TYPES OF UNEMPLOYMENT - APPSC GROUP 1 MAINS - PAPER 3

Some types of unemployment are:-

• STRUCTURAL UNEMPLOYMENT: Structural unemployment is caused by a mismatch between the sufficiently skilled workers looking for jobs and the vacancies available. Even though the number of vacancies may be equal to the number of the unemployed, the unemployed workers lack the skills needed for the jobs, or are in the wrong part of the country or world to take the jobs offered. Structural unemployment is a result of the dynamics of the labour market and the fact that these can never be as flexible as, e.g., financial markets.

• SEASONAL UNEMPLOYMENT: Seasonal unemployment results from the fluctuations in demands for labour in certain industries because of the seasonal nature of production. In such industries there is a seasonal pattern in the demand for labor. During the period when the industry is at its peak there is a high degree of seasonal employment, but during the off-peak period there is a high seasonal unemployment. Seasonal unemployment occurs when an occupation is not in demand at certain seasons.

• FRICTIONAL UNEMPLOYMENT: Frictional unemployment occurs when a worker moves from one job to another. While he searches for a job he is experiencing frictional unemployment. This specially applies for new entrants (such as graduating students) and re-entrants (such as former homemakers). Frictional unemployment is always present in an economy. Frictional unemployment exists because both jobs and workers are heterogeneous, and a mismatch can result between the characteristics of supply and demand. Such a mismatch can be related to skills, payment, work-time, location, attitude, taste, and a multitude of other factors.

• CYCLICAL UNEMPLOYMENT: Cyclical or Keynesian unemployment, also known as demand deficit unemployment, rises during economic downturns and falls when the economy improves. Keynesians argue that this type of unemployment occurs when there is inadequate effective Aggregate Demand. This is caused by a business cycle recession, and wages not falling to meet the equilibrium level. This type of unemployment is the most serious one. This arises when demand for most goods and services fall, i.e., in recession. When demand falls, less production is needed and consequently fewer workers are being demanded, in such a case mass unemployment can be expected.