Types of Unemployment (Major Ones)

Digging deeper, unemployment—both voluntary and involuntary—can be broken

down into four types.
Frictional unemployment
Frictional unemployment occurs as a result of people voluntarily changing
jobs within an economy. After a person leaves a company, it naturally takes time
to find another job. Similarly, graduates just entering the workforce add to
frictional unemployment. Usually, this type of unemployment is short-lived. It is
also the least problematic from an economic standpoint. Frictional
unemployment is a natural result of the fact that market processes take time and
information can be costly. Searching for a new job, recruiting new workers, and
matching the right workers to the right jobs all take time and effort, resulting in
frictional unemployment.
Cyclical unemployment
Cyclical unemployment is the variation in the number of unemployed workers
over the course of economic upturns and downturns, such as those related
to changes in oil prices. Unemployment rises during recessionary periods and
declines during periods of economic growth. Preventing and alleviating cyclical
unemployment during recessions is one of the key reasons for the study of
economics and the purpose of the various policy tools that governments employ
on the downside of business cycles to stimulate the economy.
Structural unemployment
Structural unemployment comes about through technological change in the
structure of the economy in which labor markets operate. Technological
changes—such as the replacement of horse-drawn transport by automobiles or
the automation of manufacturing—lead to unemployment among workers
displaced from jobs that are no longer needed. Retraining these workers can be
difficult, costly, and time consuming, and displaced workers often end up either
unemployed for extended periods or leaving the labor force entirely.
Institutional unemployment
Institutional unemployment is unemployment that results from long-term or
permanent institutional factors and incentives in the economy. Government
policies, such as high minimum wage floors, generous social benefits programs,
and restrictive occupational licensing laws; labor market phenomena, such as
efficiency wages and discriminatory hiring; and labor market institutions, such as
high rates of unionization, can all contribute to institutional unemployment.

Other Types of Unemployment

Underemployment
Occurs when people are employed, but would like and are available to work more
hours. There are two categories of underemployed people defined;
• First, part-time workers who would prefer to work additional hours.
• Second, people who usually work full time, but are currently working part-
time hours. Underemployment rates are generally higher among groups
that have a larger proportion of people working part time, such as females,
younger workers and older workers.
Hidden unemployment
Occurs when people are not counted as unemployed in the formal labour market
statistics, but would probably work if they had the chance. For example, someone
might have looked for work for a long time, given up hope and stopped looking,
but still wish to work. (These people are sometimes referred to as ‘discouraged
workers.)
Seasonal unemployment
Occurs at different points over the year because of seasonal patterns that affect
jobs. An example can be holiday-related jobs.
How is Unemployment Defined?
How to Measure Unemployment
Unemployment is measured in order to determine the unemployment rate. The
rate is a percentage that is calculated by dividing the number of unemployed
individuals by the number of individuals currently employed in the labor force.

In order to find the rate of unemployment, four methods are used:

• Labor Force Surveys: provide the most comprehensive results. Calculates
unemployment by different categories such as race and gender. This
method is the most internationally comparable.
• Social Insurance Statistics: these statistics are calculated based on the
number of individuals receiving unemployment benefits. The method is
criticized because unemployment benefits can expire before an individual
finds employment which makes the calculations inaccurate.
• Employment Office Statistics: only include a monthly total of unemployed
individuals who enter unemployment offices. This method is the least
effective for measuring unemployment.
• Official Estimates: combines information from the three other methods.
The method is not the preferred method to use when calculating the rate
of unemployment.
Lengths of Unemployment
Short-term unemployment is considered any unemployment period that lasts less
than 27 weeks. The unemployment period is temporary and often includes the
time needed to switch from one job to another. Also, if an individual is searching
for employment the search period is relatively short.
Long-term unemployment is classified as unemployment that lasts for 27 weeks
or longer. Being unemployed for a long period of time can have substantial
impacts on individuals. Jobs skills, certifications, and qualifications lessen over
time. When the job market finally increases many individuals will no longer match
the requirements for the new positions. Long-term unemployment can also result
in older workers taking early retirement.
Social and Individual Impacts
Unemployment can have lasting impacts of individual people as well as the
economy as a whole.
• Social:
⎯ Within the economy, long-term unemployment increases the
difference present in the economy and hinders long-run economic
growth.
⎯ Unemployment wastes resources and generates redistributive
pressures and distortions within the economy.
⎯ When unemployment is high, the economy is not using all of the
available resources, specifically labor.
⎯ Unemployment can also reduce the efficiency of the economy
because unemployed workers are willing to accept employment that
is below their skill level.
• Individual:
⎯ For individual people, unemployment increases poverty.
⎯ Creates poor labor mobility.
⎯ Impacts self-esteem.
⎯ Individuals are unable to meet their financial obligations.
⎯ Social unrest and conflict get worse during times of mass
unemployment.

Solutions to Unemployment
• Change in industrial technique:
Production technique should suit the needs and means of the country. It is
essential that labour intensive technology should be encouraged in place of
capital intensive technology.

• Policy regarding seasonal unemployment:

Seasonal unemployment is found in agriculture sector and agro based
industries.
To remove it:
⎯ Agriculture should have multiple cropping,
 ⎯ Plantations, horticulture, dairying and animal husbandry should be
encouraged,
• Change in education system:
Educational pattern should be completely changed. Students who have
liking for higher studies should be admitted in colleges and universities.
Emphasis should be given on vocational education. Qualified engineers
should start their own small units.
• Expansion of Employment exchanges:
More employment exchanges should be opened. Information regarding
employment opportunities should be given to people.
• More assistance to self employed people:
Most people in Zimbabwe are self employed. They are engaged in
agriculture, trade, mining and small scale industries etc. These persons
should be helped financially, providing raw materials and technical training.
• Increase in Production:
To increase employment, it is essential to increase production in agriculture
and industrial sectors. Development of small and cottage industries should
be encouraged.
• More importance to employment programmes:
In five year plans more importance should be given to employment. The
programmes like irrigation, roads, flood control, power, agriculture, rural
electrification can provide better employment to people.
• Decentralisation of industrial activity:
Decentralisation of Industrial activity is necessary to reduce
unemployment. If industrial activities are centralised at one place, there
will be less employment opportunities in the under developed areas. So
Govt. should adopt such policies which encourage decentralisation of
industrial activity.
• Population control:
The growth of population should be checked in order to solve
unemployment, problem. Family planning programme should be
implemented widely and effectively.