Unemployment is a very complex phenomenon. It is rather easy to notice but difficult to define. Broadly, unemployment may mean lack of employment. Thus, any body who fails to work may be considered as being unoccupied and therefore unemployed for the concerned period. Ordinarily, the term unemployment denotes a condition of joblessness.
But it is not a comprehensive expression. Unemployment may be either ‘voluntary’ or involuntary’. Cases of voluntary idleness do not come under unemployment in the true sense of the term. First, there are some unemployable who cannot work due to old age, disease or any other physical disablement Secondly, some people may avoid work due to laziness. They are unemployed not from necessity but from choice. In this category we may include both the “idle rich” as well as the “idle poor”, who may not like to work. Thirdly, there are some social parasites, like thieves or pickpockets, who also may be voluntarily unemployed. It will be a misnomer to bring such cases of voluntary unemployment under ‘unemployment’.
Therefore, in modern times, by unemployment we usually mean cases of involuntary idleness only. According to Keynes, “men are involuntarily unemployed, if………both the aggregate supply of labour willing to work for the current money wage and the aggregate demand for it at that wage Would be greater than the existing volume of employment.” Unemployment has been more comprehensively defined by A.E. Waugh. He mentions “An unemployed person is one who is able to find work for which he is qualified, under condition that are reasonable as judged by local standards.” Unemployment thus is a case of involuntary failure to get income-yielding, gainful work.
The meaning of unemployment varies from country to country. Unemployment in the developed countries is different from the unemployment in this developing countries. As has been aptly observed by Prof. P.C. Mahalanobis, “the concepts of employment and unemployment as used in the advanced industrialized countries are not meaningful in the case of household enterprises which constitute an overwhelming proportion of productive activities in rural areas, in India and other underdeveloped countries.
A self-employed person helping the household enterprise can never be unemployed in the sense in which this, concept is used in the industrialized countries.” Thus in the predominantly agricultural economies, where work is seasonal, intermittent and irregular, and a lot of unpaid family labour is engaged, the traditional concept of unemployment becomes a little vague.
Ever since the beginning of the 20th century the concept of “full-employment has drawn the attention of economists, politicians and social reformers. But the meaning of the term has been as controversial as that of unemployment. It is indeed most difficult to say precisely, what is meant by full-employment in different ways. But it was Keynes, who was mainly responsible for popularizing the concept of full-employment. Some of these definitions may be quoted here.
In the words of Beveridge, full employment means “having always more vacant jobs than unemployed men, not slightly fewer jobs It means that the jobs are at fair wages, of such a kind and so located that the unemployed man can reasonably be expected to take them : it means by consequence that the normal lag between losing one job and finding another will be very short.”
Types of Unemployment :
There is a lot of confusion and disagreement regarding the meaning and nature of unemployment. So, to comprehend the problem in a proper way and suggest remedies, we may discuss the various types of unemployment. Such a classification, unsatisfactory as it is, however emphasizes on different aspects of unemployment.
The nature, intensity, implications and dimensions of that problem of unemployment in an advanced industrial country are not the same as in India. Even within a country the problem will vary from one region to another region, and between the urban and rural areas. Such a classification, consequently, helps us to understand the nature of unemployment, pinpoint on the several issues involved and suggest appropriate policy measures.
Unemployment thus may be discussed broadly under several heads : (1) Seasonal unemployment, (2) Frictional unemployment, (3) Disguised unemployment, (4) Structural unemployment, (5) Cyclical unemployment, (6) Technological unemployment. Besides, we may also discuss about (a) Visible or open employment, (b) Educated unemployment, (c) Female unemployment, etc.
1. Seasonal Unemployment :
Seasonal unemployment is of a familiar and common type. It is caused by the time pattern of a particular occupation. According to Beveridge, “Seasonal unemployment means the unemployment arising in particular industries through seasonal variations in their activity brought about by climatic changes.” Seasonal unemployment occurs due to lack of productive work during certain periods of the year. Certain industries or occupations are seasonal in character.
