Types of Unemployment

man holding out of work sign

When you read or hear about jobless figures, do stop to think about the different types of unemployment? There are a number of different categories to describe people who are between employment opportunities.

Classifying Types of Unemployment

Here are different types of unemployment that may be reflected in the statistics being discussed in the news media:

Classical Unemployment

Classical unemployment occurs when there are more people looking for work than there are available positions. Some economists have suggested that the level of the minimum wage that workers can legally be paid means that employers cannot afford to hire more workers, which leads to unemployment.

Cyclical Unemployment

Unemployment defined as cyclical is tied to the business cycle. It refers to times when the number of unemployed people in a particular job category exceeds all the job openings that are available. This creates a scenario where even if all the available positions were filled, there would still be people looking for work.

Frictional Unemployment

Frictional unemployment refers to people who are actively looking for work for a reason other than a reduction in workforce or other type of job loss. They may include those who have recently moved to a new area, recent graduates trying to get hired for full-time work, or people making the transition from being full-time parents to the paid work force.

During times when there is more demand for workers than people available to do certain jobs, there will be less frictional unemployment. Qualified applicants may be in the enviable position of having to choose between multiple job offers, so frictional unemployment is more likely to occur during times when the number of available workers and job openings are about the same.

Seasonal unemployment can also be thought of as frictional unemployment. Some types of work are usually only performed during certain times of year. This would include working at a seasonal resort, doing landscaping work, and some construction jobs.

Hardcore Unemployment

There will always be a certain percentage of the population who are unemployed due to physical or mental disabilities. Those who can't hold down a job because they are living with a mental illness also fall into this category.

Hidden Unemployment

This form of unemployment may not be accounted for when statistics are being gathered, since official unemployment figures do not include people who have given up looking for work and those who are working part time but who would rather have full-time employment. People who have accepted an early retirement package rather than be laid off from their jobs would also be included in this designation.

Structural Unemployment

In a situation where job vacancies are available, but the pool of unemployed workers lacks the necessary skills to do the work, that situation is called structural unemployment. This situation also comes up in situations where available workers are in a different region than employers with openings to be filled.

Workers who would be interested in available job opportunities may not be able relocate to the areas where they could get work easily. If the housing market is not conducive to a quick sale or prices are down, qualified people may not be able to pick up and move to areas where their skills are in demand quickly or easily.

Full Employment

Is full employment a realistic goal? There will always be people who are between jobs for any number of reasons. They may have been laid off or terminated, and are currently looking for work. Other people are only employed during certain times of the year and are counted among the number of people who are unemployed the rest of the time. Perhaps a better way to consider unemployment rates is to decide what level of unemployment is "acceptable," for want of a better term.

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Types of Unemployment