Types of Unemployment

Demand-deficient, frictional, structural, and voluntary unemployment are the four principal types of unemployment.

1. Demand-Deficient Unemployment

The main reason for unemployment that usually occurs during a recession is demand deficit unemployment. Businesses experiencing a decline in the demand for their goods or services react by reducing their output, which requires a reduction in manpower inside the company. Employees are essentially laid off.

2. Frictional Unemployment

The word “frictional unemployment” refers to unemployed employees. One example would be a worker seeking employment in a non-recessionary market who recently quit or was dismissed. The fact that it is typically the result of employees looking for work that best suits their skill set means that it is not harmful.

3. Structural Unemployment

When a worker’s skill set does not match the skills required by the available jobs, or when workers are available but unable to travel to the jobs’ location, structural unemployment results.

For example, consider a teaching post that needs to be moved to China, but the employee is unable to get a work visa due to certain visa restrictions. It could also happen when a company implements new technology, such as workflow automation, which does away with the requirement for human labor.

4. Voluntary Unemployment

An employee is voluntarily unemployed when they decide to leave their position since the pay is no longer what they are used to. An example would be a worker whose take-home pay is less than their living expenses.

Other types of unemployment are:

1. Cyclical Unemployment

Unemployment is brought on by the business cycle, in which the number of jobless people increases during recessions and decreases as the economy expands. India’s cyclical unemployment rate is very low.

2. Seasonal Unemployment

It is the state of not having a job during specific times of the year. For example, laborers in India hardly ever have a job all year round.

3. Vulnerable Unemployment

Individuals who fall under the category of vulnerable unemployment are considered jobless. People work, but they do it informally, that is, without official employment contracts, and as a result, no records of their labor are ever kept. In India, it is one of the primary forms of unemployment.

4. Technological Unemployment

It is the state in which people lose their work as a result of technological advancements. According to World Bank data from 2016, 69% of Indian jobs were expected to be at risk from automation on an annual basis.

5. Institutional Unemployment

Long-term or permanent institutional variables and incentives in the economy lead to institutional unemployment. Government initiatives like high minimum pay floors, comprehensive social benefit plans, and strict laws regulating occupational licensing may lead to institutional unemployment.

6. Disguised Unemployment

In case of disguised unemployment, the number of employed persons exceeds the real requirement. Hidden unemployment is typically associated with unorganized or agricultural industries.

The unemployment rate is defined as the percentage of people in the workforce who are unemployed. The formula for calculating the unemployment rate is to multiply the total labor force by 100 and divide the number of jobless people by that amount. The national unemployment rates of a large number of countries throughout the world are continuously calculated and recorded by organizations like the World Bank, the International Monetary Fund (IMF), and the Organisation for Economic Co-operation and Development (OECD). The unemployment rate is likely to increase when the economy is struggling and there are few jobs available.

In this article, we will look into the various aspects of unemployment, and the unemployment rate, covering its types, causes, and effects. We will also look into the unemployment rate in India and the list of countries with the highest unemployment rates and discuss some strategies for resolving unemployment issues.