What is Unemployment Rates? List of Highest Unemployment Rate Countries

The unemployment rate is defined as the percentage of people in the workforce who are unemployed. The formula for calculating the unemployment rate is to multiply the total labor force by 100 and divide the number of jobless people by that amount. The national unemployment rates of a large number of countries throughout the world are continuously calculated and recorded by organizations like the World Bank, the International Monetary Fund (IMF), and the Organisation for Economic Co-operation and Development (OECD). The unemployment rate is likely to increase when the economy is struggling and there are few jobs available.

In this article, we will look into the various aspects of unemployment, and the unemployment rate, covering its types, causes, and effects. We will also look into the unemployment rate in India and the list of countries with the highest unemployment rates and discuss some strategies for resolving unemployment issues.

What is the Unemployment Rate? Formula of Unemployment Rate

The unemployment rate is the proportion of the workforce that is unemployed. The combined population of the employed and unemployed makes up the labor force. The formula for calculating the unemployment rate is:

(Unemployed ÷ Labor Force) x 100

Formula for Calculating the Unemployment Rate

Being a lagging indicator, it usually follows changes in economic conditions rather than forecasting them. This causes it to rise or fall. When the economy is struggling and there are few jobs available, one might expect an increase in the unemployment rate. It is acceptable to assume that the economy will contract if growth is high and employment availability is sufficient. The term U-3 refers to the official unemployment rate. People who have been actively looking for work for the last four weeks and who are eager and willing to work are classified as unemployed. People who work full-time, part-time, or temporary jobs are considered to be employed.

List of Countries with the Highest Unemployment Rate in 2023

The following table lists the countries with the highest unemployment rate (According to the data published by World Bank):

Country	Unemployment Rate (%)
South Africa	32.60 (Q2, 2023)
Djibouti	27.93 (2022)
Eswatini	24.39 (2022)
Costa Rica	22.00 (Q3, 2020)
Gabon	22.30 (2021)
Namibi	21.70 (2021)
Botswana	20.68 (2022)
Libya	19.60 (2021)
Somalia	19.90 (2021)
St. Vincent and the Grenadines	18.80 (2008)
Sudan	19.80 (2021)
Lesotho	18 (2022)
Jordan	22.80 (Q1,2022)
St. Lucia	20.15 (2022)
Tunisia	16.10 (Q1, 2022)
Iraq	14.20 (2021)
Montenegro	19.90 (June 2022)
Sao Tome and Prinicipe	15.90 (2021)
North Macedonia	14.80 (Q1, 2022)
North Macedonia	14.80 (Q1, 2022)

Unemployment Rate in India

Based on information from the Centre for Monitoring Indian Economy (CMIE), the unemployment rate in India as of June 8, 2021, is 12.81% despite the country being under lockdown and having limited mobility. According to a report by the CMIE, the employment rate decreased from 37.6 percent in March to 36.8 percent in April, while the unemployment rate increased from 6.5 percent in March 2021 to 8 percent in April 2021 and 14.7% at the end of May.

After the country entered lockdown in March 2020, India’s unemployment rate reached a record high of 29% in September 2020; however, it later rose to 9.1% in December 2020. The employment rate increased to 37.9 percent from 36.9 percent in December 2020, while the unemployment rate decreased once more to 6.5% in January 2021 from 9.1%.

What is Unemployment?

The term “unemployment” refers to those who are employable and actively seeking employment but are having trouble doing so. This group consists of working people who are employed but do not have a suitable job. A major indicator of a country’s economic health is its unemployment rate. Usually, it is computed by dividing the total number of workers by the number of unemployed people.

Types of Unemployment

Demand-deficient, frictional, structural, and voluntary unemployment are the four principal types of unemployment.

1. Demand-Deficient Unemployment

The main reason for unemployment that usually occurs during a recession is demand deficit unemployment. Businesses experiencing a decline in the demand for their goods or services react by reducing their output, which requires a reduction in manpower inside the company. Employees are essentially laid off.

2. Frictional Unemployment

The word “frictional unemployment” refers to unemployed employees. One example would be a worker seeking employment in a non-recessionary market who recently quit or was dismissed. The fact that it is typically the result of employees looking for work that best suits their skill set means that it is not harmful.

3. Structural Unemployment

When a worker’s skill set does not match the skills required by the available jobs, or when workers are available but unable to travel to the jobs’ location, structural unemployment results.

For example, consider a teaching post that needs to be moved to China, but the employee is unable to get a work visa due to certain visa restrictions. It could also happen when a company implements new technology, such as workflow automation, which does away with the requirement for human labor.

4. Voluntary Unemployment

An employee is voluntarily unemployed when they decide to leave their position since the pay is no longer what they are used to. An example would be a worker whose take-home pay is less than their living expenses.

Other types of unemployment are:

1. Cyclical Unemployment

Unemployment is brought on by the business cycle, in which the number of jobless people increases during recessions and decreases as the economy expands. India’s cyclical unemployment rate is very low.

2. Seasonal Unemployment

It is the state of not having a job during specific times of the year. For example, laborers in India hardly ever have a job all year round.

3. Vulnerable Unemployment

Individuals who fall under the category of vulnerable unemployment are considered jobless. People work, but they do it informally, that is, without official employment contracts, and as a result, no records of their labor are ever kept. In India, it is one of the primary forms of unemployment.

