Class 12 Indian Economic Development Notes · CBSE
Unemployment: Types and Causes
Meaning of unemployment and its eight types: open, disguised, seasonal, frictional, structural, cyclical, educated and technological, along with the causes of unemployment in India. CBSE Class 12 IED notes
Notes
Meaning of Unemployment & Consequences
Who counts as unemployed?
Unemployment occurs when people are willing and able to work at the existing wage rate but cannot find employment. Individuals unwilling to work at existing wage rates are not considered unemployed. Some economists go further: an unemployed person is someone unable to find even one hour of work in half a day.
Economic Impact
Unemployment signifies the inefficient use of human resources — leading to reduced production and a lower standard of living. A nation that keeps skilled youth idle is wasting its most valuable input.
Social Impact
Unemployment reduces the standard of living and adversely affects worker morale and self-confidence. Prolonged unemployment can lead to a loss of skills and work habits — potentially making the individual unemployable.
Unemployment in India is temporary
Due to challenging economic conditions, individuals often cannot remain unemployed for extended periods — they are forced to accept undesirable or even hazardous jobs rather than stay idle.
Census of India reports
NSO reports on Employment and Unemployment Situation
Directorate General of Employment and Training — Employment Exchange registrations
Three official sources of unemployment data in India
Types of Unemployment in India — The Core Three
India’s present unemployment problem is mostly structural in nature. Three types dominate the Indian landscape — click each card to expand it.
A situation in which the number of workers engaged in a work is more than actually/optimally required. It is also known as Hidden Unemployment.
•Most predominant form of unemployment in agriculture in developing countries like India.
•In the late 1950s, about one-third of agricultural workers in India were disguisedly unemployed.
•Causes: no alternative jobs outside agriculture, small land holdings with growing families, and joint families continuing to work on family land.
Example
The classic case: if two workers are needed on a piece of land and five are engaged, three are disguisedly unemployed — everyone seems busy, but the extra three contribute nothing (marginal productivity is zero).
Unemployment that occurs during certain seasons of the year. In India it is predominantly associated with agriculture.
•There are no employment opportunities in villages for all months of the year.
•The period of seasonal unemployment varies from state to state — it depends on farming methods, soil condition, and the type and number of crops grown.
Example
After the harvest, farmhands in Punjab villages pack up and migrate to cities for construction work — then return home when the rainy season begins.
A situation in which people are able and willing to work at the prevailing wage rate, but fail to get work. It is called open unemployment because it can be seen and counted in terms of the number of unemployed people.
•Open unemployment is different from disguised unemployment: here workers are totally idle, while in disguised unemployment workers appear to be working.
Example
A B.Com graduate who has been applying to every office in the city for a year and sits idle at home is openly unemployed — and countable in statistics.
Other Types of Unemployment
Beyond the big three, five more types complete the picture — common in both developed and developing economies. Click a card to reveal its definition and causes.
Unemployment among the illiterates who wish to work in industrial establishments.
Causes
•With the increase in urban population and migration from rural to urban industrial areas, industrial unemployment is becoming acute.
•The slow pace of industrialisation is unable to generate sufficient employment opportunities.
Unemployment among educated people.
Causes
•The rapid expansion of general education has increased the number of educated people.
•Slow growth of technical and vocational education diverts huge manpower towards general education.
Temporary unemployment that exists during the period when workers leave one job and join another.
Causes
•Labour market imperfections — lack of market information about job availability.
•Lack of perfect mobility on the part of workers.
•Introduction of new machines, nationalisation in production, or breakdown of plant.
People remain unemployed due to a mismatch between unemployed persons and the demand for specific types of workers.
Causes
•Associated with structural changes in the economy.
•The unemployed lack the skills and training required by developing industries.
•Example: due to computerisation, workers without computer knowledge remain unemployed until they complete a computer course.
Associated with the down-swing and depression phases of the business cycle.
Causes
•Most common in developed capitalist economies.
•During prosperity, income, output and employment rise; during depression they fall, giving rise to widespread unemployment.
•Example: after the 2008 global financial crisis, thousands of workers in the US and Europe lost jobs when businesses cut output.
Causes of Unemployment in India
The reason for widespread unemployment in India is not any single factor — it is the cumulative result of many causes working together.
Slow Rate of Economic Growth
Actual growth always lies far below the targeted rate of the five decades of planning. Employment created under the plans could not keep pace with additions to the labour force.
Population Explosion
Rapid population growth — employment opportunities could not absorb the large growing labour force.
Underdeveloped Agriculture
Heavy pressure of population on land and primitive farming methods cause massive rural unemployment and underemployment.
So what?
Notice how many causes are about skills and education — a defective education system and a lack of vocational training. That is why the cousin who did a diploma in refrigeration finds work faster than the one who did a general B.A. Skills are the bridge between the unemployed and the jobs that exist.