When the productive capacity of the economic system of a State is inadequate to create sufficient number of jobs, it is called—

When the productive capacity of an economic system is inadequate to create a sufficient number of jobs for the growing labor force, it is termed structural unemployment. This occurs due to fundamental shifts in the economy, such as technological changes, government policy shifts, or a mismatch between the skills workers possess and the requirements of available jobs [3]. Unlike cyclical unemployment, which is temporary and linked to business cycles, structural unemployment is a long-term phenomenon arising from the economy's inability to absorb labor due to its inherent structure or lack of capital investment [3]. Seasonal unemployment is restricted to specific periods of the year, particularly in agriculture [2], while disguised unemployment refers to a situation where more people are employed than necessary, resulting in zero marginal productivity [2]. Therefore, the lack of productive capacity to generate jobs aligns with the structural definition.

Sources

1. [3] Economics, Class IX . NCERT(Revised ed 2025) > Chapter 2: People as Resource > Unemployment > p. 25
2. [2] https://www.rba.gov.au/education/resources/explainers/unemployment-its-measurement-and-types.html
3. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 8: Inclusive growth and issues > Different types of Unemployment: > p. 272