10. Unemployment
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10. Unemployment
10.1 Basic Concepts
A person is unemployed when they are able and willing to work at the going wage, are looking for work, but cannot find any. Those who are not seeking work, such as students and homemakers, are outside the labour force.
Term |
Meaning |
Labour force |
Persons who are employed plus persons who are unemployed (seeking or available for work) |
Labour Force Participation Rate (LFPR) |
Labour force ÷ Population × 100 |
Worker Population Ratio (WPR) |
Employed persons ÷ Population × 100 |
Unemployment Rate (UR) |
Unemployed persons ÷ Labour force × 100 |
Full employment |
A situation where everyone who wants a job at the going wage can get one; some frictional unemployment still remains |
Natural rate of unemployment |
The rate at which frictional and structural unemployment exist even when the economy is at full employment |
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10.2 Types of Unemployment
Type |
Meaning |
Frictional |
Short-term unemployment while people move between jobs or enter the job market |
Structural |
A mismatch between workers' skills and the jobs available; long-lasting |
Cyclical |
Caused by a fall in demand during a recession or slowdown |
Seasonal |
Work available only in certain seasons, as in farming and tourism |
Disguised |
More people work on a job than needed, so removing some does not reduce output. Common in agriculture |
Underemployment |
Working fewer hours or at jobs below one's skills |
Open |
Able-bodied people who are willing to work but have no job at all |
Educated |
Unemployment among those with school or college degrees |
Technological |
Jobs lost because machines or software replace human labour |
Voluntary and involuntary |
Voluntary: choosing not to work at the going wage. Involuntary: willing to work but unable to find a job |
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10.3 Measuring Unemployment in India
Periodic Labour Force Survey (PLFS)
Conducted by the National Statistics Office (NSO) under MoSPI.
Launched in April 2017, with the first annual results for 2017-18. It replaced the older five-yearly Employment and Unemployment Surveys of the NSS.
The survey method was changed from January 2025 to give monthly and quarterly estimates for both rural and urban areas.
Monthly bulletins have been released since April 2025. They give the LFPR, WPR and UR at the all-India level for persons aged 15 years and above.
Approaches to defining employment
Approach |
Reference period and rule |
Usual Status (ps+ss) |
Reference period of 365 days. Principal status (ps) is the activity on which a person spent the longer time; subsidiary status (ss) covers other work done for at least 30 days. Shows long-term trends |
Current Weekly Status (CWS) |
Reference period of the last 7 days. A person is counted as employed if they worked at least one hour on any day in that week. Captures short-term changes and is used in the monthly bulletin |
National Career Service (NCS) portal (2015) matches job seekers with employers. The e-Shram portal (2021) is a national database of unorganised workers.
10.4 Causes of Unemployment in India
Population growth: a large number of new entrants to the labour force each year.
Dependence on agriculture: many workers remain in low-productivity farm work with disguised and seasonal unemployment.
Slow job creation in manufacturing; growth has often been driven by capital-intensive and service sectors.
Skill mismatch: education does not always give the skills employers need.
Informalisation: many jobs are casual, low paid and without social security.
Low female participation, due to social barriers and a lack of suitable jobs.
Regional imbalance in industry and jobs, leading to migration.
10.5 Government Initiatives
Scheme / Reform |
Key Point |
Skill India Mission (2015) |
Launched on 15 July 2015 (World Youth Skills Day) with the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). The Ministry of Skill Development and Entrepreneurship was set up in 2014 |
DDU-GKY (2014) |
Deen Dayal Upadhyaya Grameen Kaushalya Yojana: skills and placement for rural youth |
National Apprenticeship Promotion Scheme (2016) |
Supports employers who train apprentices |
Start-up India (2016) and Stand-Up India (2016) |
Support for new enterprises, including for women and SC/ST entrepreneurs |
PM MUDRA Yojana (2015) |
Collateral-free loans to micro enterprises to promote self-employment |
VB-G RAM G Act, 2025 |
Guarantees 125 days of wage employment to rural households; replaced MGNREGA from 1 July 2026 |
Production Linked Incentive (PLI) schemes (2020) |
Incentives to manufacturers to boost output, exports and jobs |
PM Viksit Bharat Rozgar Yojana (2025) |
The Employment Linked Incentive scheme, effective 1 August 2025: first-time employees registered with EPFO get one month's EPF wage up to Rs 15,000 in two instalments; employers get up to Rs 3,000 a month per additional employee. It covers jobs created between 1 August 2025 and 31 July 2027, with an outlay of Rs 99,446 crore |
The four Labour Codes
The Government brought all four Labour Codes into force on 21 November 2025. They merge 29 central labour laws into four codes.
Code |
Key Point |
Code on Wages, 2019 |
Replaces four laws, including the Minimum Wages Act, 1948; covers wages for organised and unorganised workers |
Industrial Relations Code, 2020 |
Replaces three laws, including the Industrial Disputes Act, 1947 and the Trade Unions Act, 1926 |
Code on Social Security, 2020 |
Merges nine laws; extends social security to gig and platform workers and the unorganised sector |
Occupational Safety, Health and Working Conditions Code, 2020 |
Replaces 13 laws on safety, health and working conditions |
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