Types of Unemployment

Structural Unemployment

• The main cause of structural unemployment is a mismatch between the skills and locations of workers and the requirements of available jobs.
• Workers become unemployed due to structural factors when they lack the necessary skills or education to adapt to changes in the labor market or industry.
• Structural unemployment typically lasts longer than other types of unemployment, as it requires significant changes in the skills and training of workers.

Frictional Unemployment

• The main characteristic of frictional unemployment is that it is a temporary and voluntary type of unemployment, occurring when workers are transitioning between jobs.
• Frictional unemployment is likely to occur when workers are entering the labor market for the first time, switching careers, or moving to a new location.

Cyclical Unemployment

• Cyclical unemployment occurs with changes in economic activity over the business cycle, typically increasing during economic downturns and decreasing during economic upswings.
• A lack of jobs during an economic downturn is a key factor leading to cyclical unemployment.
• The nature of cyclical unemployment is typically described as fluctuating with the overall state of the economy.
• During an economic downturn, businesses might take action due to weaker demand, such as reducing production and laying off workers.
• Cyclical unemployment can contribute to lower inflation, as reduced consumer spending and lower production lead to lower prices.
• Fiscal policy can help reduce cyclical unemployment by increasing government spending and stimulating economic growth.