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Unemployment Types, Rate and Policies, ISC Class 11

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EconomicsISC Class 11 · Human Capital Formation and Unemployment

Unemployment: Measurement, Types, Causes and Policies (ISC Class 11 Economics)

Updated 17 October 2026 · Fact-checked

Unemployment is a situation in which people who are willing and able to work at the prevailing wage cannot find work. The labour force is the employed plus the unemployed; the unemployment rate = unemployed / labour force x 100. Its types include open, disguised, seasonal, educated, structural, frictional and cyclical unemployment; policy uses wage and self-employment schemes, skill development and support for enterprise.

Only the labour force counts: unemployment rate is the unemployed divided by employed plus unemployed, while students and homemakers stay outside it.

Illustration drawn for QuestionBuddy.

Understand Unemployment: Measurement, Types, Causes and Policy Measures

Key terms. Labour force = Employed + Unemployed. Unemployment rate = Unemployed / Labour force x 100. Labour force participation rate (LFPR) = Labour force / Working-age population x 100. Worker-population ratio (WPR) = Employed / Population (reference age) x 100. Persons not seeking work (students, homemakers, retired) are outside the labour force.

Types.

  • *Open:* willing workers have no work at all.
  • *Disguised:* more people are engaged than needed; marginal productivity is zero, so output does not fall if some leave (family farms).
  • *Seasonal:* work only in certain seasons (sowing and harvest).
  • *Educated:* educated persons cannot find suitable jobs.
  • *Structural:* mismatch of skills and jobs or decline of an industry.
  • *Frictional:* short-term, while changing jobs.
  • *Cyclical:* fall in aggregate demand in a recession.

Causes. Rapid population growth; slow growth of jobs; dependence on agriculture and under-employment; inadequate skills; poor education system; limited industrial base; seasonal nature of farming; capital-intensive techniques; mismatch between education and the labour market.

Policy measures (after 2000). MGNREGA (2005): guaranteed wage employment in rural areas; Prime Minister's Employment Generation Programme (2008): subsidised loans for micro enterprises; DAY-NRLM (2011): self-help groups; Skill India Mission and PM Kaushal Vikas Yojana (2015); MUDRA loans (2015); Startup India (2016). Broader: faster growth in labour-intensive sectors, education and skills reform, support to small industry and self-employment.

Disguised unemployment test. If removing some workers leaves output unchanged, they are disguised unemployed.

Unemployment: Measurement, Types, Causes and Policy Measures: key facts

Unemployment rate
Unemployment rate = Unemployed / Labour force x 100 | Labour force = Employed + Unemployed
Per cent.
LFPR
LFPR = Labour force / Working-age population x 100 | Per cent
Participation.
WPR
WPR = Employed / Population x 100 | Per cent
Share working.

How to answer Unemployment: Measurement, Types, Causes and Policy Measures questions

Classify each person first (employed, unemployed, outside the labour force).

  1. 1Count employed and unemployed to get the labour force.
  2. 2Compute the rate with the labour force as base.
  3. 3For disguised unemployment, find the workers needed for the same output.
  4. 4Match the policy measure to the type.

Unemployment: Measurement, Types, Causes and Policy Measures 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 farm of 2 hectares has 8 family members working on it; the farm can be cultivated with 5 workers and the output is the same.

How many are disguised unemployed?

Try it first, then show the solutionSolution
  1. Workers needed = 5.
  2. Workers engaged = 8; the extra 3 add nothing to output.

Answer: 3 workers.

Memory hook: Remove them and output does not fall.

Tricks to remember Unemployment: Measurement, Types, Causes and Policy Measures

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

  • Rate on labour force

    Unemployed are divided by labour force, not by population.

    Use it when: Rate.

  • Zero marginal product

    Disguised: extra workers add nothing.

    Use it when: Disguised.

  • Season, skill, school, slump

    Seasonal, structural, educated, cyclical.

    Use it when: Types.

Unemployment: Measurement, Types, Causes and Policy Measures: solved examples

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

Example 1: Rate · 1 mark · MCQBoard level

In a town, 8,000 persons are employed and 2,000 are unemployed and seeking work. The unemployment rate is:
(a) 10% (b) 20% (c) 25% (d) 40%

Try it first, then show the solutionSolution
  1. Labour force = 10,000; rate = 2,000 / 10,000 = 20%.

Answer: (b) 20%

Example 2: Types · 4 marks · Short answerBoard level

Name the type of unemployment in each: (i) a farm labourer idle outside the sowing and harvest season; (ii) a graduate engineer working as a clerk; (iii) a worker changing jobs between two firms; (iv) job losses when demand falls in a recession. (4 marks)

Try it first, then show the solutionSolution
  1. (i) Seasonal.
  2. (ii) Educated (under-employment).
  3. (iii) Frictional.
  4. (iv) Cyclical.

Answer: (i) seasonal; (ii) educated; (iii) frictional; (iv) cyclical.

Example 3: Compute the rates · 6 marks · Long answerHarder board level

A district has a population aged 15 and above of 50,000. Of these, 12,000 are students, 8,000 are homemakers or retired and outside the labour force, 27,000 are employed, and the rest are seeking work. Find the labour force, the number unemployed, the unemployment rate, LFPR and WPR. (6 marks)

Try it first, then show the solutionSolution
  1. Outside the labour force = 12,000 + 8,000 = 20,000.
  2. Labour force = 50,000 - 20,000 = 30,000.
  3. Unemployed = 30,000 - 27,000 = 3,000.
  4. Unemployment rate = 3,000 / 30,000 x 100 = 10%.
  5. LFPR = 30,000 / 50,000 x 100 = 60%; WPR = 27,000 / 50,000 x 100 = 54%.

