EconomicsCBSE Class 12 · Employment: Growth, Informalisation and Other Issues

Unemployment: Types and Government Employment Generation (Class 12 Economics)

Updated 17 October 2026 · Fact-checked

Unemployment exists when people without work because of lack of work seek or are willing to take work at the prevailing wage. India has open, disguised and seasonal unemployment. The government creates jobs directly (public employment) and indirectly (raising output of its enterprises), and through programmes such as MGNREGA (2005), which promises 100 days of wage work.

Understand Unemployment: Types, Measurement and Government Employment Generation

Meaning of unemployment (NSO). A person is unemployed when he or she is not working owing to lack of work but either seeks work (through employment exchanges, intermediaries, friends, relatives or applications) or expresses willingness or availability for work at the prevailing conditions and pay. Economists also say a person is unemployed if he cannot get work for even one hour in half a day. Data sources are Census reports, NSO reports on employment and unemployment, Periodic Labour Force Survey reports, and employment-exchange registrations (DGE&T).

Types of unemployment.

Open unemployment: people who actively look for work but do not find it.
Disguised unemployment: more people work on a task than needed, so removing some would not reduce output. Common on small Indian farms, where family members all work on the same plot. A late-1950s study (NCERT) found about one-third of agricultural workers disguisedly unemployed.
Seasonal unemployment: no work in the off-season because farm work depends on seasons; workers may migrate to cities and return for the rainy season.

In India people rarely stay fully unemployed for long, because poverty forces them into unpleasant or dangerous jobs.

How governments create jobs.

Direct: employing people in departments (administration) and running industries, hotels and transport companies.
Indirect: when government enterprises raise output, private firms that buy from them also raise output and employment. For example, if a public steel company expands, private firms using its steel expand too.

Employment generation programmes aim at poverty alleviation and also provide services (primary health, primary education, rural drinking water, nutrition), help in buying income-generating assets, and create community assets through wage employment. The Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA) promises 100 days of guaranteed wage employment per household to rural households willing to do unskilled manual work.

Neighbouring topics. The WPR, jobless growth and the informal sector have separate pages.

Unemployment: Types, Measurement and Government Employment Generation: key facts

Unemployment rate: Unemployment rate (%) = unemployed / labour force x 100; Labour force = employed + unemployed.
Disguised unemployment: Disguised unemployed = workers employed - workers actually needed (output unchanged); Marginal product of the removed workers is zero.
Wage income under a guarantee: Income = days of work x daily wage; cost = households x days x wage; Wage rates in sums are assumed.

How to answer Unemployment: Types, Measurement and Government Employment Generation questions

Questions ask you to define unemployment, distinguish its types with examples, explain how governments create jobs, and compute rates or programme costs.

1Define unemployment using NSO's two parts: not working for lack of work, and seeking or willing to work.
2Describe each type with its cause and an example; add the NCERT one-third disguised unemployment fact where helpful.
3Separate direct from indirect employment generation with the steel-company style example.
4For rate sums, find the labour force first, then divide unemployed by it.
5For MGNREGA sums, multiply households, days and wage; comment on benefit to the rural poor.

Unemployment: Types, Measurement and Government Employment Generation in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Disguised unemployment

Suppose a family of eight works on a small plot that needs only five people to produce the same wheat. The three extra family members have no other job.

How many are disguisedly unemployed and what happens to output if they leave?

Try it first, then show the solutionSolution

Disguised unemployed = 8 - 5 = 3.
If they leave, the five remaining can produce the same output.
Their marginal product is zero.

Answer: Three persons (37.5% of the workers) are disguisedly unemployed; output stays the same if they leave.

Memory hook: Looks employed, adds nothing.

MGNREGA income

Imagine a rural household that finds farm work for only 210 days in a year and joins a guaranteed work scheme paying ₹250 a day for 100 days.

How much income does the scheme add and how many days remain idle?

Try it first, then show the solutionSolution

Income from the scheme = 100 x 250 = ₹25,000.
Idle days earlier = 365 - 210 = 155; with the scheme = 155 - 100 = 55.

Answer: The scheme adds ₹25,000 and cuts idle days from 155 to 55 (wage rate assumed).

Memory hook: A hundred days of work fills the lean season.