Take the case of ice-cream production, which has a peak demand during the summer. In the winter season, with a fall in the demand for ice-cream, the demand for labour engaged in its production also falls, and seasonal unemployment takes place. Similarly in the case of house building, bad weather causes a suspension of work throwing the masons out of work. A sugar mill may be closed for a number of months in a year, as the supply of sugarcane stops. Seasonal unemployment may also be witnessed in the case of traditional and underdeveloped agriculture. For instance, in India, the cultivators tilling the unirrigated lands very often remain idle for 120 to 150 days in a year.
Seasonal unemployment takes place mainly due to the lack of suitable alternative employment opportunities in the slack season. Such unemployment usually does not lead to serious distress, as the wages in seasonal occupations are comparatively higher, which provides for the period of unemployment. The wages of the masons are a case in point. Another feature of seasonal unemployment is that such unemployment is completely independent of the wishes of the workers or employers affected.
Through the development of complementary and subsidiary industries and the modernization of agriculture that such unemployment can be controlled.
2. Frictional Unemployment :
Frictional unemployment takes place due to the presence of economic frictions, or bottlenecks. In a dynamic growing economy constant changes are taking place. So the factors of production have to adapt themselves with changing circumstances. If the factors of production including labour were perfectly mobile from one mode of employment to another, there would be no unemployment. But in practice, there is lack of geographical and occupational mobility. Labour fails to adapt and adjust with the changes in the economy immediately. This leads to a maladjustment between supply and demand for labour. As a consequence of this there is unemployment.
Frictional unemployment is “due to the frictions that prevent the maintenance of perfect equilibrium in an ever-changing world, and to the inevitable lag that retards the process of readjustment.
Frictional unemployment may take place due to several reasons. For example, it may occur due to a change in demand. Such changes in demand may take place either due to a mere change of consumer taste or fashion. It may also occur due to economic progress, or introduction of new machinery and techniques. Thus when computers are introduced to do the job of the accountants, the present accountants would lose their jobs temporarily, till they learn how to operate the computers. Thus as labour could not be immediately shifted from the ‘declining* to the ‘expanding* industry, frictional unemployment may also occur when workers quit their present jobs to search for better jobs.
Frictional unemployment occurs for a temporary period only. Hence the presence of frictional unemployment should not be considered as an unhealthy sign of the economy. According to economists like Keynes and Lerner, etc. frictional unemployment is compatible with the concept of full employment, it (frictional unemployment) is not a major problem because employable persons seeking work will not, as a rule, remain unemployed for frictional reasons for more than a few weeks or months.
3. Disguised Unemployment :
As the word suggests, disguised unemployment refers to a situation when a person is apparently employed, but in effect unemployed. !t is a phenomenon of concealed unemployment, not visible to the open eyes. Here it is not possible to identify as to who are unemployed, as all “appear to be working.” As Nurkse has remarked, “In an overpopulated peasant economy, we cannot point to any person and say he is unemployed in disguise. The people may all be occupied and no one may consider himself idle.”
The concept of disguised unemployment was originally conceived by Mrs. Joan Robinson. Her concept of disguised unemployment is more applicable to the advanced developed countries. According to her, “a decline in demand for the product of the general run of industries leads to a diversification of labour from occupations in which productivity is higher, to others where it is lower. The cause of this diversion, a decline in effective demand, is exactly the same as the cause of unemployment in the ordinary sense and it is natural to describe the adoption occupations by dismissed workers as disguised unemployment.”
4. Structural Unemployment :
Structural unemployment takes place because of a change or defect in the economic structure of a country. It occurs as a result of changes in demand and supply conditions for certain categories of labour. According to Beveridge, structural unemployment means “the unemployment arising in particular industries or localities through a change of demand so’ great that it may be regarded as affecting the main economic structure of a country.”
Lipsey says, “As economic growth proceeds the mix of required inputs between skilled and unskilled labourers changes as do the proportions in which final goods are demanded. These changes impose considerable demands for readjustment on the economy. When the adjustment does not occur fast enough so that severe pockets of unemployment occur in areas, industries and occupations in which the demand for factors of production is falling faster than the supply, we speak of “structural employment”. Ackley speaks in a similar vein, “The term ‘structural unemployment’ usually refers to the more serious and enduring limitations of worker mobility—using the term mobility in the broadest sense to include mobility as among geographical locations as among employers and industries and as among skills and occupations.
