CDS (I) 2021 General Knowledge · Question 2 of 120

Correct — A, Structural unemployment. The stem is a definition, and the two words that carry it are 'mismatch' and 'pattern'. Structural unemployment is involuntary unemployment caused by a mismatch between the skills workers can offer and the skills employers are demanding — and, in the regional version the stem also names, between where the vacancies are and where the workers are. The jobs exist and the workers exist; they simply do not fit each other. That is why this kind of unemployment is stubborn. It cannot be cured by boosting demand, because more spending does not turn a retrenched jute-mill hand in Howrah into a data-centre technician in Hyderabad. What it takes is retraining, or migration, or both, and both take years — which is why structural spells last far longer than the short gap between one job and the next.

• (b)Disguised unemployment — A different failure altogether — too many people already working on the same job rather than vacancies going unmatched. The school example is a farm that needs two hands but employs five; the extra workers add nothing to output, so the marginal productivity of labour is zero. Nobody in that picture is looking at an unfilled vacancy.
• (c)Altered unemployment — Not a term in economics. It is a filler option, put in to reward the candidate who knows the standard four-way classification — frictional, structural, cyclical and seasonal — and can see that this one is not on the list.
• (d)Cyclical unemployment — Comes from a temporary fall in overall demand across the economy, as in a recession, and disappears when demand recovers. It is not about the pattern of vacancies failing to fit the pattern of workers; in a downturn the vacancies are not there at all.

Economists sort unemployment by its cause because the cure differs in each case. Frictional unemployment is the short spell while someone moves between jobs. Structural unemployment follows a lasting change in what is produced or how — technology, trade, the decline of an industry — leaving workers whose skills or location no longer match the vacancies. Cyclical unemployment is the extra unemployment of a downturn. Seasonal unemployment follows the farming or tourist calendar. Indian discussion adds disguised unemployment, common in agriculture, where more people work a holding than it needs.

Read the definition and ask what has gone wrong in it. Here, vacancies and workers both exist but do not correspond by occupation or by region — a matching failure, which is structural by definition. The tempting wrong answer for an Indian candidate is disguised unemployment, because it is the type the school text dwells on; but that is over-employment on existing work, not unmatched vacancies. Cyclical is tempting for anyone who reads 'unemployment' and thinks 'recession'. Structural unemployment is exactly what skilling missions are aimed at, which is why the same paper carries a question on a rural skill-training scheme.

• Structural unemployment is caused by a mismatch between the skills or location of workers and the skills or location that employers need.
• It responds to retraining and migration, not to demand stimulus, and spells last much longer than frictional ones.
• Frictional unemployment is the brief gap while changing jobs; the two are hard to separate in the data except by duration.
• Cyclical unemployment rises in a downturn and falls in a recovery.
• Disguised unemployment is the Indian farm case in which the marginal productivity of an extra worker is zero.

• Choosing disguised unemployment because it is the type most discussed in Indian textbooks, when the stem describes unfilled vacancies.
• Treating any long spell of unemployment as cyclical.
• Being drawn to an invented term such as 'altered unemployment' when the real four-way list is short and learnable.

As a name-the-type item from a one-line definition, or in reverse — give the type and ask which situation illustrates it.

• practice — not a real PYQ

  A textile mill closes permanently and its weavers remain out of work because the new jobs in their district are all in software services. This is best described as

  • (a)frictional unemployment
  • (b)structural unemployment
  • (c)cyclical unemployment
  • (d)seasonal unemployment

  Answer(b) structural unemployment — the industry has gone for good and the workers' skills no longer match the vacancies that exist, so retraining rather than demand support is the remedy.

• practice — not a real PYQ

  Which one of the following types of unemployment is most likely to fall on its own when aggregate demand in the economy recovers?

  • (a)Structural unemployment
  • (b)Disguised unemployment
  • (c)Cyclical unemployment
  • (d)Technological unemployment

  Answer(c) cyclical unemployment — it is created by the downturn in overall demand and reverses when demand picks up again.