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  • Unemployment occurs when a person who is actively searching for employment and ready to accept work at current wage rate and still unable to find work.

  • It is used as a measure of the health of the economy.

  • It has been a burning problem of modern societies, whether developed or undeveloped.

  • It is measured in terms of unemployment rate = no. of unemployed/ total labour force


Voluntary Unemployment

Frictional Unemployment

  • Temporary phenomenon,

  • Workers temporarily out of work while changing jobs

  • Strikes and lockouts

  • It is due to difficulties in getting workers and vacancies together.

Casual Unemployment

  • Where workers are employed on a day-to-day basis

  • Occurring due to short-term contracts, which are terminable any time

Seasonal Unemployment

  • Some industries and occupation in which production activities are seasonal in nature

  • Agro-based industrial activities like sugar mills etc.

  • Offer employment only for a certain period of time in a year

  • Can find in any country, causes wastage of resources,

Structural Unemployment

  • Due to structural changes in the economy, it taken place

  • Decline in demand for production lead to reduction in its manpower requirements

  • E.g. improvement of transportation in Towns, tongas become out dated and tonga operators become unemployed, therefore, they need to search jobs in any other industry

Technological Unemployment

  • It arise as a result of technological improvement

  • Due to improvement in machinery, production methods, some workers are replaced by Machines

  • e.g. due to the arrival of computers, typewriters lost their jobs.

Cyclical Unemployment

  • Trade cycles, recessionary and depressionary phases

  • Deflationary period, demands decline, production decreased and need to reduced workers

  • Unemployment caused by insufficiency of effective demand

  • Short term phenomenon

  • Increasing total expenditure and pushing up the level of effective demand, can reduced this kind of unemployment

Chronic Unemployment

  • Unemployment tends to be a long-term feature of a country it is called chronic unemployment.

  • Underdeveloped country

  • Vicious circle of poverty

  • High population growth

  • Backward or primitive technology

  • Low capital formation, are causes for this

Disguised Unemployment

  • Situation of employment with surplus manpower, some workers have zero marginal productivity, removal of them will not affect the volume of total output

  • Suppose, for one work four man work effectively, if there are six people involved with that work they are not contributing anything in additional production

  • Their marginal productivity is zero


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