If the people would start sporting long hair, the demand for hair cuts would drastically decline. This would lead to large-scale unemployment among the barbers. The agitation among the barbers in the Indian metropolitan cities a few years ago is a case in point. Similarly at present iron ore is exported to Japan through Paradip port. So an elaborate export industry has come up in the neighbourhood. Once this export is stopped, many people associated with export of iron ore would be thrown out of employment.
Structural unemployment may also be caused due to the absence of adequate ability, skill, or training on the part of workers, although there may by vacant jobs around. Sometimes structural unemployment may occur due to relocation of industries. Myrdal has observed, large-scale structural unemployment in the United States is caused by the absence of jobs that could easily be done by such workers as are released during the process of technological development and by a lag in the adjustment of a high percentage of young and older workers—adjustment in the point of quality to the changed labour demanded.
Structural unemployment may also be seen in the overpopulated underdeveloped countries. “This largely arises owing to disproportionate growth of population in the past (thereby a continuous rise in labour force in absence of mass-scale emigration) in relation to capital formation and employment opportunities in non-agricultural pursuits. From this point of view even disguised unemployment may be considered as a case of structural unemployment.
There are some distinct similarities between frictional and structural unemployment, as both arise due to a maladjustment between the demand for and supply of labour. However, there are certain important differences between the two. Frictional unemployment is of a shorter duration and takes place because of temporary factors. Hence although the demand for labour may decline in certain industries this fall in demand is counterbalanced by a rise in demand in some other industries. In case of structural unemployment, the deficiency in demand for labour is more permanent, extensive and deep rooted. The barriers to mobility are rather more formidable.
According to Thomas D. Simpson structural unemployment is more heavily concentrated among certain employment and demographic groups. It affects a significant number of workers in certain occupations, industries, racial, and age groups, whereas frictional unemployment tends to occur more widely. Secondly, structural unemployment is less voluntary than frictional unemployment. However, as Ackley observes “structural unemployment differs from frictional more in degree than in kind.”
5. Cyclical Unemployment :
Cyclical unemployment happens to be the most common type of unemployment in an industrially developed capitalist economy. According to the classical economists, in the long run there would be a full employment equilibrium. But in reality we find that a capitalist economy is characterised by alternate periods of prosperity and depression, rising economic activity and employment and sluggish business conditions and falling employment opportunities. Cyclical unemployment is also popularly known as Keynesian unemployment, following Keynes. Keynes has culled this type of unemployment as involuntary unemployment. Lerner has termed this unemployment during an economic depression s deflationary unemployment.
6. Technological Unemployment :
Technological unemployment takes place because of rapid technological improvements. Introduction of improved machinery and labour saving know-how has a tendency to displace labour force. Myrdal cites the example of technological unemployment in the American agricultural sector in the fifties, when due to the introduction of labour-saving techniques, the agricultural workers as part of the total civilian labour force declined from 12’6 to 8’5 per cent.
Introduction of improved technology in production will lower the capital-output ratio and the labour-output ratio. This will increase the productivity of capital and labour, causing technological unemployment. Probably due to this reason, even now introduction of electronic computers has always been viewed with suspicion by the workers. In the initial periods after the industrial revolution in England, sometimes labour riots broke out and machines used to be destroyed by the labourers, resisting the introduction of machinery.
But is it necessarily true that mechanical improvements lead to displacement of labour in the long run ? Since the days of Ricardo, the effects of technological advance on employment have led to a lot of controversy among the economists. Myrdal, however, observes “But it is perhaps worth stating as a well established historical experience that, taking the long-term view and disregarding short time and isolated exceptions, technological advance in the progressive economies of the western countries has not generally caused mass unemployment.”
Thus during a period of transition there may be unemployment. But a country can ill-afford to freeze the existing technological situation.