4. Technological Unemployment

It is the state in which people lose their work as a result of technological advancements. According to World Bank data from 2016, 69% of Indian jobs were expected to be at risk from automation on an annual basis.

5. Institutional Unemployment

Long-term or permanent institutional variables and incentives in the economy lead to institutional unemployment. Government initiatives like high minimum pay floors, comprehensive social benefit plans, and strict laws regulating occupational licensing may lead to institutional unemployment.

6. Disguised Unemployment

In case of disguised unemployment, the number of employed persons exceeds the real requirement. Hidden unemployment is typically associated with unorganized or agricultural industries.

Causes of Unemployment

Causes of unemployment are mentioned below:

• The working population’s poor educational background or lack of occupational skills.
• Industries requiring a lot of labor are being negatively impacted by the decline in private investment, especially since demonetization.
• Transitioning between the three sectors is challenging due to the poor productivity in the agriculture sector and a lack of alternative possibilities for agricultural workers.
• Complexities in law and small businesses become unprofitable due to inadequate state support, insufficient market, financial, and infrastructure linkages, and cost and compliance delays.
• Insufficient expansion of infrastructure and insufficient investments in the manufacturing sector limit the secondary industry’s employment prospects.
• Due to a lack of necessary training or skills, a large portion of the country’s workforce works in the informal economy; this information is not included in employment statistics.
• The main reason behind structural unemployment is that the education offered in schools and universities does not meet the demands of the labor market today.
• Regressive social norms that prevent women from taking/continuing employment.

Effects of Unemployment

The following are the impacts or effects of unemployment:

• Poverty is a problem that is a result of unemployment.
• Due to lower output and lower consumer demand for products and services brought on by unemployment, the government is forced to take on more debt.
• Antisocial elements can quickly attract unemployed individuals. They start to doubt the country’s democratic principles as a result of this.
• Long-term jobless individuals may engage in unlawful and unethical acts to make money, which raises the crime rate in the entire country.
• The nation’s economy is impacted by unemployment because the labor force that could have been productively engaged to produce resources instead becomes reliant on the working population, increasing the state’s socioeconomic expenses. For example, a 1% rise in unemployment results in a 2% reduction in GDP.
• It is common to see jobless individuals develop drug and alcohol addictions or attempt suicide, which depletes the nation’s human capital.

Strategies for Resolving Unemployment Issues

One of the main issues facing the modern world is unemployment. Many people struggle with unemployment. Following are the steps to address the issue of unemployment:

1. Change in Industrial Technique

A production technique centred on the requirements and resources of the country should be implemented to address the issue of unemployment. Work-intensive technology needs to take the role of capital-intensive technology.

2. Managing Seasonal Unemployment

Work in the agro-based and agricultural sectors is only available during certain seasons. It is recommended to implement strategies such as plantation horticulture, multi-cropping, animal husbandry, and horticulture. Also, sectors like the cotton industry need to be supported.

3. Education System Changes

The current system of education has to be modified. Instead of delivering academic knowledge, it should place more of an emphasis on vocational education. Students who want to pursue higher education should have access to colleges and institutions.

4. Support for Self-Employment

The majority of people work for themselves, but sadly, their lack of professional expertise prevents them from achieving the intended outcomes. As a result, providing technical instruction and appropriate raw material use should assist them.

5. Introduction of Fresh Policies by the Government

To improve worker productivity and create more chances for employment for all, the government should take the lead.

Conclusion – Unemployment Rates

Unemployment happens when a person is willing and able to work but lacks a paying job. The percentage of unemployed persons in the labor force is known as the unemployment rate. As a result, determining who is employed is necessary to calculate the unemployment rate. Changes in industrial practices, policies about seasonal unemployment, modifications to the educational system, growth of employment exchanges, increased support for independent contractors, emphasis on full and more productive employment, and a rise in production rate are some of the strategies used to address the issue of unemployment.

UPSC Prelims Previous Year’s Questions on Unemployment Rates

Unemployment rates is an important topic from the point of view of both Prelims and Mains Examination. Students preparing for UPSC exam can refer to this article for ease of understanding of the topic and comprehensive notes on Unemployment Rates.

Q. Disguised unemployment generally means (2013)

(a) large number of people remain unemployed

(b) alternative employment is not available

(c) marginal productivity of labour is zero

(d) productivity of workers is low

Ans: (c)

FAQs on Types, Causes and Effects Unemployment Rates

1. What do you mean by unemployment rate?

The percentage of the labor force that is jobless is known as the unemployment rate. The formula for calculating the unemployment rate is (Unemployed ÷ Labor Force) x 100.

2. What is called unemployment?

When someone actively looks for work but is not successful in doing so, it is referred to as unemployed. One important indicator of the state of the economy is unemployment.

3. What is the definition and formula for unemployment rate?

The definition of employment rates is the degree to which persons who are willing and able to work are being utilized as accessible labor resources. By dividing the total number of jobless persons by the total number of people in the labor force and multiplying the result by 100, we may determine the unemployment rate.

4. What is the unemployment rate in India?

The unemployment rate in India in 2022 was 7.33%, which was 0.38% lower than in 2021. India’s unemployment rate decreased by 2.48% from 2020 to 7.71% in 2021.

5. What is an example of unemployment?

An example of unemployment is when employees bargain for a minimum wage that exceeds what a business can pay, which makes hiring them impractical for the business and results in their unemployment.