Types of Unemployment

Structural:

Changes in labour skills demanded, leaving different groups unrequired e.g. 1980s manufacturing in the UK, Welsh miners, and Detroit in 1990

Cyclical:

People lose jobs in a recession (two consecutive quarters of negative growth) this has strong links with the business cycle. This can lead to structural unemployment as the market becomes more concentrated on different business sectors.

Frictional:

People are in between jobs looking for work, for example those recently fired or quit. This is linked with the bureaucracy and procedure of finding work, as it takes times for checks, assessments, and interviews. This is also created through labour laws, labour unions, and the time taken for wage negotiation.

Seasonal:

This is unemployment during a specific season. An example of this is a ski instructor during the summer or ice cream salesman during the winter. There are certain jobs which have an aspect of this such as agricultural workers as there Is a wait time between sowing and planting, and the time of harvest.

Geographical:

Those with the required skill to work, but the jobs are not located where they can work. For example hypothetically a teacher is trained in Scunthorpe but there are no teaching jobs there; they are all in London, and the teacher is unable to commute to London.

The most dominant types of unemployment are structural and frictional; currently there has been a rise in cyclical unemployment as a result of the financial crisis. When an economy struggles to grow or experiences negative growth there is usually a high rate of unemployment as there are parts of the economy that are underutilised.

Unemployment can be shown through a variety of graphical methods all with their own merits. The most common is a simply supply of labour and demand of labour graph. Unemployment can be simply displayed through an inward shift of aggregate demand, and also operation in a PPF that is not on the curve. There is also the Marginal Revenue Product of Labour which can be graphed and this is used to argue that minimum wage can be beneficial.

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