Types of Unemployment

12 Key excerpts on "Types of Unemployment"

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  eBook - ePub

  Labour Economics

  Unlocking the Secrets of Labour Economics, Navigating Work, Wages, and Economic Impact

  • Fouad Sabry(Author)
  • 2023(Publication Date)
  • One Billion Knowledgeable

    (Publisher)

  The condition of being unemployed and actively seeking employment is known as unemployment. Economists differentiate between overlapping types and theories of unemployment, such as cyclical or Keynesian unemployment, frictional unemployment, structural unemployment, and the classical definition of unemployment. Occasionally mentioned additional Types of Unemployment include seasonal unemployment, persistent unemployment, and hidden unemployment.

  Although there have been numerous definitions of "voluntary" and "involuntary" unemployment in the economics literature, a simple distinction is typically made between the two. Involuntary unemployment is a result of the socioeconomic environment (including market structure, government intervention, and aggregate demand) in which individuals operate. Voluntary unemployment is a result of the individual's decisions. In this context, a substantial proportion or majority of frictional unemployment is voluntary, as it reflects individual search behavior. Voluntary unemployment includes workers who reject low-paying jobs, whereas involuntary unemployment includes workers laid off as a result of a recession, industrial decline, company bankruptcy, or organizational restructuring.

  In contrast, cyclical unemployment, structural unemployment, and classical unemployment are predominantly involuntary. However, structural unemployment may be the result of decisions made by unemployed individuals in the past, and classical (natural) unemployment may be the result of legislative and economic decisions made by labor unions or political parties.

  Even when wages are allowed to adjust, the clearest cases of involuntary unemployment are those in which there are fewer job openings than unemployed workers, so even if all job openings were filled, some unemployed workers would remain. This is the case with cyclical unemployment, in which macroeconomic forces cause microeconomic unemployment, which can then boomerang back and exacerbate these macroeconomic forces.

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  The Assimilation of Immigrants in the U.S. Labor Market

  Employment and Labor Force Turnover

  • Michael E. Hurst(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  An alternative view, while accepting that most spells of unemployment are of short duration, holds that most unemployment can be accounted for by relatively few persons with long durations, who are unemployed because of a lack of available jobs. Two complications suggest that standard calculations of duration can lead to underestimates. First, almost half of transitions out of unemployment are by persons leaving the labor force, ru (Summers, 1990a ). About half of these express that they "want a regular job now." "Indomitable seekers", unemployed persons who do not drop out of the labor force, experienced average durations in 1975 almost twice as long as the average duration for all completed spells. Second, a longer duration of unemployment leads to a greater probability of unemployment during any given month. Thus, at any point in time the population of the unemployed will consist of a significant share who are long-term unemployed. As an example, while half of completed spells of unemployment in 1974 for adult males ended within one month, half of all unemployment for adult males in 1974 was accounted for by men who eventually would be unemployed for 4 months or more. Between 1948 and 1978, the average duration of unemployment for "currently unemployed" persons was between 10 and 30 weeks, about three times the duration for the average spell (Akerlof and Main, 1981). Again, the flows into and out of unemployment and the labor force can tell us more about the true unemployment picture than unemployment rates or average durations.

  3.3 Types of Unemployment

  Before describing the theoretical models of labor turnover, it is necessary to provide a few more definitions. We define here four Types of Unemployment. Frictional unemployment can occur when the economy is technically at full employment levels, where labor demand equals labor supply. It arises from the dynamic nature of the labor market in which there are flows into and out of the state of employment, but because of imperfect information (asymmetric between employers and employees) and imperfect mobility of workers (between firms) at prevailing wages, it takes time for employees and employers to become matched. Frictional unemployment is often considered voluntary, since, theoretically, an individual could reduce his or her reservation wage and receive an immediate offer of employment. Frictional unemployment occurs within sectors (occupational, industrial, geographical); frictional imbalances between sectors are usually considered structural. Frictional unemployment will be a major focus of this book, as will be explained in Chapter 4 .

