Unemployment, The Measurement of

The unemployed are those who are looking to work or are willing to work but cannot find it at the going wage. This notion of unemployment is motivated by the neo-classical conception of the labour market where wages clear the market and the failure to get work is voluntary. Deviations from this ideal are measured by the above definition of involuntary unemployment. Other definitions have also been used. The influential two-sector development models (Lewis,1954, Rannis and Fei, 1964) theorised non-neoclassical labour markets in the sectors dominated by subsistence family enterprise (such as agriculture). As output was shared among the family members, the family enterprise aimed to produce as much as possible without regard to the marginal productivity of labour. This led to the concepts of `labour surplus ’ and `disguised unemployment ’ both of which referred to people who were employed with low productivity in the subsistence sector and could therefore be transferred to the modern high productivity sector without output loss in the subsistence sector. The early literature on unemployment in India attempted to measure such unemployment through measures that were defined with respect to low productivity or low incomes. However, the