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Development Economics

Unemployment: Measurement, Types, Causes and Remedies


Unemployment is the condition of not having a job, often referred to as being “out of work”, or unemployed. Not having a job when a person needs one, makes it difficult if not impossible to meet financial obligations such as purchasing food to feed oneself and one’s family, and paying one’s bills; to pay rent may lead to homelessness.

Being unemployed, and the financial difficulties and loss of health insurance benefits that come with it, may cause malnutrition and illness, and are major sources of mental stress and loss of self-esteem which may lead to depression, which may have a further negative impact on health.

In economics, unemployment refers to the condition and extent of joblessness within an economy, and is measured in terms of the unemployment rate, which is the number of unemployed workers divided by the total civilian labour force.

The global economic turmoil has created unemployment around the world. Mismatch in job and skills as well as the temporary nature of most of the jobs is problematic. Certain segments of the labour market do not give secure employment.

Meaning of Unemployment:

Unemployment can be defined as:

“People who are able to work and looking for a job but unable to find suitable paid employment”.

In other words; Unemployment is the situation where an able-bodied person seeks a job but is unable to find one at the current wage rate.

The classification of unemployment as under:

Unemployment can also be defined as:

Unemployment is defined as all persons … years of age and above who during the reference period were; (a) without work i.e., were neither in paid or self-employment nor employed as unpaid family helpers, (b) currently available for work i.e., were available for paid employment or self-employment, and (c) seeking work i.e., had taker specific steps in a specified period to seek paid or self-employment.

Measuring Unemployment:

The unemployment rate is measured as:

Unemployment rate = Unemployed Labour Force/Total Labour Force

For the purpose of calculating the unemployment rate, unemployed persons are considered to be those who are willing and able to work for pay but are unable to find jobs. The civilian labour force includes all those willing and able to work for pay, both employed and unemployed.

Types of Unemployment or Categories of Unemployment:

Frictional Unemployment:

Frictional unemployment occurs where there is a shortage of one type of labour force in one region and surplus in the other region. It takes time to search for a new job Frictional unemployment is temporary.

Seasonal Unemployment:

Seasonal unemployment occurs in agriculture between the time of sowing of a n and harvesting of a crop and in industries which are using agricultural raw materials. During off seasons the labour is unemployed. It also occurs in those units which produces seasonal goods, for example ice factories, rice husking of ginning factors.

Structural Unemployment:

This type of unemployment occurs when there is a change in the structure of economy or an industry. It also appears during diversification of the economy.

Cyclical or Demand Deficient Unemployment:

Cyclical or demand deficient unemployment occurs during the cyclical changes i.e. during recoveries and boom unemployment is low and demand for output and job is high while, unemployment is high during the times of recession and depression in the economy.

Disguised Unemployment:

Disguised unemployment is occurring when the contribution of a worker is less than what he should produce by working in normal hours per day. In other words, his marginal revenue product is either nil or negligible and if that worker is withdrawn, the total output may increase.

Under Employment:

If the labour force is receiving rewards less than their abilities, skill, experience, education, training and specialization it is said to be underemployed which is another type of unemployment.

Causes of Unemployment:


Poverty and unemployment go together, there are less chances for poor to get employment. Because of poverty there is a problem of unemployment. Majority of able-bodied people have less chances of starting business.

High Population Growth:

At present population growth rate is 1.95%, which is high enough. On one side out one million people are entering for employment while job opportunities are not available to absorb this labour force.

Shortage of Capital:

There is a shortage of capital in Pakistan. That is why the level of investment is low and due to low level of investment and lack of investment opportunities, less chances of employment are available.

Agricultural Mechanization:

Due to mechanization in agriculture per hectare yield is increasing but population is becoming unemployed. Surplus labour force is seeking employment in urban sector but job opportunities are not available.

Slow Rate of Industrial Development:

Political, social, cultural and economic conditions are obstacle in economic development. Development of large scale, small scale and cottage compared countries is slow. Under developed industrial sector cannot absorb surplus labour force.

General Education:

Most of the students opt for general education. They are not interested vocational training. They have degrees but no work training. Employment opportunities for general education are limited while, the candidates seeking employment are large.

Capital Intensive Industries:

Most of the large and medium sized industries are capital intensive i.e. they need huge funds, but fewer human hands. Labour intensive industries can create more job opportunities.

Attitude Towards Job:

In our country, attitude of people towards jobs is biased, government jobs have more prestige than in the private sector. Private jobs demand more labour and involve risk. So, people prefer to become an office clerk than to work as a private electrician.

Remedies/Measures to Remove Unemployment:

The unemployment and underemployment problems can be solved by adopting the following remedial measures:

Population Control:

This is the most important method to reduce unemployment. When the growth population will slow down, the number of job seekers will be lower to match the availability.

Increase in Capital Formation:

Capital formation means rapid economic development. In order to increase capital formation, savings should be encouraged. Higher capital formation means me investment and a higher level of employment.

Rapid Industrial Growth:

Another solution of the problem of unemployment lies, on rapid expansion industry. It is industry which can provide not only jobs but also higher incomes to remove poverty from the country.

Small Scale Industries:

Since small scale industries are more labour intensive. So, in industrial policy, development of such industries should be encouraged and small-scale businessmen should be financed.

Technical Training and Skill Formation:

There should be more emphasis on imparting technical and training skills to the people. In the future development of our economy, only skilled persons have scope for employment.

Encouragement of Self-employment:

Through various industries and financial schemes, self-employment should be encouraged in the form of small business, workshops, clinics etc.

Diversification of Agriculture:

Instead of concentrating on formal crops, activities allied to agriculture should be aimed, e.g. fruit growing, dairy, poultry, fish and bee keeping, processing, preservation and packing of foods.

Change in Social Attitudes:

Through education, people’s attitude towards work and jobs needs to be changed. They should be taught not to hesitate work in factories. Manual labour should be given respect so that young people willingly adopt it.

Government Policy:

The government through various steps and policies, has always encouraged generation of employment opportunities. In this regard, there should be good programs for the generation of employment. By concentrating on small project programs create large number of jobs.


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