  Structural unemployment also is derived from imbalances and imperfect information and mobility, and can be thought of as a long-term form of frictional unemployment. Structural unemployment, however, occurs between sectors—if workers were perfectly mobile between occupations, industries, or geographic areas (through the ability to acquire education, for example), and if they had advance notice of impending changes in their current sector, adjustments could be made so that structural unemployment would not exist. Structural unemployment is generally long term in nature, and is often associated with plant closings and mass layoffs.

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  Soviet Labour And The Ethic Of Communism

  Full Employment And The Labour Process In The Ussr

  • David Lane(Author)
  • 2019(Publication Date)
  • Taylor & Francis

    (Publisher)

  4 Types of Involuntary Unemployment

  While mass structural unemployment is not a characteristic of the USSR, one must consider the presence of other forms of unemployment and underemployment, the most important types of which are 'structural', 'seasonal' and 'frictional'. Structural unemployment is an absence of jobs in a particular labour market. This usually occurs on a regional basis. Population grows in a given area at a faster rate than the supply of jobs. In addition, certain districts might be predominantly concerned with a particular industry having a relatively narrow and specialized pattern of skills: for instance, the mining industry recruits few women workers, in textiles men are a minority and agriculture (at least in the USSR) has a preponderance of unskilled manual workers. 'Seasonal' unemployment is linked to the cyclical nature of production or of demand. In the Soviet Union, due to the inclement winter weather, this is particularly the case with agriculture, fishing, open-cast mining and building. 'Frictional' unemployment occurs when workers are idle between jobs or statuses. School-leavers or demobilized military may not wish, or may be unable, to find suitable work immediately. If workers are hierarchically or geographically mobile there may be periods of idleness between the time that workers leave one job and take up another.

  Frictional Unemployment

  In any modern economy, however perfectly organized, there are likely to be periods of'friction' when school-leavers come onto the market or when employees voluntarily change jobs. Instantaneous individual adjustments which would be necessary to equilibriate supply of (and demand for) labour even in a perfectly free market are impossible to achieve: in any labour market there are always some jobs vacant and some people seeking work. This is illustrated in Figure 4.1 . At wage W, ONi is demanded, but only ON is employed. The frictional level of unemployment is N-Ni.1

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  The Economics of Unemployment Insurance

  • Mark M. Hauser, Paul Burrows(Authors)
  • 2018(Publication Date)
  • Taylor & Francis

    (Publisher)

  It is possible to distinguish first cyclical or general unemployment. This type of unemployment is usually widespread and the danger is great that the workers involved in it will remain without work for a long time. The main cause of this type of unemployment is usually regarded as being too low a level of aggregate demand for goods and services in the economy. In the past there has been a tendency for this form of unemployment to appear at intervals of perhaps eight to ten years. This unemployment cycle is commonly referred to as the ‘major’ or the ‘business’ cycle.

  Besides this long and severe cycle of unemployment one can discern—very distinctly since the end of the second world war— a second, so-called ‘minor’ cycle of unemployment lasting perhaps four to five years. This second cycle is much less severe than the major cycle mentioned before. It has been associated with fluctuations especially in stocks and has therefore sometimes been labelled the ‘inventory’ cycle.

  Secondly, one may distinguish seasonal unemployment. This again is a distinct cycle of unemployment, but one which tends to recur periodically in particular periods of each year. Its main economic cause is the seasonal pattern of production in certain sectors of the economy and/or seasonal fluctuations in the demand structure in certain sectors. Agriculture, building and tourism are sectors experiencing seasonal demand or supply fluctuations and seasonal unemployment.

  A further form of unemployment is commonly referred to as frictional unemployment. This kind of unemployment accompanies technological progress, the reorganisation of production, and lasting shifts in the pattern of demand. Workers in particular jobs and with particular skills lose their occupation and must seek alternative employment. In a dynamic and developing economy there is need for constant change of this kind, which means that the labour force has to adapt itself to new conditions more or less continually. Thus there is a certain level of frictional unemployment at all times, though not necessarily always in the same sectors or in the same geographical areas of the economy.

