Unemployment: Causes, Measurement, Types of Unemployment in India

By BYJU'S Exam Prep

Updated on: November 14th, 2023

Unemployment is referred to as the condition when individuals belonging to the age group of the working population are searching for a job and are not able to avail. The National Sample Survey Organization in India (NSSO) pursues the measurement of the rate of unemployment in India. There are numerous types of unemployment in India, such as structural, frictional, cyclical, and many more. It directly affects the country’s economy and GDP. This also poses a threat to the social structure of the country.

This is an essential topic for numerous competitive exams. The aspirants preparing for the UPSC exam must have a well-versed knowledge of the topic to be able to answer the questions pertaining to this topic.

What is Unemployment?

Unemployment is the state when individuals in the working age group are seeking job opportunities but are unable to avail of any. This directly affects the economy of the country. During the lockdown, the unemployment rate in India surged to 29%, but later, it was reduced to 8.3% in December 2022.

The inflations and recessions are the major factors that lead to unemployment. The business cycles of the companies sometimes compel them to trim off the workforce to sustain. The lack of adequate skills is also a major factor in unemployment in India.

There is a concept of natural unemployment that suggests that its rate can never be reduced to zero due to the presence of frictional, structural, and cyclical unemployment.

Types of Unemployment in India

The concept of unemployment has been classified and categorized into numerous types based on varied aspects. Some unemployment types are structural, cyclical, frictional, etc. The unemployment rate in India indicates the number of unemployed individuals in the country.

Check the table presented below to gain complete knowledge of the topic.

Types of Unemployment in India Meaning
Structural Unemployment This type of unemployment is characterized by the differences in the skill set possessed by an individual from the type of skills required to pursue a job.
Frictional Unemployment This refers to the interval or the time period between migrating from one job to the next. This is not caused due to a reduced number of jobs in India but because the employees quit their job in search of higher roles and better opportunities.
Cyclical Unemployment Individuals lose their jobs due to the loss in businesses or due to recession. At this time, the number of unemployed individuals surges. This is also known as demand deficiency unemployment.
Educated Unemployment Individuals cannot avail of jobs according to their qualifications or the degree attained; rather they are opting for jobs in different fields.
Disguised Unemployment The disguised unemployment could be traced to the number of employed individuals exceeding the required individuals. In turn, the net productivity does not change with more people being employed in that sector. This is a major sign in the unorganized sectors.
Under Unemployment When in an organization, employed individuals are unable to unleash their full potential. They only contribute to a limited extent.
Voluntary Unemployment This type of unemployment refers to individuals who do not want to earn or pursue a job. The job shortage is not the criteria accounting for this type.
Chronic Unemployment No employment for a prolonged period of time is referred to as chronic employment.
Seasonal Unemployment This type accounts for the individuals getting unemployed during a particular season of the year. The farmers are an example of this.
Technological Unemployment This is the loss of jobs due to advancements in technology. The AI technologies at the forefront these days might cause a loss in certain types of job requirements.
Vulnerable Unemployment This accounts for the main kind of unemployment in India. In this type, the people are working in the informal sector. The records of their work are not getting registered. An example of this type can be contractual work.
Open Unemployment No job is available, and both skilled and non-skilled workers are affected.

Measurement of Unemployment

Unemployment is usually measured with the formula, Unemployment rate = [Unemployed workers/ Total Labour Force] X 100.

The National Sample Survey Organization [NSSO] is responsible for measuring the unemployment rate in India. NSSO is an organization under the Ministry of Statistics and Programme. They usually take into consideration three approaches for defining the conditions of unemployment in India which are enlisted below-

  • Daily Status Approach– This approach takes into account the unemployment of each day, keeping the reference for a week. No productive work in even one hour of the day is considered a period of unemployment for that day.
  • Weekly Status Approach– This approach counts the individuals who have been unemployed or unproductive for even an hour of the day in the week the survey has been scheduled.
  • Usual Status Approach– This underlines the record of the individuals who have been unproductive or unemployed for the maximum period in 365 days or 1 year.

Causes of Unemployment

There are numerous causes of unemployment, such as high population density and lack of adequate education and skills in the working population.

Inflation and the lack of industry-related skills are considered to be the major causes of unemployment in India. Several initiatives have been taken by the Government to alleviate this social issue, such as Skill India, Training of Rural Youth for Self-Government, Pradhan Mantri Kaushal Vikas Yojana, etc.

Check the other causes of unemployment in India to be able to get knowledge of the whole topic.

  • Low production level in the agricultural sector. They usually do not have adequate opportunities.
  • Numerous technical and legal complexities and financial crunch make it difficult for small enterprises to survive.
  • A huge number of the working population is associated with the informal sector. The data of this is not accounted for in the statistics.
  • The education system in India is also not modified in accordance with the existing needs of the jobs.
  • The lack of adequate skillsets in the working population also poses a major challenge and adds up to the causes of unemployment.
  • There have been numerous social norms and regressive thoughts that do not allow women to enter the workforce.

Effects of Unemployment

The major effects of unemployment lead to the causes of poverty. It affects the economy of the country. It trims off and reduces the production and consumption of goods that put extra pressure on the Government.

Prolonged unemployment in India can cause a rise in crime and antisocial elements. Unemployment has negative impacts on the country.

Mathematically, the rise of 1% in unemployment leads to a reduction in the 2% of GDP rate. Unemployed people can get addicted to alcohol and drugs. It leads to a loss of the human resources of the country. The government has taken numerous initiatives to reduce these issues.

Initiatives Taken By Government to Mitigate Unemployment

Many policies initiated by Government have been targeted to cater to the prevailing issues of unemployment in India. Check the list of the measures to solve the problems of unemployment taken by the Government of India at various time intervals-

  • TRYSEM was launched by the Government in 1979. The full form of this initiative is the Training of Rural Youth for Self-Government. This initiative’s primary purpose and objective were to assist the youth in the age group of 18-35 years to nurture the skills required for the job perspectives.
  • Integrated Rural Development Programme (IRDP) was launched in 1980 by the Government of India. It aimed at creating employment opportunities in rural areas.
  • RUDSETI is the Rural Development and Self Employment Training Institute that focuses on reducing unemployment in Youth.
  • The Jawahar Rizgar Yojana [JRY] was a merger of two initiatives, the Rural Landless Employment Guarantee Act and NREP, the National Rural Employment Program.
  • Mahatma Gandhi National Rural Employment Guarantee Act [MGNREGA] was initiated by the Government of India in 2009. It focuses on unskilled labor work. It provides 100 days of paid work to one of the adult members of the family.
  • PMKVY is the Pradhan Mantri Kaushal Vikas Yojana targets the youth of the country to imbibe the skills that are relevant to industry and the job market.
  • Start-Up India Scheme was initiated by the Government to nurture the environment of start-ups and entrepreneurship. This motivates the youth to take up entrepreneurial skills. Under this scheme, the banks provide loans to women and individuals belonging to the Scheduled Castes and Scheduled Tribes from 10 lakhs to 1 crore.
  • National Skill Development Mission was also initiated to take into account all the initiatives to develop skills. It also expanded the program by blending the skills’ quality and also considering the time factor.

Unemployment in India UPSC

Unemployment is a social evil that hinders GDP growth, negatively affects the country, and poses a threat to the youth getting distracted. The unemployment rate in India is an essential topic for the IAS exam.

An IAS Officer ought to be diligent and well aware of all the major concerns that can affect the country. Unemployment is one of the major factors that can affect the economy in a negative way. The topic can be covered well through the Economics Notes as well.

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