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Different types of Unemployment

Updated on February 6, 2014

Growing unemployment is a major problem for any country. The rising tide of unemployment has social, economic, and political ramifications. The resentment of millions of youngsters without gainful employment and practically nothing to fall back creates an explosive and uncontrollable situation. lt is up to the government and the political leadership to take serious cognisance of this issue and apply lasting solutions to arrest the tide of unemployment.

Unemployment is the state of being unemployed or not having a job; it is a serious social evil. It is an economic condition marked by the fact that individuals remain unhired though are actively seeking jobs. International Labour Organization has defined Unemployment as a situation where people are without jobs and they have actively looked for work within the past four weeks.

Types of Unemployment are as follows;

  • Frictional Unemployment

  • Cyclical Unemployment

  • Structural unemployment

  • Disguised Unemployment

  • Technological Unemployment

  • Voluntary and Involuntary Unemployment

Frictional Unemployment

It is a temporary Unemployment caused by incessant changes in the economy. It takes time, for example for new workers to search, among different job possibilities; even experienced workers often spend a minimum period of unemployment time moving from one job to another. It is also called Search Unemployment, that is amount of unemployment that corresponds to job vacancies in the same local labor market and occupation. More recently, it has been suggested that Speculative and Precautionary Unemployment should be considered elements of frictional unemployment.

Speculative Unemployment: It arises as a result of a fall in the real wage which is regarded as temporary. This will lead some workers to reduce their present supply of hours in favoring of offering more in the future.

Precautionary Unemployment: It is also know as Wait Unemployment. It is suggested to arise when the nature of the job task or form of labour contract prevents an employee who takes a job taking advantage of another job at a higher rate of pay which comes along later. Under these circumstances employees may refuse the first job offer and wait for one at the expected wage.

Search Unemployment: It is often assumed that the search process is most efficient when the worker is unemployed. Here, the cost of search is the income forgone from employment less any unemployment benefits received.

Cyclical Unemployment

It is Short-run Demand deficient unemployment. The implication is that during certain phases of the business cycle there will be sufficient jobs for the whole of the labor force no matter how it is trained or deployed.

Demand-Deficient Unemployment: A situation in which Aggregate Demand is too low to provide work for all those who wish to work at the current real wage no matter how they are trained or deployed. The unemployment outnumber the existing job vacancies at the current levels of money wage rates.

Structural Unemployment

Unemployment resulting from the fact that the regional or occupational pattern of job vacancies does not match the pattern of worker availability. There may be jobs available, but unemployed workers may not have the required skill; or the jobs may be in different regions from where the unemployed workers live.

Seasonal Unemployment: Unemployment that results from the seasonal pattern of work in certain industries. The agricultural, construction and tourist industries have traditionally exhibited a marked seasonal pattern in employment an element of Structural Unemployment.

Disguised Unemployment

A situation in which more people are available for work than is shown in the unemployment statistics. Married women, some students or prematurely retired persons may register for work only if they believe opportunities are available to them. It is also referred as Concealed Unemployment and the discouraged worker effect. Disguised Unemployment will be revealed an unusually low participation rate.

Technological Unemployment

The new technology employed as the economy grows through time is capital intensive, with the result that less labor is required and unemployment grows.

Voluntary and Involuntary Unemployment

That unemployment which results from the process of job search and speculative and precautionary unemployment. That unemployment which would be eliminated by a rise in aggregate demand which resulted in higher prices and a lower real wage. While resisting money wage cuts because there is no mechanism which can secure these without disturbing the existing structure of wage differentials. Keynes suggested workers would accept a cut in the real wage brought about by higher prices.

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