Unemployment has a great importance in the economic metrics of any country. Currently, in the Indian scenario, the unemployment rate has been estimated at 3.52% and still growing. Before we can answer if we can come up with solutions to the problem, we need to understand what unemployment is.
What is Unemployment?
Unemployment is a situation when a person of legal employment age cannot find work in an economy. Unemployment can be used as a measure to know the current situation of the country and the measurement tool is known as the unemployment rate. Economists have concluded that unemployment rate is an important factor in the health of an economy. It is a ratio of the number of unemployed people over the deployed workforce. A high rate of unemployment usually signifies recession but there are other factors too such as population, resources and money circulation.
Based on certain characteristics, any unemployment can be classified into four broad categories which are as follows:
- Frictional Unemployment – It is a voluntary unemployment characterized by the transition period of a person between jobs. The period can range from few days to few weeks. This type of unemployment is transient and soon covers up. But in a populated country like India, frictional unemployment is not so significant.
- Cyclical Unemployment – This is involuntary and mostly depends on the skills of a worker and the demand for a particular product in the market. The individuals have no control over the jobs but the business cycle depends on seasoned products which have demand during a particular season of the whole year.
- Structural Unemployment – People lose their jobs when technology takes over the routine jobs and their skills are obsolete. This unemployment is generated due to automation.
- Long-term unemployment – Long-term unemployment is the subset of structural unemployment and is defined differently in different countries. It refers to the situation when a person is unemployed for more than a specific period of time.
Effects of unemployment
Unemployment has a great effect on the economy as well as the lifestyle of people. Unemployed people don’t have money to spend and when the unemployment rate increases, the money circulation will be less. This, in fact, impacts different businesses as they cannot