Poverty can be of different types like absolute poverty and relative poverty. There may be many other classifications like urban poverty, rural poverty, primary poverty, secondary poverty and many more. Whatever be the type of poverty, the basic reason has always been lack of adequate income. Here comes the role of unemployment behind poverty. Lack of employment opportunities and the consequential income disparity bring about mass poverty in most of the developing and under developed economies of the world.
Lack of effective aggregate demand of labor is one of the principal reasons for unemployment. In the less developed economies a substantial portion of the total workforce works as surplus labor. This problem is particularly prevalent in the agricultural sector. Due to excess labor, the marginal productivity of the workforce may be zero or even negative. This excess pool of labor is the first to become unemployed during the period of economic or social crisis.
When a capitalist economy undergoes some dynamic changes in its organizational structure, it results in structural unemployment. This type of unemployment may also emerge if the lack of aggregate demand continues for a substantially long period of time. In case of frictional unemployment, workers are temporarily unemployed. There may be cases of hidden unemployment where workers restrain themselves from working due to absence of appropriate facilities.
It is true that unemployment and poverty are mostly common in the less developed economies. However, due to the global economic recessions, the developed economies are also facing these challenges in the recent times. The US subprime crisis and its wide spread impacts have played a major role in worsening the situation.
In India, the problems of unemployment and poverty have always been major obstacles to economic development. Underemployment and unemployment have crippled the Indian economy from time to time. Even during the period of good harvest, the Indian farmers are not employed for the entire year. Excessive population is another major problem as far as Indian economy is concerned. Regional disparity is also crucial in this context. A part of the urban workforce in India is subjected to sub-employment. Mass migration from rural to urban regions is adding to the problems of unemployment and poverty in India.