In a common sense, unemployment is a situation characterized when any one is not gainfully employed in a productive activity, it means that an unemployed person is one who is seeking any work for wages but is unable to find any job suited to his capacity. From this view one can easily make an idea of voluntary and involuntary unemployment.

Obviously, in an economy, there is a section of working population who is not interested in any gainful job and still others are interested in employment at wag rates higher than those prevailing in the labour market. Keynes calls this type of labour force as voluntary unemployed.

According to him, involuntary unemployment refers to a situation in which people are ready to accept work at prevailing wage rate but fail to get the same wage.

In a developed country, the problem of unemployment is of two types, i.e., involuntary unemployment and frictional unemployment. Unemployment in such countries is generally caused by a deficiency of effective demand.


This can be eliminated by raising effective demand and providing various incentives to investors which has been done by most of the developed countries.

In underdeveloped countries, unemployment is almost structural. There is always underemployment of the factors of production within the limits of known knowledge. The demand for labour is less and there is lack of employment opportunities as agricultural sector is primitive.

The industrial sector is also backward; capital is deficient and limited size of the service sector. Under these circumstances, a large number of people are happy in accepting jobs at prevailing wage rates.

Meaning of Under Employment


In under-developed countries like India, there exists side by side the problem of unemployment and the problem of under-employment. Under- employment means the situation under which a laborer does not get full time job or gets job much below his capacities or qualifications.

In simple words, he remains without work for some months in a year or for some days in a month or for some hours in a day. If a person does not get work for 273 days in a year for eight hours per day, he will be treated as under-employed.

Estimates of Unemployment in India

In 1951, there were 33 lakh unemployed people in India. By the end of the Seventh Plan, the number of unemployed went to 86 lakhs. Further, ending eighth plan (1992-93), the number of unemployed increased to 140 lakh. However, the situation of different states in India is different from the point of view of unemployment.


In Meghalaya it is the minimum, that is, barely 0.41 percent of labour force is unemployed. On the contrary, it is the maximum in Kerala, i.e. 25.7 percent of the labour force is unemployed.

In four southern states: namely, Kerala, Karnataka, Andhra Pradesh and Tamil Nadu and three Eastern states; namely Orissa, West Bengal, and Bihar unemployment is the highest. On the other hand, in Meghalaya, Nagaland, Himachal Pradesh and Manipur.

It is the lowest less unemployment is found in U.P., M.P., Assam and Rajasthan. Unemployment is modest in Punjab, Haryana, Maharashtra, J. & K. and Gujarat. Several factors account for the variation in the degree of unemployment in different states.

Normally, unemployment is high in areas having the following characteristics (i) Larger proportion of agricultural labourers than the cultivators. (ii) Greater tendency toward urbanization but less development of industries. (iii) More pressure of population on agriculture. (iv) High rate of illiteracy.


Types of Unemployment

Broadly, unemployment is of many types like (i) Cyclical, (ii) Frictional, (iii) Techno­logical, (iv) Seasonal, (v) Structural, (vi) Voluntary, (vii) Involuntary, (viii) Disguised and Casual Unemployment. But in most of underdeveloped countries, unemployment can be of three main forms:

(a) Open unemployment

(b) Disguised unemployment


(c) Underemployment.

(a) Open Unemployment:

Under this category, unemployment refers to a situation where a large labour force does not get employment opportunities that may yield them regular income. In a sense, workers are willing to work and able to work but they are not getting any job.

This type of unemployment is the result of the lack of complementary resources, especially capital. The rate of capital accumulation lags behind the rate of population growth. This type of unemployment can be identified as structural unemployment.


(b) Disguised Unemployment:

Basically, disguised unemployment is associated with the agriculturally underdeveloped countries like India. Still, it is also suitable to industrially developed countries which are hitter by cyclical unemployment.

However, it implies to that unemployment that is not open for every one and remains concealed. In fact, such employment is a work sharing device, i.e., existing work is shared by a large number of workers.

In such a situation, even if many workers are withdrawn, the same work can be continued by few workers. The contribution of such labourers to production is zero or near zero. In Indian villages, this form of unemployment is a common feature.

(c) Underemployment:

This form of unemployment can be defined in two ways: (a) a situation in which a labour does not get the type of work he is capable of doing; he has the abilities and can yield larger income but he is denied the opportunity due to the lack of suitable jobs; (b) as a labourer does not get sufficient work to absorb him for the total length of working hours a day.

Some times second form of unemployment is known as seasonal unemployment. The first form of underemployment can be explained with the help of an example.

Suppose a degree holder engineer wants an appropriate job, starts as an operator, may be said to be underemployed. He may be deemed as working and earning in production activity. But in reality, he is not working to his full capability, thus, he is in the state of underemployment.