Lecture on Types of Unemployment

Introduction

• Types of unemployment are based on the reasons causing unemployment.
• Key types discussed: Frictional, Structural, Cyclical, Seasonal.

Frictional Unemployment

• Definition: Unemployment when individuals are "between jobs".
• Cause: Time taken to match workers with jobs due to non-instantaneous labor markets.
• Characteristics:
  • Considered short-term.
  • Sometimes considered desirable as individuals move from low to high productivity jobs.
  • Affected individuals possess marketable skills.

Structural Unemployment

• Definition: Unemployment due to changes in the economy's structure.
• Causes:
  • Changes in consumer demand.
  • Technological advancements.
  • Geographical shifts in labor demand.
• Characteristics:
  • Typically long-term.
  • Individuals may lack marketable skills.
  • Seasonal unemployment is considered a subset, where jobs are available only during certain seasons (e.g., agriculture, swim instructors).

Cyclical Unemployment

• Definition: Unemployment related to the business cycle.
• Cause: Declines in total spending and production, typically during recessions.
• Characteristics:
  • Leads to loss of output and underutilization of labor.
  • Results in a GDP gap.

Full Employment

• Definition: Scenario with no cyclical unemployment.
• Characteristics:
  • Includes only frictional and structural unemployment.
  • Known as the natural rate of unemployment.

Classification of Unemployment in Statistics

• Employed:
  • E.g., painting houses while seeking an electrician position.
• Not in Labor Force:
  • Full-time students, homemakers, retirees.
• Unemployed:
  • Recent graduates looking for work (frictional unemployment).
  • Workers between jobs (frictional unemployment).
  • Workers laid off during a recession (cyclical unemployment).
  • Laid-off software store workers due to online competition (structural unemployment).
  • Migrant workers post-harvest (seasonal unemployment).
• Discouraged Workers:
  • Individuals who have stopped looking for work due to frustration.

Examples and Classifications

• Person painting houses: Employed.
• Full-time student: Not in labor force.
• Recent graduate: Unemployed (frictional).
• Stay-at-home parents: Not in labor force.
• Discouraged worker: Not in labor force.
• Laid-off workers during recession: Unemployed (cyclical).
• Software store workers laid off: Unemployed (structural).
• Migrant farm workers post-harvest: Unemployed (seasonal).