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Definition: Unemployment

The word unemployment is composed of two words: “Un” and “Employment”. Un meaning not and denotes a negative or opposite kind of force and Employment meaning utilizing what one has or possesses. In simple words, when despite having the necessary skills if the person is unable to get a job which is suited to his caliber he is unemployed. It is usually associated with the working population (or) people of workable age group. Workforce includes people who are eligible to work excluding retired, disabled etc. There is a difference between people who are not working(voluntary unemployment) and people who are unemployed.

Eg1. If a lady holds a B.B.A degree from a reputed university and is ready to work but is unable to find the right job fulfilling all her requirements, be it in terms of wage, salary and position of employment and henceforth is not working, would be considered unemployed.

Eg2. A mother who takes care of her child after resigning from the job is a case of voluntary unemployment. Also a person pursuing a higher degree though eligible to join the workforce will be considered under the umbrella of voluntary unemployment.

Categories of Unemployed People

1. Job Losers

2. Job Leavers

3. New Entrants

4. Re-entrants

All the above mentioned categories are explained with the following example:


Case 1: Akhila was employed in a company ABC Consultants, and was working well but after completing three years she felt disinterested in the job and started laying off time hence one part of the management decided to lay her off for 3-4 month, but the other half was vocal about firing her from the job and recruiting new people.This case wherein the management may either lay off or fire Akila is managements decision but in both the scenarios they belong to Job Loser category.

Case 2: Anusha wanted to devote her full time to her family and hence leave the role of business consultant in a multinational company, this category refers to Job Leavers.

Case 3: Noopur graduated from BXZ University in 2015, and is applying for a graduate trainee programme, she’ll be joining the workforce and comes in the category of new entrants.

Case 4: Mr. Natarajan worked as the branch manager at UCB Bank and after completing his tenure of 34 years in company retired at the age of 63, but the company needed his assistance and hence after 6 months he joined the bank again as a senior visiting consultant. This is an example of Re-entrants.

Types of Unemployment

1. Frictional Unemployment

2. Structural Unemployment

3. Cyclical Unemployment

Let’s understand this with the help of a family’s story Leena is the granddaughter of Lonard who is a high school science teacher trying to work with the students on a project making it a success. Leena’s father Joseph is employed in a factory as a regular laborer and he loves his job and is highly dedicated. Leena’s uncle Jerry works as a seasonal worker during the Christmas season. We’ll try to get an insight into the three types of unemployment and the economies involved with this family.


As soon as Leena passed out of college, she starts looking at newspaper and other advertisements for a job, till the time she gets a job Leena is frictionally unemployed. It is the type of unemployment which takes place because of the fact that organizations take time to introspect and know about their requirement, and till that time they don’t have any vacancies. Also, when the organizations finally open up the vacancies it takes time for people like leena to learn about that opportunity and apply for the same.

Joseph, loves working on his job but his company decides to bring in new technology and employ people who are technically sound and adept well to the new technology. To bring in new talent the company decides to cut short on the people who are currently employed there. In such a scenario, Joseph is structurally unemployed. In general this type of unemployment occurs because of the absence of demand for a specific type of worker with certain desired skills ( because of the mismatch in the skills required by the organization and the skills employees have).

Jerry and Lonard may lose their job due to changes in the season and depending upon the state of economy. Depending on the economy’s state the workers may lose/get jobs. This kind of unemployment which depends on the state of economy is referred as “cyclical unemployment”. Economy of a country/ world determines how and what type of jobs will be generated or what needs to be cut down.


How to Measure Unemployment:

Unemployment is measured by means of “Rate of Unemployment/ Unemployment Rate”( measured as a percentage).

Unemployment Rate = (No. of Unemployed) (X) / (Total Workforce) (Y)


Example. In Jan 2013, 156,700 thousand of residents of Bayer’s island were employed and 12,764 thousand were unemployed. Calculating the unemployment rate using the above formulae, we get a value of 7.53% . Similarly using the above formulae unemployment rate can be calculated for any country/ state etc.


Causes of Unemployment

1. People quit their current job in lieu of getting a better job opportunity.

2. Company laying off their employees and not hiring them again.

3. Company may be shut down leading to joblessness of its current employees.

4. People on paternity/ maternity leave who have rejoined the workforce but are still to takeover at a particular position.

5. Technological advancement has led to decreased involvement of people.

Factors Affecting Unemployment

1. Economic Factors: If the economic conditions of the economy is well it will give rise to more and more jobs but the reverse might also happen when the conditions of the economy are not stable.

Eg. Great Depression of USA which tested the economy and made people jobless within a short span of time.

Similarly, the Indian economy is doing very well as of now and is developing with more and more job opportunities coming up for people.

2. Advancement in Technology: Advancement in the technology not only leads to reduction in the number of people being involved in a particular job but also makes people more skilled depending on the needs of the company.

Eg. A company ABC previously used to involve its employees for cutting and welding of sheets but after collaborating with a new welding firm the sheets are being welded their and the need for workers has reduced at the same time it has also reduced the time of producing a finished sheet.


3. Companies Values: Company’s reputation in the market as well as its core values affect the rate of employment a lot, because people judge the company by the brand/ product that it offers. Also, if we hear something positive about a firm from anywhere whether it be our friends, family or any other third party we build an image about that company.

Eg. Maggie is a very popular product of company Nestle, which has a huge customer loyalty, but the company suffered a lot of damage because of the latest Maggie controversy, people think before joining the companies who don’t have a positive market reputation.

4. Fluctuations in the Industry: In some industries it might so happen that the firm is active during certain part of the year and laid off during rest of the year. During the off season company would want less employees compared to what is needed during the peak season.

Eg. Agriculture Industry

Implications of Unemployment

1. Cost to the Government: Government needs to offer certain benefits to the unemployed like providing facilities at low or minimal cost . The expenses incurred in such scenarios is born by the government and hence is an added burden to the economy of the nation.

2. People’s Power to Purchase: When people aren’t employed they restrict themselves in terms of how and where they spend & also the employed population has to pay more tax and is very cautious about the spending.

3. Impact on Society: Both the factors explained above affect the society at both individual as well as societal level, as it affects the spending power of the society as a whole.

4. Miscellaneous Impact: Unemployment also impacts people by affecting:

(a) Their mental health.

(b) Health Diseases

(c) Mistrust amongst government and general people

(d) Gaps in employment

(e) Affects people’s standard of living


Hence, this concludes the definition of Unemployment along with its overview.


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