Step 1: Understanding the Concept:
The Employees' Compensation Act, 1923, provides for compensation to employees for injuries suffered by accident arising out of and in the course of employment. The Act defines different types of disablement based on the nature and extent of the loss of earning capacity. The question asks to identify the specific type of disablement based on its definition.
Step 2: Detailed Explanation:
Let's look at the key definitions under Section 2 of the Act:
\begin{itemize}
\item Permanent total disablement (Section 2(1)(l)): This means such disablement of a permanent nature as incapacitates an employee for all work which he was capable of performing at the time of the accident. The loss of earning capacity is 100%.
\item Permanent partial disablement (Section 2(1)(g)): This means such disablement of a permanent nature which reduces his earning capacity in every employment which he was capable of undertaking at that time. Where the injury is specified in Schedule I, Part II, it is deemed to result in permanent partial disablement. The question's wording "reduces the capacity to work in any employment \textit{similar} to that the worker was performing" is a practical description of this category. It impairs but does not eliminate the ability to work.
\item Temporary disablement: This means a condition that results in the temporary reduction of earning capacity, whether total or partial. The employee is expected to recover.
\end{itemize}
The key phrase in the question is "reduces the capacity to work." It does not say "incapacitates for all work." This reduction in capacity in similar employment points towards a permanent but partial loss, fitting the definition of Permanent partial disablement.
Step 3: Final Answer:
The type of disablement described is Permanent partial disablement.