Unemployment – Types of Unemployment

Unemployment is an economic condition where people willing for job remain unemployed. Unemployment level differs from country to country as per their economic conditions. In developed countries unemployment level is low as compare to developing countries.  Unemployment level is dependent on different market forces. The probability to get hired in good economies is more as compare to struggling economies.

The ideal situation seeks by the country is full employment level, a condition where all individuals get a job matched to their skills. Current unemployment level in the world is 95% (Zimbabwe) to 1.5% (UK), normally acceptable average unemployment rate is up to 9%. Unemployment is classified in five major types.

Frictional Unemployment

This type of unemployment is temporary in nature and occurs when people leave their existing jobs to get some other better opportunity e.g., graduates or skilled individuals hunting for better opportunities. The unemployment period among switching jobs is short and called fractional unemployment. In developed economies there are insurance programs to cope with these temporary situations.

Structural Unemployment

[linkunit]The growth in economy also have some costs like structural unemployment, In a growing economies changes in technology and production method occurs rapidly and need workforce with up-to-date skills, which cause unemployment for the existing people working with old methods and technologies.  This structural change and mismatch of skilled workers in labor market brings this type of unemployment. Geographical immobility, occupational immobility and technological changes are the main causes. For example, Information technology’s revolution brought structural unemployment for the people who have no or less knowledge of computer.

Real Wage or Classical Unemployment

As appeared by the name this type of inflation occurred when there is a demand to increase in wages. Normally when labor unions and organizations negotiate for higher wages, the situation arises employer does not offer more jobs due to rising wage rates and the demand for labor falls and raise unemployment level.  This is also known as disequilibrium unemployment.

Cyclical or Demand Deficient Unemployment

On the downward slope of economy’s trade cycle unemployment increases due to decreases in total demand of goods and services which lead decrease in demand of labor consequently. In recession time first unskilled and surplus labors became unemployed and if the economic condition keeps going downward Cyclic unemployment increases.