Types of Unemployment
It 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.
Few causes of structural unemployment are geographical immobility (difficulty to move to a new work location), occupational immobility (difficulty to learn a new skill), and technological change (introduction of new technologies that need less labor force). Structural unemployment depends on the growth rate of an economy and structure of an industry.
Classical unemployment is also known as real wage unemployment or disequilibrium unemployment. This type of unemployment occurs when trade unions and labor organization bargain for higher wages, which leads to strikes and lockouts and result in the fall in the demand for labor.
Cyclic unemployment occurs when there is an economic 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 laborers become unemployed.
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 long-term unemployment. During this period, an unemployed individual can 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? These were introduced immediately after the Great Depression of 1930s. Their main aim is to provide temporary income to an unemployed person and his dependents to help them during unemployment. Unemployment insurance programs help cushion the impact of the downturn of an economy at the time of recession.