Tricks to remember Unemployment: Types, Measurement and Government Employment Generation

Short memory aids. Say each one aloud once, then use it on a question the same day.

O-D-S
Open, Disguised, Seasonal unemployment: 'Out of work, Doing nothing useful, Seasons decide'.
Use it when: Types of unemployment.
Direct hire, indirect pull
Direct: the government employs; indirect: government demand raises private jobs.
Use it when: Government role.
100 days, 2005
MGNREGA 2005: 100 days of guaranteed wage work per rural household.
Use it when: Programme fact.

Unemployment: Types, Measurement and Government Employment Generation: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Identify the type · 1 mark · MCQBoard level

Farm labourers in a village have no work during the months after harvest until the next sowing. This is:
(a) open unemployment
(b) disguised unemployment
(c) seasonal unemployment
(d) frictional unemployment

Try it first, then show the solutionSolution

Lack of work in the off-season is seasonal unemployment.

Answer: (c) seasonal unemployment

Example 2: Direct and indirect employment · 3 marks · Short answerBoard level

Explain how the government generates employment directly and indirectly. Give one example of each. (3 marks)

Try it first, then show the solutionSolution

Direct: employing people in departments and in public enterprises.
Indirect: public enterprises' output expansion raises demand for private firms' output.

Answer: Directly, the government employs people in its departments for administration and runs industries, hotels and transport companies. Indirectly, when government enterprises raise output, private firms that supply them or use their products also raise output and employment; for example, expansion of a public steel company increases production and jobs in private firms using its steel.

Example 3: Unemployment rate · 4 marks · Short answerHarder board level

Suppose an economy has a population of 1,000 (in thousands), of whom 376 (in thousands) are employed and 24 (in thousands) are unemployed and seeking work. Find the labour force, the unemployment rate and the worker-population ratio. Why may the unemployment rate understate the real problem in India? (4 marks)

Try it first, then show the solutionSolution

Labour force = 376 + 24 = 400 thousand.
Unemployment rate = 24 / 400 x 100 = 6%.
WPR = 376 / 1,000 x 100 = 37.6.
People seldom remain fully unemployed because of poverty; they take poor or underemployed work, and disguised and seasonal unemployment are not in the rate.

Answer: Labour force 400 thousand; unemployment rate 6%; WPR 37.6. The open rate misses disguised and seasonal unemployment and underemployment.

Example 4: Cost and benefit of a guarantee scheme · 4 marks · Short answerHarder board level

Suppose a district has 20,000 rural households. Each is guaranteed 100 days at ₹250 a day (assumed). (i) Find the wage income per household. (ii) Find the total wage bill in rupees and in crore. (iii) If 60% of the households actually take all 100 days, find the wage bill. (4 marks)

Try it first, then show the solutionSolution

(i) 100 x 250 = ₹25,000.
(ii) Total = 20,000 x 25,000 = ₹50,00,00,000 = ₹50 crore.
(iii) 60% of 20,000 = 12,000 households; bill = 12,000 x 25,000 = ₹30,00,00,000 = ₹30 crore.

Answer: (i) ₹25,000 per household. (ii) ₹50 crore. (iii) ₹30 crore for 12,000 households. The scheme transfers income to the rural poor and creates community assets.

Example 5: Design a response to off-season unemployment · 5 marks · Long answerHOTS / competency

Suppose a drought-hit district has high disguised and seasonal unemployment. Using NCERT's discussion, explain the two kinds, and suggest two government measures, one direct employment programme and one that works indirectly. Evaluate one limitation. (5 marks)

Try it first, then show the solutionSolution

Disguised: too many workers on the same task; seasonal: no work in the off-season.
Direct measure: wage employment under MGNREGA, 100 days per household, which also builds community assets.
Indirect measure: expand public enterprises or infrastructure so that private firms supplying them add jobs.
Limitation: the scheme gives only limited days of unskilled work and does not create permanent skilled jobs.

Answer: MGNREGA directly provides wage work in the lean season and public enterprise expansion creates indirect jobs; both help, but permanent skilled employment needs further diversification.

Where students lose marks in Unemployment: Types, Measurement and Government Employment Generation

The slips examiners see most often, and what to write instead.

