In this video we are going to talk about types of unemployment based on the reason that is actually causing unemployment here. To understand this let's start looking at the reasons types of unemployment. First one comes frictional unemployment that means if somebody is between jobs are looking for a job and there is a potential employer there but it takes some time to find that job that's what we call frictional unemployment. Simple reason here labor markets don't operate instantaneously Matching workers to the jobs is going to take some time.
That's what causes this unemployment Benefits, it's only short run. Okay, so although it may take some time It's not going to last longer in some instances We actually consider this as desirable because workers may be moving from low product due to high productive jobs Unemployed has marketable skills when it is when it comes to fictional and him Second type of unemployment is structural unemployment. Structural unemployment comes because of the change in the structure of the economy. So simple reason change in consumers demand for the good.
That's one type of structural change. Second could be a change in technology or change in geographical location of the product being produced. That means geographical change in labor demand. So all these things can cause structural unemployment.
Thank you for watching. Downsides, this is more likely long run. Unemployed may not necessarily have marketable skills. Sometimes seasonal unemployment is also considered as structural unemployment. It is a type of unemployment, in this case, unemployment resulting from seasonal production or seasonal consumption of groups, such as maybe a swim instructor.
That's we consume that particular service only in the summer. So after the summer is over, that job is no longer available. So those kind of things, seasonal unemployment. Some goods may be consuming entire year or we are willing to consume entire year, but the production is only part of the year, such as agriculture labor, only harvesting season they may be having the labor. Third type of unemployment, we call it a cyclical unemployment.
Cyclical means coming from the business cycles, mostly seen during the recession phase of the business cycle. Reason, decline in total spending, total production drops that causes unemployment to increase. Downsides, low last output and underutilization of labor forces that leads to GDP gap essentially.
Next thing we want to look at is what is considered as full employment. Full employment means, doesn't mean that it have unemployment rate to be zero. Only thing it means that there is no cyclical unemployment. That means unemployment coming from the sources other than the business cycle is known as full employment. So this unemployment, when you have full employment, we also call it as natural rate of unemployment or full employment unemployment.
Unemployment rate including only structural and frictional unemployment. That means if economy is doing really, really well, the unemployment rate that we have in the economy is simply natural rate of unemployment. Now we want to see the classification based on the types of unemployment and unemployment statistics. We're asking which of the following people would be unemployed according to the official statistics. So let's start looking at each of them and let's try to classify them.
First one, a person who is painting houses while seeking a permanent position as an electrician. In this case, this person is considered as, sorry, employed because he's painting the houses That means he's employed, although he may be looking for work. Second one, a full-time student.
Full-time student is not classified as unemployed. He comes as not in labor force. There are a few groups that included not in labor force.
Okay, so one is full-time student. Second group that comes is homemakers. That means stay-at-home moms or stay-at-home parents. Okay, so homemakers is also not in labor force.
and also retirees. Somebody who retired from work, not participating, they're also considered as not in labor force. So this is the third group, full-time students is also considered not in labor force.
Next one, a recent graduate who is looking for work. That means he's unemployed. When he's unemployed, we have to find what type of unemployment.
That's what comes here, frictional unemployment. So why is it frictional? He's a recent graduate.
We expect him to find the job based on his graduation or degree. So that's why we consider he has frictional unemployment. Next group, a person who decide to stay home to take care of his children full time. Okay, so I was just telling you, these are the people comes as part of not in labor force. Okay, so another group here, not in labor force.
We don't count them when you're calculating unemployment statistics. A worker who quit his job because he thinks the pay is insufficient. That means he's also between jobs.
This is also considered as frictionally unemployed. Okay, so. That means this person is going to find a job, at least if a decision is correct, currently is unemployed and looking for the job.
A person who is looking for work eight months, but six months ago he quit job because he's frustrated. So he's also comes as part of not in labor force. And he's also known as specific term. We call them as discouraged workers.
Discouraged worker means who is willing to work. But since he can't find the work easily, so he has given up looking for work. Those are the people comes as discouraged.
Next group, workers are laid off when the GM automobile factory closed due to recession. As soon as you see the term recession, that means that has to be dealing with cyclical unemployment. So these people are considered as, I'm sorry, sorry about that. This is cyclical unemployment. So these people are considered as unemployed because of the recession.
Workers selling software in store are laid off and the store goes bankrupt due to competition from online software dealers. This is considered as structural unemployment because consumers demand for goods is changing. So the way we purchase goods is also changing. That's what is creating unemployment in this case. So that means this is structurally unemployed.
Migrant farm workers jobs end when the harvesting is finished. This is what comes as seasonal unemployment. OK, so because once the season is over, you no longer have that particular job.