4 Types Of Unemployment;Frictional,Structural And Cyclical

There are the following types of unemployment: frictional, structural, seasonal, cyclical, institutional.The problem of employment has always been one of the most important and fundamental in the functioning of society and the state economy. Unemployment is one of the most obvious and urgent problems of a socio-economic nature.

By Adopting This Classification Parameter, The Following Types of Unemployment Are Identified:

Frictional unemployment is associated with the time spent on finding a new job and lasts about 1–4 months. Frictional unemployment comes at a time when some workers voluntarily change jobs, finding, for example, a more interesting or well-paid job. Others are actively looking for work and trying to find a job after being fired from their previous place Still others enter the labor market for the first time or re-enter it, moving from the category of economically inactive population to the opposite category (for example, after graduating from college, university, etc.).

Structural unemployment – associated with technological changes in production, which change the structure of demand for labor (arises in the case when an employee who is dismissed from one industry cannot work in another). This type of unemployment occurs if the sectoral or territorial structure of the demand for labor changes. Over time, important changes occur in the structure of consumer demand and in production technology, which in turn changes the structure of total labor demand.

Since the existence of frictional and structural unemployment is inevitable, economists call their sum natural unemployment. The natural rate of unemployment is its level due to natural causes (staff turnover, migration, demographic reasons). Most often occurs if:

  • demand for workers in a given profession or in a given region is falling;
  • The released workers cannot quickly change their profession and qualifications or change their place of residence and remain unemployed for some time until they find their application in the existing labor market.

It is important that both types of unemployment (frictional and structural) constantly exist in the economy. Completely destroy them or reduce to zero is impossible. People tend to strive to improve their welfare, and firms will always look for more skilled workers, seeking to maximize profits.

Seasonal unemployment is due to seasonal fluctuations in the output of certain industries. In industries with seasonal demand, firms prefer to lay off workers rather than lower wages for the same reasons as in the case of cyclical fluctuations.

This type of unemployment could be avoided, provided that all job seekers refuse seasonal work. But this is impossible, because there are those who are satisfied with seasonal work (for example, teachers during the summer holidays, when during a long summer vacation you can get a season without loss at the main place of work), or those for whom this work is at least a source of income.

Cyclical unemployment occurs in a period of cyclical economic recession and lack of demand. It arises in connection with a decrease in real GDP and the release of part of the labor force. It arises in cases where a drop in aggregate demand for manufactured products causes a drop in aggregate demand for labor in the face of the inflexibility of real wages to a lower level.

Institutional unemployment arises due to the limited labor force and employers in the actual information about vacancies and the desire of employees. This type of unemployment occurs if the labor market is not functioning effectively. People may simply not be aware of existing vacancies or firms may not be aware of the employee’s desire to take the proposed position. Another institutional factor is the level of unemployment benefits. If the benefit level is high enough, then a situation arises, called an unemployment trap.Its essence lies in the fact that an individual who is able to get a low-paid job will prefer to receive benefits and not work at all. As a result, unemployment increases, and society suffers losses not only due to the fact that the national product is produced below the potential level, but also because of the need to pay excessive unemployment benefits.

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