Unemployment is defined as a situation in which a mentally and physically capable person of working age is willing to work at the existing wage rate, but does not get a job to work. Unemployment is expressed by the following formula:

Unemployment rate = (Unemployed workers/Total Labour Force) X 100

In India, the unemployment rate is measured by the National Sample Survey Organisation on three approaches- daily status approach, weekly status approach and usual status approach.

Types of unemployment existing in a developing country like India

• Open unemployment: It is a situation where a large section of the labour force does not get a job that may provide them with regular income. When the labour force expands at a faster rate than the growth rate of the economy, open unemployment occurs.
• Disguised Unemployment: It is a situation in which more people are doing a work than actually required. Even if some are withdrawn, production does not suffer. It happens due to rapid growth of population and lack of alternative job opportunities e.g. overcrowding in agriculture.
• Seasonal Unemployment: Such unemployment occurs during certain seasons in industries and occupations such as agriculture, tourism, ice factories, etc. People remain unemployed in off- seasons.
• Cyclical unemployment: It results directly from cycles of economic upturn and downturn. Unemployment typically rises during recessions and declines during economic expansions.
• Voluntary Unemployment: When people choose not to work. It happens when people are not able to find employment that matches their expectations.
• Structural Unemployment: It occurs when the skills, experience, and education of workers do not match the demand of the industry due to technological changes etc.
• Frictional Unemployment: It refers to the period between job transitions. People are regarded as unemployed while they are attempting to find a new job.
• Casual unemployment: When a person is employed on a day-to-day basis (unorganised sector), unemployment may take place due to short term-contracts, shortage of raw materials, fall in demand, change of ownership, etc.

Other than these major types of unemployment existing in India, underemployment is also rampant. Here people are either employed on a part-time basis or undertake a job where lesser qualification is required e.g. post graduates applying for posts of peon. The faulty education system also adds to the unemployment by creating a mismatch between skills imparted and those required by the industries. For e.g. a large number of engineering graduates in India remain unemployed due to this.