TYPES OF UNEMPLOYMENT
What is Unemployment? In economics, unemployment refers to the condition of unwanted job losses, or willing workers without jobs. The willingness of the unemployed worker to be employed is the key to the idea. A person who is :- Ø Physically Fit Ø Mentally sound Ø Well qualified Ø Willing to work at prevailing wage rate But does not get job, this situation is called unemployment
Unemployment can be broadly classified under two broad categories Ø VOLUNTARY UNEMPLOYMENT - Unemployment that results when resources which are willing and able to engage in production choose not to produce output. These are resources (especially labor) that decide to leave one job, often in search of another. Ø INVOLUNTARY UNEMPLOYMENT - The contrast to voluntary unemployment is involuntary unemployment, in which resources are forced out of work. Involuntary unemployment is also known as Forced Unemployment.
TYPES OF UNEMPLOYMENT 1. Seasonal Unemployment 2. Cyclical Unemployment 3. Technical Unemployment 4. Frictional Unemployment 5. Structural Unemployment 6. Disguised Unemployment
Seasonal Unemployment Seasonal unemployment refers to a situation where a number of persons are not able to find jobs during some months of the year. EXAMPLE-: Agriculture is a seasonal activity. There is an increased demand for labour at the time of sowing, harvesting, weeding and threshing. In between there is little or no demand for labor. Agricultural labour finds himself unemployed during this period. This is called seasonal unemployment.
Cyclical unemployment Cyclical unemployment, occurs when there is not enough aggregate demand in the economy to provide jobs for everyone who wants to work. Demand for goods and services fall, less production is needed and less workers too.
Technical Unemployment Unemployment caused by technological changes or new methods of production in an industry or business. Example: The evolution of the car assembly plant. In the beginning, everything on the line was done by humans in order to build a car. The assembly line itself was a great technological innovation. Today, robots are employed for much of the hand-work humans used to do.
Frictional Unemployment This is a type of voluntary unemployment that arises because of the time needed to match job seekers with job openings. Just as friction always takes place before the slider comes to its final position on the surface, people need time to find the best job, thus voluntarily rubbing back and forth between choices and staying unemployed Example: When you make up your mind and set off looking for a better job and abandoning the current one, you are in the frictional unemployment labor force.
Structural Unemployment This unemployment arises due to structural change in dynamic economy. Unemployment caused by massive mismatch of skills or geographic location is noted as structural unemployment. Example: Heavy Manufacture (mining) - Manufacture now involves machines so humans are no longer needed for the harder work. Structural unemployment poses more of a problem because workers must seek jobs elsewhere or must develop the skills demanded. The process is full of pain and frustration, and may lead to negative impacts on society.
Disguised Unemployment When more people are engaged in some activity than the number of person required for that, this is called disguised unemployment EXAMPLE: An agricultural field require 3 workers but people engaged in this activity is 6 then this unemployment for 3 workers is called disguised unemployment
Cost Of Unemployment Personal Cost - Ø Loss of paycheck - Loss of earnings to the unemployed Ø Loss of self esteem - Those who are unemployed will find it more difficult to get work in future(this is known as hysteresis effect) Ø Increase in social problems - Areas of high unemployment (especially youth unemployment) tends to have more crime and vandalism
Cost of Unemployment Economic Cost - Ø Loss in output Labour has productivity, high or low, depending on its skill and availability of capital per labour. Therefore, unemployment means loss of output expected from the employment of unemployed labour force. Ø Increased Govt borrowings. Tax revenue will fall because there are less people paying Income Tax and VAT. Also the Govt will have to spend more on unemployment benefits. Ø Lower GDP for the economy - The economy will be below full capacity. This is inefficient and will lead to lower output and incomes.