Major 8 Types of Unemployment

Unemployment is defined as the non-availability of the job (works) for people able and willing to work at the existing wage rate. It is a problem for both developed and developing countries. It creates problems like poverty, inequality, robbery, prostitution, theft, crime, etc. Therefore, solving the unemployment problem people who are either unfit for work due to mental or physical reasons or don’t want to work. For example, sadhus, are excluded from the category of unemployed. In this topic, we will cover all the major 8 types of unemployment.

What really is Unemployment Mean?

If there is engagement in some occupations does not necessarily mean an absence of unemployment. People who are partially employed or engaged in inferior jobs though they can do better jobs are not adequately employed. It is called the state of underemployment which is equally harmful to the prosperity of the country. In the free market economic system (capitalism), full employment is almost impossible. The best that can be done is to keep the number of unemployed people as low as possible In developing countries unemployed can be reduced by increasing investment in human and physical capital, development of infrastructure, and industrial sector

Unemployment and job
Types of Unemployment

Major Types of Unemployment

Unemployment can be both voluntary and involuntary. Voluntary unemployment is defined as the situation in which people are unemployed because of their choice or they are not working due to laziness or they are not interested to work. On the other hand, involuntary unemployment is defined as the situation in which people are willing to work at the existing wage rate but they are not able to get the work. The major types of unemployment are as follows

1.Open unemployment

Open unemployment is defined as the situation in which some workers have no work to do. They are willing to work at the existing wage rate but they are forced to remain unemployed in the absence of work. These workers are completely idle. Such kind of unemployment is found in developed countries like UAE, UK, Japan, etc as well as urban areas of developing countries.

2. Underemployment

Underemployment is defined as the situation in which employed persons are working but less than they are really capable of it. In this situation, people do not get the job or work they are capable of doing or are trained for. They possess the abilities and expertise to do the type of work that could yield a larger income. But due to the non-availability of suitable as per their abilities and expertise, they join the inferior occupation.

3. Disguised unemployment

Disguised unemployment is defined as the situation in which a person seems as employed but in fact, he is not employed. In this type of unemployment, the unemployed person is visible or he/she is hidden. That’s why this type of unemployment a known as hidden unemployment. In this type of unemployment, too many persons have been involved in work or persons are more than actually required. This type of unemployment problem is found in the agriculture sector in developing countries. Due to a lack of employment opportunities outside the agriculture sector, all members of the family are found to be engaged in farming even it is not necessary. If we reduce the involved persons in agriculture, the total production will not decrease because the marginal productivity of some workers is zero.

4.Cyclical unemployment

Cyclical unemployment is defined as the type of unemployment that results due to the operation of the trade cycle or business cycle. The trade cycle refers to the regular upward and downward movement in business or overall economic activities. When a business or economic activity is going down aggregate demand decreases. For this less production is needed and consequently, fewer workers are needed this results in the unemployment problem. During the period of the Great Depression in the 1930s, a large number of the labor force was unemployed in developed countries especially in the USA and Europe.

5. Seasonal unemployment 

Seasonal unemployment is defined as the situation in which people are out of work and looking for a job during the off-season. For example, ice-cream vendors during the winters and ski-lift Operators during the summer are out of work or they become unemployed. Similarly, farm labors also remain unemployed except for planting and harvesting season and it is a common type of unemployment both in developed and developing countries.

6. Frictional unemployment

Frictional unemployment is defined as the situation in which people are looking for a new or better job and employers are looking for the right workers. It is also known as search unemployment because it occurs when people leave the job and searching for a new job. The main cause of frictional unemployment is imperfect information regarding job vacancies (demand for labor) and supply of labor. Therefore, it is of short-term nature. These types of unemployment are usually found in developed countries.

7. Structural unemployment

Structural unemployment is defined as the situation which occurs due to the changes in the structure of the economy. The main cause of structural unemployment is a mismatch between the skills needed for available jobs. This kind of unemployment usually exists in developing countries like Nepal where unemployment is basically structural in nature. Here the large numbers of people are unemployed because of the underdeveloped structure of the economy. Structural unemployment can also occur due to the introduction of new technology in the production process. It replaces a man with machines. This can be solved only through rapid economic development.

8. Educated unemployment

Educated unemployment refers to unemployment among educated people i.e. matriculates and higher educated. This is the problem of both developed and developing countries. Some of these people may be openly unemployed or underemployed. It means that some of the educated people may be doing no work or maybe in inferior jobs. It is because they may not be able to get work suitable to their qualification or their skill and ability may be less than the required for the job. In Nepal, a large number of educated people are unemployed because of the non-availability of jobs. It can be solved by the development of the industrial sector.

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