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  The Education-Jobs Gap

  Underemployment Or Economic Democracy?

  • D W Livingstone(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  structural unemployment . Numerous types of structural unemployment have been distinguished (Standing 1983; Hart 1990). These include technological unemployment in which new machine-based techniques such as computers and other microelectronic devices eliminate jobs; geographical mismatch where it is too difficult and costly for job seekers to move from established communities to where new jobs are being created; demographic shifts such as increased female labor force participation, increasing numbers of young job seekers, high immigration, and increasing numbers of older people who still want to work; institutionalized benefits plan factors that encourage employers to use overtime with existing workers because it is cheaper than hiring additional workers with benefits, and which discourage unemployed people from taking low-paying jobs because of loss of state income support; and capital restructuring unemployment whereby multinational enterprises move labor-intensive operations offshore to the newly industrializing countries with cheaper pools of labor. While it remains difficult to measure the levels of each of these components, it is reasonably clear that chronic structural unemployment has grown in virtually all of the advanced industrial societies since the 1970s and led to an increasing extent of human damage.

  In the U.S., for example, annual average unemployment rates during the post-1973 period have generally been at least two percent higher than in the 1947-73 period; the general unemployment rate has usually been over six percent and the rate for blacks and Hispanics about double that (Mishel et al. 1997,243). But these statistics only begin to hint at the extent of the damage. A recent New York Times (1996, 6) poll found that nearly three-quarters of Americans have been affected by a permanent job layoff, either personally or of someone close to them during the past fifteen years. As the New York Times' (1996, 7-8) team of reporters concluded from their six-month investigative project:

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  Introducing a New Economics

  Pluralist, Sustainable and Progressive

  • Jack Reardon, Maria Alejandra Caporale Madi, Molly Scott Cato(Authors)
  • 2017(Publication Date)
  • Pluto Press

    (Publisher)

  Arthur Pigou in The Theory of Unemployment (1933 [1968]) for example, studied ‘frictional unemployment’ as unemployment arising from normal labour turnover from the ongoing creation and destruction of jobs and from people entering and leaving the labour force. During the Great Depression, John Maynard Keynes (1883–1946) argued that the capitalist system cannot obtain full levels of spending, income and employment; and that at any one point in time it is highly unlikely that the economy will operate at full capacity. He distinguished ‘frictional unemployment’ from ‘involuntary unemployment’; the latter ignored and assumed not to exist according to neoclassical economists, but which according to Keynes presented a fundamental social and economic problem. Simply defined, involuntary unemployment occurs when a worker wants a job but is unable to attain one, since not enough are offered. This is usual during recessions. At this juncture it is important we understand and define the different Types of Unemployment. Frictional unemployment occurs when workers switch jobs or change occupations. According to Keynes, this includes ‘various inexactnesses of adjustment. . . so that there will always exist in a non-static society a proportion of resources employed in ‘between jobs’ (Keynes, 1936 [2010]: 6). If a worker switches her job, she can either switch jobs immediately from the old to the new, or quit and search for a new one. Only the latter counts as unemployment. Voluntary unemployment occurs when workers quit their present job to look for something different, and presumably better, than their present job. A paradox here is that as the job market improves, voluntary unemployment can increase, which, all else being equal, will increase the overall unemployment rate

