What are the 3 Types of Unemployment?

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Unemployment is a serious concern in today’s developing economy. And the problem of unemployment is faced by the person when he is finding work but is not able to get the work. Here, we will discuss these different types of unemployment existing in society.

So, here we will know the unemployment definition and types.

What is unemployment?

Unemployment is a situation when a person wants to work, or is willing to work, and is finding work but is not able to find the work or does not get a job. Then the person is known to be unemployed.

How do you calculate unemployment?

Unemployment is calculated by dividing the number of unemployed individuals or persons with a total number of employed individuals or persons in the economy. 

  • Unemployment = Number of unemployed workers / total number of employed workers * 100
  • It is expressed in percentage terms. 

A person can become unemployed in various ways as:

  • Voluntary leaving the job
  • The skills of a person have become outdated or due to technology the person is no more needed.
  • A person is laid back from the job.
  • A person has left the job due to various personal reasons or job environment, etc.

All these factors in all are responsible for unemployment and its types. 

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What are the different types of unemployment?

There exist various types of unemployment. Although the 3 kinds of unemployment are as follows:

  1. Structural Unemployment
  2. Cyclical Unemployment
  3. Frictional Unemployment

So, let us understand the main types of unemployment in brief.

  1. Structural Unemployment: The structural unemployment takes place when there is a shift in the economy and individual does not find a job according to his/her caliber or capabilities.

For Example Replacement of humans with machinery, where humans are now learning to operate machinery rather than doing the work by themselves.

Structural unemployment definition: The structural unemployment definition can be stated as, “When an individual is doing a job much lower than his capabilities and skills and is not able to find an appropriate job.” Then it may be labeled as structural unemployment. Although, it is different from Frictional unemployment as frictional takes place for a longer time span or period.

Causes of unemployment structural:

Some of the causes of structural unemployment can be stated as:

  • Job outsourcing
  • Technological advancement
  • Cheap availability of labor or workers

Points to be noted on structural unemployment:

  • Structural unemployment mainly focuses on the structural problems that are existing within an economy.
  • It also exists when there is a mismatch between the employer’s hiring and a person’s skills for the job.

Cyclical Unemployment: Cyclical Unemployment is a result of the downfall and the rising trend of the economy, due to which there are not enough jobs available in the economy to provide to the workers.

As the case may be, if the economy is rising then the jobs are available and the company will be hiring and providing more employment opportunities with increased production, and when the economy is declining there will be no job opportunities and sales.

cyclical unemployment definition: The cyclical unemployment definition can be stated as, “An unemployment where there is not enough aggregate demand in order to provide for the jobs and works to workers, although the production is decreasing, where less workforce is needed.”

Causes of Cyclical Unemployment:

Some of the causes of Cyclical Unemployment are as:

  • Imbalance within the economy
  • Jobless persons ae higher than the jobs available
  • There is less demand in the market.

Frictional Unemployment: Frictional Unemployment is a result of job switching, i.e when a person is searching for a job and leaves his current job. Thus, the time span between the two for which period he was not employed or was unemployed is termed out as frictional unemployment.

frictional unemployment definition: The frictional unemployment definition can be stated as, “A type of unemployment in which a worker has lost his current job and is in search of another job.” Even though there will never be a phase of zero frictional unemployment existing in the economy. As in the economy there will constantly be a job hunt by an individual or job seeker where folks will be unwaged for a certain time span.

Causes of frictional unemployment:

Frictional unemployment basically can deal with any one of the following situations as:

  • A person moving to another place to find a suitable job.
  • A person leaving their job to find a better employment option.

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Different types of unemployment:

There also exist some other categories of unemployment other than the three types of unemployment stated above, which are as follows:

  • Natural Unemployment
  • Long-Term Unemployment
  • Real Unemployment
  • Seasonal Unemployment
  • Classical Unemployment
  • Underemployment
  • Regional unemployment
  • Voluntary unemployment

Now, let us discuss these 8 types of unemployment in brief.

3 types of unemployment

1. Natural Unemployment:

Natural unemployment consists of the 3 different types of unemployment prevailing in society and telling us that there will always be one kind of unemployment prevailing in the economy. As, whether the worker has lost a job, or is currently searching for a job, or not able to find a job according to his caliber and skills, or there is less job in the economy. Thus, natural unemployment consists of 3 types of unemployment which are as follows:

Structural Unemployment

  • Cyclical Unemployment
  • Frictional Unemployment

2. Long-Term Unemployment:

Unemployment that exists for a longer time span or period of more than one year is termed out as long term unemployment.

For example, a person lost his job on 20th March 2020, and as on 2 April 2021 he is still unemployed and searching for a job, then it is the case of long term unemployment.

3. Real Unemployment:

Real unemployment is basically a term used to describe or denote the “official” unemployment rate. It is most probably known as the “U-6” rate, a name given by the Bureau of Labor Statistics. And in its definition of unemployment, it includes, 2 types of the workforce or workers are involving as follows:

  • Marginally attached workers, and
  • Part-time workers

Real Unemployment Categories:

  • Marginally attached workers: These are the workers who have found work in the past year but not in the past 4 weeks or a month, and not they have become discouraged workers.
  • Part-time workers: These are the workers or workforce people who want to work need a full-time work are finding the one but are not able to find a full-time job, and need to work part-time to earn.

