What is the Unemployment Rate

The definition of unemployment rate as defined by the Labor organization is the total number of unemployed or jobless people prevailing to the total number of jobless people who are working to make a living. This ratio is called as unemployment rate which varies from country to country.

Every year there are billions of people who attain the working age and look for a suitable employment, but not always that they end up with a job. The unemployment prevails in the country when there is more number of employment seekers than the available jobs. The labor organization of India defines that the percentage of people who are currently jobless/unemployed to the total number of working labor class is termed as unemployment rate. A survey conducted in the year 2011 says that the economies, both developed and developing are seeing an economic slowdown in terms of employment. The employment industry is not growing as expected.

There might be several reasons for unemployment but the various economies argue that market mechanisms play an important role in unemployment. Earlier when there was no currency everyone knew how to grow food, make shelter and make a living. Only after the invention of currency dependency took its place. People started depending on middle men for food and shelter. This was the emergence of unemployment. India has been seeing lot of fluctuation since 2002. It was 8.8 percentages in 2002 which declined to 6.8 in the year 2008, and raised again in the year 2010 to 10.8 percent.

The researchers say there are different types of unemployment. The first type of unemployment is the classical unemployment where the wages are set higher than the market level which makes the number of job seekers more than the vacancy. Cyclical unemployment occurs when the numbers of jobs in an economy are lesser than the job seekers. Marxist theory said that some workers are to be kept over worked and some have to be kept as a reserve. The major reason for unemployment is lack of professional education. Another challenge is illiteracy and corruption which is adding to the raising population. With the high growth rate of population more number of jobseekers are emerging whilst the lesser number of jobs available.

Involuntary unemployment occurs when there is a recession in the economy. Structural unemployment is a situation when there is a mismatch between the skill sets available with the job seeker and the job available. Friction unemployment is a situation when a job seeker is changing his job profile with a different skill set. For example his previous job experience might not be relevant for the job he is seeking for. The unemployment rate is the result of various unemployment types which exist in an economy. With this kind of unemployment the percentage keeps fluctuating depending on market conditions.