Answer: Labour force 30,000; unemployed 3,000; unemployment rate 10%; LFPR 60%; WPR 54%.

Example 4: Disguised unemployment · 5 marks · Long answerHarder board level

A farm of 5 hectares has 12 workers and produces 600 quintals. It is observed that with 7 workers the output is still 600 quintals. Find the disguised unemployed and the marginal product of the extra workers. If the wage is Rs 200 a day and the farm is open for 250 days, find the annual wage cost that could be saved. If the 5 workers shift to a rural industry with a productivity of 3 quintals each per year, find the extra output. (5 marks)

Try it first, then show the solutionSolution
  1. Disguised unemployed = 12 - 7 = 5 workers.
  2. Marginal product of the extra workers = 0 (output unchanged).
  3. Wage saving = 5 x 200 x 250 = Rs 2,50,000 (if they were paid wages).
  4. Extra output from the industry = 5 x 3 = 15 quintals.

Answer: 5 disguised unemployed; marginal product zero; Rs 2,50,000 wage cost; 15 quintals extra output elsewhere (illustrative).

Example 5: Policy matching · 4 marks · Short answerHOTS / competency

Match the policy to the problem and explain: (i) seasonal unemployment in villages; (ii) lack of skills among rural youth; (iii) lack of credit for a small tailor wanting to expand; (iv) educated youth wanting to start a business. (4 marks)

Try it first, then show the solutionSolution
  1. (i) MGNREGA: wage employment in lean seasons.
  2. (ii) Skill programmes such as DDU-GKY or Skill India.
  3. (iii) MUDRA loans for small business credit.
  4. (iv) Startup India for entrepreneurship support.

Answer: (i) MGNREGA; (ii) Skill India/DDU-GKY; (iii) MUDRA; (iv) Startup India.

Where students lose marks in Unemployment: Measurement, Types, Causes and Policy Measures

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

  • Mistake: Using population as the base for unemployment rate

    Wrong base.

    Wrong working

    3,000 / 50,000

    Right working

    3,000 / 30,000

    Do this: Base is the labour force.

    Usually costs: 2 marks.

  • Mistake: Counting students as unemployed

    Not working.

    Wrong working

    Students unemployed

    Right working

    Outside the labour force

    Do this: Only those seeking work.

    Usually costs: 2 marks.

  • Mistake: Disguised unemployment as seasonal

    Both on farms.

    Wrong working

    Seasonal

    Right working

    Disguised: zero marginal product

    Do this: Use the test.

    Usually costs: 1 mark.

Exam tips

  • Define labour force before any calculation.
  • Name a scheme and its year for each policy measure.
  • Use the zero marginal productivity test for disguised unemployment.

Practice questions on Unemployment: Measurement, Types, Causes and Policy Measures

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

  1. Q1 · 1 mark · MCQBoard level

    Persons who are not seeking work, such as full-time students, are:
    (a) unemployed (b) outside the labour force (c) employed (d) disguised unemployed

    Hint

    Not part of labour force.

    Answer

    (b) outside the labour force

  2. Q2 · 4 marks · Short answerBoard level

    Explain disguised unemployment and educated unemployment with an example each. (4 marks)

    Hint

    Zero marginal product; mismatch.

    Answer

    Disguised unemployment: extra workers on a family farm add nothing to output. Educated unemployment: a graduate cannot find a job matching her qualifications.

  3. Q3 · 5 marks · Long answerHarder board level

    In a state, employed = 3.6 crore, unemployed = 0.4 crore and the working-age population is 6.5 crore. Find the unemployment rate, LFPR and WPR. If 0.3 crore of the unemployed find work, find the new unemployment rate. (5 marks)

    Hint

    Labour force = 4.

    Answer

    Labour force = 4.0 crore; unemployment rate = 10%; LFPR = 4 / 6.5 = 61.54%; WPR = 3.6 / 6.5 = 55.38%. After 0.3 crore get work: unemployed 0.1, rate = 0.1 / 4 = 2.5%.

  4. Q4 · 5 marks · Long answerHarder board level

    A village has 400 farm workers; 100 are idle for 4 months, 60 are disguised unemployed and 40 are seeking non-farm work without success. Find the number in each category as a share of the farm workers and the total underutilised. If MGNREGA provides 100 days a year at Rs 220 a day to the 100 seasonal workers, find the annual wage income per worker and in total. (5 marks)

    Hint

    100 + 60 + 40 = 200.

    Answer

    Seasonal 25%, disguised 15%, open 10%; total underutilised 200 (50%). MGNREGA income per worker = 100 x 220 = Rs 22,000; total = Rs 22,00,000.

  5. Q5 · 4 marks · Short answerHOTS / competency

    A government plans to raise employment by buying labour-saving machines for all public works to increase speed. Evaluate this choice in terms of unemployment, with two arguments for and two against. (4 marks)

    Hint

    Capital vs labour intensity.

    Answer

    For: faster work and better quality. Against: fewer jobs and higher unemployment in a labour-surplus economy. A better approach is labour-intensive public works with machines where needed.

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. 1.Labour force equals?Show answer

    Employed plus unemployed.

  2. 2.Unemployment rate base?Show answer

    Labour force.

  3. 3.Disguised unemployment test?Show answer

    Zero marginal productivity.

  4. 4.A rural wage employment scheme?Show answer

    MGNREGA.

  5. 5.WPR means?Show answer

    Employed as per cent of population.

Unemployment: Measurement, Types, Causes and Policy Measures: frequently asked questions

Is a homemaker unemployed?

No, outside the labour force.

Is under-employment unemployment?

It is related but different.

Which survey measures employment?

Periodic Labour Force Survey.

What is frictional unemployment?

Short-term, between jobs.