4. Seasonal Unemployment:

The changes in season are the reason for unemployment here as the seasonal business grows so does the demand for worker grows, after which there is no need of manpower and workforce in the current seasonal business industry. Thus, the definition of seasonal unemployment states that unemployment is caused due to changes in seasons.

For example, Ice cream vendors demand in the summer season is high, demand for Air conditioners in the summer season, room heaters in winter, etc all gives rise to seasonal unemployment.

5. Classical Unemployment:

Classical Unemployment occurs as a result of high wages and thus is also known as “real wage unemployment” or “induced unemployment.” Thus happens when the set wages of workers are too high that employers do not hire all the available workforce needed.

This high wage occurs due to the following reasons as:

  • The government has set a minimum payout a wage for each worker that is high for the employer.
  • Unions or worker’s groups demand high wages.
  • In long term contracts, the wages are fixed at a high rate.

Thus, due to these reasons employers hire fewer workers creating a situation of classical unemployment.

6. Underemployment:

Underemployment is a situation where the workers are willing to work, have skills but are not employed according to their skills, and do not find a suitable job. Underemployment is basically caused by cyclic unemployment.

7. Regional unemployment:

Unemployment that affects a particular geographical area is termed out as regional unemployment.

8. Voluntary unemployment:

A type of unemployment where the person finds a job but is not willing to work by himself.

Among the types of unemployment in economics stated above, the most common 4 different types of unemployment are:

  • Seasonal Unemployment
  • Classical Unemployment
  • Voluntary unemployment
  • Long-Term Unemployment

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Frictional vs structural unemployment: 

There exists some difference between the frictional unemployment as well as in structural unemployment although they both appear to be the same causing unemployment of workers. 

a) Structural Unemployment: The structural unemployment takes place when there is a shift in the economy and individual does not find a job according to his/her caliber or capabilities. Structural unemployment is due to changes in the economy or shit in the economy. It lasts for years. 

For Example Replacement of humans with machinery, where humans are now learning to operate machinery rather than doing the work by themselves.

b) Frictional Unemployment: Frictional Unemployment is a result of job switching, i.e when a person is searching for a job and leaves his current job. Thus, the time span between the two for which period he was not employed or was unemployed is termed out as frictional unemployment. Frictional unemployment is caused because workers transit from one place to another in search of a job. It is for a short period or for short time and thus temporarily unless the worker finds a job. 

Causes of unemployment:

Some of the main causes of unemployment are as follows:

  • Aggregate demand
  • Global competition
  • Education
  • Automation, and 
  • Demographics. 

As technological up-gradation will lead to no demand of workers at the workplace, markets need to compete in the global market otherwise the product will become outdated, more educated youth in the society will lead to the availability of cheaper workforce leading to more of unemployed youth in society. Globalization leads to change in the way countries trade between each other which leads to a change of the workforce, which is the most common type of structural unemployment.

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Conclusion:

Unemployment can be caused by any of the reasons such as globalization, demand factors, etc. in society. Although the types of unemployment existing in the economy can also be the reason contributing to unemployment. As we have discussed the 4 types of unemployment economics as well as the 3 main types of unemployment that make natural unemployment.

Frequently Asked Questions 

What are the three different types of unemployment and their causes?

the three different types of unemployment and their causes are as:

1. Frictional unemployment.

Causes of frictional unemployment:

Frictional unemployment basically can deal with any one of the following situations as:

  • A person moving to another place to find a suitable job.
  • A person leaving their job to find a better employment option.

2. Structural unemployment.

Causes of unemployment structural:

  • Some of the causes of structural unemployment can be stated as:
  • Job outsourcing
  • Technological advancement
  • Cheap availability of labor or workers

3. Cyclical unemployment.

Causes of Cyclical Unemployment:

  • Some of the causes of Cyclical Unemployment are as:
  • Imbalance within the economy
  • Jobless persons ae higher than the jobs available
  • There is less demand in the market.

What are the 4 types of unemployment?

The 4 types of unemployment macroeconomics are as:

  • Frictional unemployment.
  • Structural unemployment.
  • Cyclical unemployment.
  • Seasonal unemployment.

What are the three different types of unemployment?

The three different types of unemployment are as follows:

  • Frictional unemployment.
  • Structural unemployment.
  • Cyclical unemployment.

What are the kinds of unemployment?

The kinds of unemployment are as:

  • Natural Unemployment
  • Long-Term Unemployment
  • Real Unemployment
  • Seasonal Unemployment
  • Classical Unemployment
  • Underemployment
  • Regional unemployment
  • Voluntary unemployment

Which kind of unemployment would be easiest to tolerate?

The type of unemployment that would be easiest to tolerate is Frictional unemployment as workers opt for a job for a very short period of time and become unemployed afterward.

What are the three negative impacts of unemployment?

The three negative impacts of unemployment are as:

  • Depression
  • low self-esteem and
  • Anxiety

Define seasonal unemployment?

The seasonal unemployment definition says that unemployment is caused due to changes in seasons. As there is a change in the season there is unemployment here as the seasonal business grows so does the demand for worker grows, after which there is no need of manpower and workforce in the current seasonal business industry.

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