There
are two approaches that can be used to classify unemployment. The first
approach follows the old-trodden path of classifying unemployment from the
viewpoint of the caused or sources. The more modern approach is derived from
analyzing the behavior of labor market participants and the implications of the
different kind of unemployment for macroeconomic policy. Since both approaches
are consistent with each other, we shall employ the two in out analysis.
are two approaches that can be used to classify unemployment. The first
approach follows the old-trodden path of classifying unemployment from the
viewpoint of the caused or sources. The more modern approach is derived from
analyzing the behavior of labor market participants and the implications of the
different kind of unemployment for macroeconomic policy. Since both approaches
are consistent with each other, we shall employ the two in out analysis.
Based
on the sources, we can classify unemployment into four types: Frictional,
Structural, Demand-Deficient, Cyclical or Keynesian and Classical.
on the sources, we can classify unemployment into four types: Frictional,
Structural, Demand-Deficient, Cyclical or Keynesian and Classical.
Some
authors include a fifth: seasonal unemployment. This is the unemployment, which
comes and go with the seasons of the year, i.e. it is occasioned by seasonal
variations. For example, construction workers are after unemployed during the
wet or winter season. Local farmers in most Less Developed Countries (LDCs) are
usually employed during the planting and harvesting season and idle or
underemployed in other periods. Again, the demand for rainy season products
such as umbrellas, robber shoes and slippers, rain coats etc is usually high
during the wet season and more workers are required for their
authors include a fifth: seasonal unemployment. This is the unemployment, which
comes and go with the seasons of the year, i.e. it is occasioned by seasonal
variations. For example, construction workers are after unemployed during the
wet or winter season. Local farmers in most Less Developed Countries (LDCs) are
usually employed during the planting and harvesting season and idle or
underemployed in other periods. Again, the demand for rainy season products
such as umbrellas, robber shoes and slippers, rain coats etc is usually high
during the wet season and more workers are required for their
Frictional unemployment
Frictional
unemployment is that type of unemployment that results from moving between
jobs. At any given time, in an economy, people are always moving from one job
to the other. Such movements usually involve some temporary displacement from
the former job. In general, getting information on better job opportunities,
going through the process of application through to taking on an appointment,
has its associated cost. And quite often, this may include a temporary
unemployment.
unemployment is that type of unemployment that results from moving between
jobs. At any given time, in an economy, people are always moving from one job
to the other. Such movements usually involve some temporary displacement from
the former job. In general, getting information on better job opportunities,
going through the process of application through to taking on an appointment,
has its associated cost. And quite often, this may include a temporary
unemployment.
Frictional
unemployment occurs as a result of the incompleteness of information to both
workers who are constantly on the “look-out” for better jobs and employers who
are looking for better workers. The amount of information available about job
opportunities that one worker possesses is incomplete. So also is the amount of
information available to one employer about labor opportunities. Thus,
frictional unemployment is due to normal workings of the labor market and is
used to measure the extent of short-run job/skill matching problems. Frictional
unemployment is thus a type of transitional
unemployment.
unemployment occurs as a result of the incompleteness of information to both
workers who are constantly on the “look-out” for better jobs and employers who
are looking for better workers. The amount of information available about job
opportunities that one worker possesses is incomplete. So also is the amount of
information available to one employer about labor opportunities. Thus,
frictional unemployment is due to normal workings of the labor market and is
used to measure the extent of short-run job/skill matching problems. Frictional
unemployment is thus a type of transitional
unemployment.
Structural unemployment
Structural
unemployment is that type of unemployment that is occasioned by structural
changes in the economy, which render some workers unsuitable because their skills
do not match the new needs of the labor market. Except the worker(s) acquire
the necessary skills, they may remain unemployed for a considerably long time.
Thus, while frictional employment represents short-run job/skill mismatch,
structural unemployment explains long-run adjustment process, which tends to
last for longer periods.
unemployment is that type of unemployment that is occasioned by structural
changes in the economy, which render some workers unsuitable because their skills
do not match the new needs of the labor market. Except the worker(s) acquire
the necessary skills, they may remain unemployed for a considerably long time.
Thus, while frictional employment represents short-run job/skill mismatch,
structural unemployment explains long-run adjustment process, which tends to
last for longer periods.
As
the economy grows, techniques of production are developed, new labor services
are required, and labor will have to adjust to the changing needs. In addition,
changes in the pattern of demand in the economy can lead to changes in the
demand for labor. For a sector or industry experiencing a fall in the demand
for its product, there will be a corresponding fall in the demand for labor.
This would mean that workers would have to move their services to other sectors
where demand is rising. Structural unemployment can increase either because the
pace of change accelerates or because the pace of adjustment to change is slow.
the economy grows, techniques of production are developed, new labor services
are required, and labor will have to adjust to the changing needs. In addition,
changes in the pattern of demand in the economy can lead to changes in the
demand for labor. For a sector or industry experiencing a fall in the demand
for its product, there will be a corresponding fall in the demand for labor.
This would mean that workers would have to move their services to other sectors
where demand is rising. Structural unemployment can increase either because the
pace of change accelerates or because the pace of adjustment to change is slow.
The
most widely affected in relation to structural unemployment are usually aged
workers whose skills have become obsolete and who might be unwilling/unable to
retrain or relocate.
most widely affected in relation to structural unemployment are usually aged
workers whose skills have become obsolete and who might be unwilling/unable to
retrain or relocate.
Cyclical unemployment
Also
called Demand-Deficit of Keynesian unemployment, this type of unemployment
occurs when aggregate demand falls and wages and prices have not yet adjusted
to restore full employment. Cyclical unemployment is directly related to the
business cycle. It is that part of unemployment associated with changes in
business conditions –n primary recessions and depressions. During cyclical
downturns (i.e. during recessions), fewer goods and services are purchased on
the aggregate, and employers reduce production and the number of workers.
Several workers in basic industries etc., are usually unemployed for some time
during depressions or recessions and can only return to their jobs when the
economy bounces back.
called Demand-Deficit of Keynesian unemployment, this type of unemployment
occurs when aggregate demand falls and wages and prices have not yet adjusted
to restore full employment. Cyclical unemployment is directly related to the
business cycle. It is that part of unemployment associated with changes in
business conditions –n primary recessions and depressions. During cyclical
downturns (i.e. during recessions), fewer goods and services are purchased on
the aggregate, and employers reduce production and the number of workers.
Several workers in basic industries etc., are usually unemployed for some time
during depressions or recessions and can only return to their jobs when the
economy bounces back.
Classical unemployment
This
describes the unemployment caused by the maintenance of an abnormally high
(above-equilibrium) wage rate in the labor market. The equilibrium wage rate is
that which clears the labor market, that is, equate the demand for labor with
the supply. This will vary from one labor market and economy to the other.
However, whenever in any labor market, the prevailing wages rate is fixed arbitrarily
above the equilibrium level, the demand for labor falls below the supply and
some unemployment is created.
describes the unemployment caused by the maintenance of an abnormally high
(above-equilibrium) wage rate in the labor market. The equilibrium wage rate is
that which clears the labor market, that is, equate the demand for labor with
the supply. This will vary from one labor market and economy to the other.
However, whenever in any labor market, the prevailing wages rate is fixed arbitrarily
above the equilibrium level, the demand for labor falls below the supply and
some unemployment is created.
Classical
unemployment can be caused by minimum wage legislation and/or the exercise of
trade union powers.
unemployment can be caused by minimum wage legislation and/or the exercise of
trade union powers.