Unemployment – Meaning, Types, Causes and Impact


Unemployment refers to a situation when all able and willing persons of a country do not get suitable opportunities to work.

  • People who are engaged in economic activities are termed workers, and they constitute the workforce.
  • The workforce is the total number of persons actually working.
  • Workforce participation rate is the ratio of the workforce to the total population of a country.
  • Worker population ratio is the ratio of the total number of workers in a country to the population in the country multiplied by 100.


Nature and Types of Unemployment in India – Read here

Rural Unemployment

In many countries, the incidence of unemployment is more pronounced in rural areas.


  1. Seasonal unemployment is a situation where several persons cannot find a job in a particular season as in the case of agriculture and factories producing woollens and ice cream.
  2. Disguised unemployment refers to a situation where marginal physical productivity of labour is zero or may become negative.

Causes of rural unemployment

  • In many countries, Agriculture is the predominant occupation of rural people, and it fails to absorb the increasing job population of the land. It also provides only seasonal employment to the rural population.
  • In many countries, The joint family system and the habit of staying at home are other reasons responsible for it.
  • There is a lack of alternative occupations to the rural population.
  • Use of capital-intensive technology has resulted in surplus labour in rural areas which has led to it.

Urban Unemployment

Industrial unemployment: This problem became acute with the increase in the size of the urban population and the increasing migration of rural people to urban industrial areas in search of employment. The slow pace of industrialization in many countries could not keep pace with the growth of the urban labor force.

Educated unemployment: Educated people fail to earn their living through self-employment and cannot do physical work too. This gives rise to unemployment among these educated people.

Causes of Unemployment

The slow growth rate of different sectors: In many countries, the economy was unable to grow at a pace proportionate with the continuous growth of the labor force in the industrial, agricultural, and service sectors. Thus, adequate employment opportunities were not created in these sectors.

Defective educational system: In many countries, the educational system does not emphasize vocational and technical education. This has lead to the problem of urban unemployment.

Use of capital-intensive technology: Most industries have adopted capital-intensive technology in their
production activities, particularly the large- and medium-scale industries. Many countries had depended on imported technology at the initial phase of industrialization. Today, there is surplus labor for productive activities, but dependence on capital-intensive technology has led to unemployment.

Rural-urban migration: Lack of employment opportunities in rural areas and relatively high wage rates in urban areas have led to rural migration to urban areas. Hence, this situation has created urban unemployment problems in many countries.

Impact of Unemployment

Unemployment negatively impacts the economy of the world. This is because it creates a feeling of hopelessness and depression among unemployed people.

  • It results in the wastage of human resource as people are not involved in any kind of productive activities. This makes them a liability to the nation.
  • Unemployed people cannot support their families and educate their children. This makes the entire family dependent on the nation, and hence, the dependence of unemployed people increases on the working population of the country.
  • The quality of life of an unemployed person deteriorates which also impacts the social life of a person. This may result in people engaging in illegal activities such as theft and robbery.
  • Increasing trends towards unemployment is an indicator of a depressed economy where most of its human resource is not engaged in any productive activity.

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