Introduction
Unemployment occurs when individuals are deprived of jobs and seeking it. The rate of unemployment is measure of prevalence of unemployed people and is calculated through a percentage in which total unemployed individuals are divided by all employed individuals. During the times of recession, the economy generally experiences a high rate of unemployment. For details which have not anything to do using statistics or economics, nevertheless seem to be dogmatic, it has remained shared practice to categorize workers on sponsored by government’s provisional service and special work structures as jobless. According to standard definitions these workers may be considered as employed and no evidence is observed against those on various such schemes to work with less efficiency than others. The comparison of unemployed with the people on various such work schemes significantly devalues the position of such work schemes.
Types of Unemployment
Economists differentiate among several intersecting types of unemployment, together with Keynesian or cyclical unemployment, classical unemployment, structural unemployment and frictional unemployment. Various other types of joblessness that are seldom mentioned are hidden unemployment, hardcore unemployment, and seasonal unemployment. A current alternate sorting is into contractional unemployment, developmental, and obstructional. Some major types of unemployment are discussed in this section as following:-
- Classical Unemployment
Real-wage or classical unemployment follows when real or actual wages for jobs are set higher than level of market clearance which causes increase of job seekers as compared to the available job vacancies.
Some economists believe that unemployment upsurges more if government interferes into the country’s economy with the aim to improving the economic conditions of jobless people. The best example to support this idea is when the government enforces a minimum wage level higher than the level from the market equilibrium due to which many workers go out of work as they are willing to offer their services at low wages due to their low skills but the employers are unable to hire them lower than minimum wage level. So in this case the employer seeks for better skill workers as they have to pay higher wages which brings more unemployment of the low skill workers. Another example is such laws which restrict employers from laying off people. In this case the employers get more inclined towards slowing the hiring process to avoid laying off people afterwards. For instance, During October, 2012 a massive layoff across most of the US states, affected more than 130 thousand worker . Nevertheless, this argument has been criticized for disregarding several external factors while excessively simplifying the connection between unemployment and wage rates which may be stated that other factors of economy may also have impacts on unemployment .
- Cyclical Unemployment
Keynesian or Cyclical unemployment is also identified as the deficient-demand type unemployment which occurs at insufficient aggregate demand of providing jobs for everyone seeking job within the country. Demand for services and goods falls, less products are needed and therefore less workers are required, salaries are adhesive hence do not meet market equilibrium level as well as unemployment results. The name of this type of unemployment is considered to be driven from the common shifts in business cycle even though unemployment can be tenacious as arisen in the 1930s Great Depression. With this type of unemployment, number of jobless workers go beyond the job vacancies, consequently, though full employment is attained while all the open jobs are filled, few workers will still remain jobless .
- Structural Unemployment
This type of unemployment occurs in case of if there are no jobs in labor market is available for those who need and want one due to the difference between skills of unemployed people and available jobs. This type of unemployment is difficult to be differentiated from the frictional unemployment which is that structural unemployment lasts longer. In frictional unemployment, a simple sort of demand side initiative will not be able to do the job in order to reduce the unemployment .
Seasonal unemployment is a subcategory of structural unemployment due to the reason that it is linked with specific types of jobs. The official unemployment initiatives may reduce this type of unemployment through the use of seasonal adjustments in statistics which results in permanent, substantial form of structural unemployment.
- Frictional Unemployment
This type of unemployment is the unemployment faced by a person when he/she is in the time period of between two jobs in which the worker has left one job while he/she is searching for next job. This type of unemployment is basically the transitioning period between two jobs. This type of unemployment is also called search unemployment due to the reason that the person is searching for next job while he/she has left previous job to get a new one. This type of unemployment can be based on voluntary initiative of the individual in most of the cases. This type of unemployment always exists in every economy and usually the government is not able to eliminate it. So the experts of economy usually subtract the value of frictional unemployment from total unemployment in order to find out the rate of involuntarily unemployed people .
The frictional unemployment is present in an economy due to the heterogeneous nature of the workers and the jobs hence the mismatch in between both results in this type of unemployment. The various forms of mismatch may include skills, work time, location, payment, taste, attitude etc. Generally both the parties i.e. employers and workers allow some level of differences in such forms of mismatch and usually tend to tolerate little mismatches but in case if a better opportunity becomes available to any of these parties then they will exercise their option to go for that. This type of competition and availing of opportunities is fundamentally beneficial for the overall economy of the country as it ensures better use of resources and skills. The biggest drawback of this unemployment to the economy is that if the differences are larger and persistent then the overall economy will suffer huge difference of demand and supply of employment. Consequently, every government tries to find out various methods to reduce any unnecessary frictional type of unemployment. These methods include education, training, assistance and advices .
The frictions present in labor market may sometimes be illustrated graphically as well through the use of Beveridge curve and convex curve through downward sloping which depicts a correlation of unemployment rate to vacancy rate. The various changes in supply and demand of labor are the reason for the variations along the curve. An increase and decrease of frictions in labor market will shift this curve outwards and inwards respectively.
- Hidden Unemployment
This type of unemployment is also known as covered unemployment which is basically the unemployment of those potential workers who are not reflected on the official statistics due to the different ways of measuring the unemployment. In most of the countries the unemployment rate is considered as the total number of people who are looking for jobs actively however are unable to get one according to their skills. The people who have stopped looking for jobs are usually not counted in the employment rate even though the fact that they are basically unemployed. The uncounted people in this case are also those who take their retirement prior to the standard period in order to avoid getting laid off. The people who are underemployed are also not counted in the official statistics so they may also be considered in this type of unemployment. The people who have entered working age however are still in their education phase are also not counted in the official statistics so they also come under hidden unemployment. The overall result of hidden unemployment can be stated that the official statistics of unemployment are usually underestimated .
- Long Term Unemployment
This type of unemployment as evident from its name is considered for those people who remain unemployed for more than one year. This type of unemployment can be considered as an important indicator for showing the social exclusion. This type of unemployment usually occurs in those workers who take early retirement in order to avoid getting laid off or for any other reason whatsoever.
Conclusion
There are various ways of measuring unemployment by the official experts in an economy but these ways do not ensure exact figures. The various types of unemployment can be overlapped to each other in many ways. The reduction of unemployment is possible by the government in some of the types of unemployment and is difficult in some others. The understanding of types of unemployment brings better understanding of the ways to reduce unemployment in an economy by critically analyzing the causes of the unemployment.
References
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