Mistake: Defining unemployment as 'not having a job'
Leaving out search or willingness.
Wrong working
Unemployment means a person has no job.
Right working
A person is unemployed if he is not working for lack of work but is seeking or willing to work at the prevailing pay.
Do this: Write both parts.
Usually costs: 1 mark.
Mistake: Dividing by population for the unemployment rate
Mixing with WPR.
Wrong working
Unemployment rate = 24 / 1,000 x 100 = 2.4%.
Right working
Unemployment rate = 24 / 400 x 100 = 6%, using the labour force.
Do this: Labour force = employed + unemployed.
Usually costs: 1 to 2 marks.
Mistake: Calling disguised unemployment 'no work at all'
Confusing it with open unemployment.
Wrong working
Disguised unemployed people have no work.
Right working
They appear to be working but their removal would not reduce output.
Do this: Remember the marginal product is zero.
Usually costs: 1 mark.

Exam tips

Give one example with each type: idle labourers after harvest (seasonal), extra family members on a small plot (disguised), educated youth registered at exchanges (open).
Write MGNREGA as: 2005, 100 days of guaranteed unskilled manual wage work per rural household willing to do it.
Show the labour force in every unemployment-rate sum.

Practice questions on Unemployment: Types, Measurement and Government Employment Generation

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Under MGNREGA, a rural household is promised:
(a) 50 days of employment a year
(b) 100 days of guaranteed wage employment
(c) a government job
(d) 200 days of skilled work
Hint
A hundred days.
Answer
(b) 100 days of guaranteed wage employment
Q2 · 3 marks · Short answerBoard level
Distinguish between open unemployment and disguised unemployment. (3 marks)
Hint
Seeking work vs apparently working.
Answer
In open unemployment people are without work and actively seek it. In disguised unemployment more people than needed work on a task, for example family members on a small farm, so removing some does not reduce output. Open unemployment is visible in the job market; disguised unemployment is hidden within employment.
Q3 · 3 marks · Short answerHarder board level
A farm has 9 workers. Output stays the same if the workers are reduced to 6. (i) Find the number and per cent of disguised unemployed. (ii) If each of these workers can earn ₹6,000 a month elsewhere (assumed), find the extra family income per month and per year. (3 marks)
Hint
Needed workers = 6.
Answer
(i) 9 - 6 = 3 workers; 3 / 9 x 100 = 33.3%. (ii) The 3 extra workers can leave without lowering farm output; extra income = 3 x 6,000 = ₹18,000 a month, or 18,000 x 12 = ₹2,16,000 a year (assumed wage).
Q4 · 4 marks · Short answerHarder board level
A district has 15,000 households, of which 70% take part in a guaranteed wage scheme for 100 days at ₹240 a day (assumed). Find the number of households, the total wage bill in crore and the average wage income per household in the district. (4 marks)
Hint
70% of 15,000 first.
Answer
Households = 0.70 x 15,000 = 10,500. Wage per participating household = 100 x 240 = ₹24,000. Bill = 10,500 x 24,000 = ₹25,20,00,000 = ₹25.2 crore. Average over all 15,000 households = 25,20,00,000 / 15,000 = ₹16,800.
Q5 · 1 mark · Assertion-reasonHOTS / competency
Assertion (A): Open unemployment figures understate the problem of unemployment in India.
Reason (R): Many people accept low-paying or unsafe jobs because of poverty, and disguised and seasonal unemployment are not captured.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.
Hint
Think of underemployment.
Answer
(a) Both A and R are true and R is the correct explanation of A.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Name the three types of unemployment in NCERT.Show answer
Open, disguised and seasonal unemployment.
2.Which body defines unemployment for India's official data?Show answer
The National Statistical Office.
3.How many days of work does MGNREGA guarantee?Show answer
100 days per household.
4.What is indirect employment generation?Show answer
Jobs created in private firms when government enterprises expand their output.
5.What did the late-1950s study find about agricultural workers?Show answer
About one-third were disguisedly unemployed.

Unemployment: Types, Measurement and Government Employment Generation: frequently asked questions

What is disguised unemployment?

A situation in which more workers are engaged than needed, so some can be removed without reducing output.

What is seasonal unemployment?

Unemployment during the off-season of an occupation such as farming.

Is the unemployment rate the same as the worker-population ratio?

No. The unemployment rate uses the labour force as base; WPR uses the total population.

Are the wage rates in the sums official?

No. Daily wages and household counts are assumed for practice.