Unemployment and types
Unemployment and types
Unemployment is defined as a situation where someone of working age is not able to get a job but would like to be in full time employment.
Note: If a Mother left work to bring up a child or if someone went into higher education, they are not working but would not be classed as unemployed as they are not actively seeking employment.
One grey area is voluntary unemployment. This occurs when the unemployed choose not to take a job a the going wage rate (e.g. wrong job, benefits too high e.t.c) They could be counted as unemployed because they are still seeking a job (they just don’t want to take one they are offered.
🌎TYPES OF UNEMPLOYMENT
✅DEMAND DEFICIENT UNEMPLOYMENT
Demand deficient unemployment occurs in a recession or period of very low growth. If there is insufficient Aggregate Demand, firms will cut back on output. If they cut back on output then they will employ less workers. Firms will either cut back on recruitment or lay off workers. The deeper the recession, the more demand deficient unemployment there will be. This is often the biggest cause of unemployment, especially in a downturn. This is also known as cyclical unemployment referring to how unemployment increases during an economic downturn.
✅STRUCTURAL UNEMPLOYMENT
This is unemployment due to inefficiencies in the labour market. It may occur due to a mismatch of skills or geographical location. For example structural unemployment could be due to:
👉Occupational immobility-
There may be skilled jobs available, but many workers may not have the relevant skills. Sometimes firms can struggle to recruit during periods of high unemployment. This is due to the occupational immobility.
👉Geographical immobility
Jobs may be available in London, but, unemployed workers may not be able to move there due to difficulties in getting housing e.t.c.
👉 Technological Change
If an economy goes through technological change some industries will decline. This is likely to lead to structural unemployment. For example, new technology (nuclear power) could make coal mines close down leaving many coal miners unemployed.
✅FRICTIONAL UNEMPLOYMENT
This occurs when workers are in between jobs e.g. school leavers take time to find work. There is always likely to be some frictional unemployment in an economy as people take time to find a job suited to their skills.
✅VOLUNTARY UNEMPLOYMENT.
This occurs when workers choose not to take a job at the going wage rate. For example, if benefits offer a similar take home page to wage tax, the unemployed may feel there is no incentive to take a job.
Seasonal
Occurs when people are out of work during the off-season. This may include landscapers, construction workers, and/or other outdoor jobs in cold winter climates. Often times, workers involved in seasonal unemployment hold a different job during the off-season.
✅DISGUISED / HIDDEN UNEMPLOYMENT
ften unemployment statistics don’t include certain types of workers. For example, those put on incapacity benefit may not be counted as unemployed, but, it may really be a type of structural unemployment
In economic terms, the natural rate of unemployment is the minimum rate of unemployment without an increase in the rate of inflation. This occurs when businesses are at the peak of the expansion phase and the economy is in full long-run conditions. The natural rate of unemployment includes frictional unemployment and structural unemployment only, which are added together to equal the natural rate. Because structural and frictional unemployment always exist, an economy can never have a 0% natural rate of unemployment. The natural rate of unemployment in countries varies. In America, the natural rate is 5%
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