. In this sense, we say that the person remains unemployed for some hours every day, or for some months of the year. According to the data given by the National Sample Survey, “extreme underemployment” refers to the situation wherein a person works for 28 hours a week, while “limited underemployment” refers to the situation wherein a person works for 20–42 hours a week.

The following are two types of underemployment that can be identified.

Visible underemployment

This underemployment refers to the situation in which people work for less than the normal hours of work. For example, suppose the normal working hours in a particular country is 9 hours per day. Now, if a person involuntarily works for only 5 hours, then he will be in visible underemployment.

Invisible underemployment

This underemployment refers to the situation in which a person is engaged in work that does not fully utilize his ability. In other words, this situation exists when people do not get work according to their qualifications and skills. For example, suppose a person holding a postgraduate degree gets work that is suitable for a graduate, then he will be in invisible underemployment. That is, underemployment exists but is not visible to people.

Types of Unemployment #4

Frictional unemployment

This type of unemployment occurs due to imperfections in the mobility of labor. Sometimes it happens that a person wishes to change his job. However, in the process of searching for a new job, he may remain temporarily unemployed. Similarly, a person might wish to remain voluntarily unemployed for some time. For example, a female worker might take a sabbatical for a few weeks or months on account of her marriage, maternity, etc.

Types of Unemployment #5

Cyclical unemployment

This type of unemployment occurs due to cyclical fluctuations such as recession and depression in the economy. During a recession and depression, there is a fall in the economic activity of a country. As a result, there is a cut in the production process. Consequently, the level of employment falls and a number of workers are rendered unemployed.

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