Types of Unemployment

Unemployment is an economic condition where an individual or individuals seeking jobs remain un-hired. The level of unemployment differs with economic conditions and other market forces. Basically there are five types of unemployment.

Frictional Unemployment: Frictional unemployment is a temporary condition. This unemployment occurs when an individual is out of his current job and looking for another job. The time period of shifting between two jobs is known as frictional unemployment. The probability of getting a job is high in a developed economy and this lowers the probability of frictional unemployment. There are employment insurance programs to tide over frictional unemployment

Structural Unemployment: Structural unemployment occurs due to the structural changes within an economy. This type of unemployment occurs when there is a mismatch of skilled workers in the labor market. Some of the causes of the structural unemployment are geographical immobility (difficulty in moving to a new work location), occupational immobility (difficulty in learning a new skill) and technological change (introduction of new techniques and technologies that need less labor force). Structural unemployment depends on the growth rate of an economy and also on the structure of an industry.

Classical Unemployment: Classical unemployment is also known as the real wage unemployment or disequilibrium unemployment. This type of unemployment occurs when trade unions and labor organization bargain for higher wages, which leads to fall in the demand for labor.

Cyclical Unemployment: Cyclic unemployment when there is a recession. When there is a downturn in an economy, the aggregate demand for goods and services decreases and demand for labor decreases. At the time of recession, unskilled and surplus labors become unemployed. Read about causes of economic recession.

Seasonal Unemployment: A type of unemployment that occurs due to the seasonal nature of the job is known as seasonal unemployment. The industries that are affected by seasonal unemployment are hospitality and tourism industries and also the fruit picking and catering industries.

Causes of Unemployment

Recession and the gap in the demand and supply are the causes of unemployment. An unemployment situation occurs as long as the demand-supply gap persists. Another cause of unemployment is financial crisis and economic depression.

If an unemployment situation continues for a long period of time, it is called as long-term unemployment. During this period, an unemployed individual could apply for unemployment compensation. The main objective of unemployment compensation is to provide partial and temporary wages to involuntarily unemployed workers who were recently laid off. Another aim of unemployment compensation is to stabilize the economy at the time of recession.

Are you aware of unemployment insurance programs? Unemployment insurance programs were introduced immediately after the Great Depression of 1930s. The main aim of unemployment insurance is to provide temporary income to an unemployed individual and his dependents to tide over the period of unemployment. Unemployment insurance programs help cushion the impact of the downturn of an economy at the time of recession.

To sum up, unemployment is a nightmare faced by the workforce around the globe at the times of recession or when there is a downturn in the economy.