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  On Unemployment

  A Micro-Theory of Economic Justice: Volume 1

  • Mark R. Reiff(Author)
  • 2015(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part of that number represents cyclical unemployment, that is, unemployment that is the result of swings in the business cycle and which therefore increases and decreases along with other macroeconomic measures of the economy. On the other hand, part of that number represents structural unemployment, which refers to those who are unemployed for reasons other than swings in the business cycle and who are therefore not likely to regain employment without government intervention even when the business cycle swings back. Exactly what these reasons are or even what they might be is subject to dispute, but many people have argued for some time now that structural unemployment is caused in whole or in part by tech- nological innovation, even though this technological innovation has otherwise produced increases in productivity and increases in overall economic growth. The thought is that changes in technology dictate changes in the composition of the labor force for which there can be full demand, and therefore if the com- position of the labor force does not change to meet those changes in demand (by providing more highly educated workers, for example), there is nothing that can 28 ● A Micro-Theory of Economic Justice be done for those who are left behind unless we want to allocate resources and production in our economy inefficiently. Structural unemployment is accord- ingly much more difficult to do something about than cyclical unemployment, or at least that is how the argument goes. 38 I am going to argue, however, that while structural unemployment does exist and while it may indeed be harder to address than cyclical unemployment, con- temporary unemployment is not in fact as structural as some (typically anti- Keynesians) allege, and in any event it is not incurable, and therefore the fact that a certain degree of unemployment may be structural does not relieve gov- ernment of its duty to take action to reduce it.

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  Social Insurance and Economic Security

  • George E. Rejda(Author)
  • 2015(Publication Date)
  • Routledge

    (Publisher)

  The major advantage of tax credits is that employers have a strong financial incentive to hire those unemployed workers most in need of help. Tax credits are also helpful in reducing structural unemployment.

  On the negative side, however, tax credits have certain disadvantages. Tax credits are expensive because of reduced tax revenues to the federal government, which makes it more difficult to reduce the sizable federal deficit. In addition, tax credits alone cannot substantially reduce the total unemployment rate during economic downswings. Expansionary monetary and fiscal policies are also needed to stimulate the economy during such periods.

  SUMMARY

  • Involuntary unemployment can cause economic insecurity because of the loss of earned income; unemployment also forces many employees to work part-time because of economic reasons; there is also uncertainty of income for workers with jobs; and some groups have considerable difficulty finding jobs.

  • Cyclical unemployment (also called demand-deficient unemployment) is unemployment that results from a deficiency in aggregate demand.

  • Technological unemployment is unemployment that results from the displacement of workers by new computer technology, labor-saving machinery, new production techniques, or new management methods.

  • Structural unemployment can be defined as unemployment that results from a mismatch between the skills required for the available jobs in the community and skills possessed by workers seeking work.

  • Frictional unemployment refers to temporary unemployment that can result from the changing of jobs.

  • Seasonal unemployment can result from fluctuations in business activity because of weather, customs, styles, and habits.

  • The Bureau of Labor Statistics (BLS) releases monthly statistics on employment, unemployment, people outside the labor force, and other personal and occupational characteristics of the working population.

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  Available until 5 Dec |Learn more

  Modern Labor Economics

  Theory and Public Policy - International Student Edition

  • Ronald G. Ehrenberg, Robert S. Smith, Kevin F. Hallock(Authors)
  • 2021(Publication Date)
  • Taylor & Francis

    (Publisher)

  One reason why we might observe a negatively sloped wage curve can be found in the efficiency-wage explanation of structural unemployment reviewed earlier. Suppose, for example, that one cause of long-term unemployment is the widespread payment of above-market wages by employers in an effort to reduce shirking among their employees. In regions where this and other causes happen to create higher levels of unemployment, the efficiency-wage premiums needed to reduce shirking would be lower—which would cause the negative association that we observe between regional unemployment rates and wage levels.

  Demand-Deficient (Cyclical) Unemployment

  Frictional unemployment arises because labor markets are dynamic and information flows are imperfect; structural unemployment arises because of long-lasting imbalances in demand and supply. Demand-deficient unemployment is associated with fluctuations in business activity (the “business cycle”), and it occurs when a decline in aggregate demand in the output market causes the aggregate demand for labor to decline in the face of downward inflexibility in real wages. Such a decline took place during the Great Recession of 2007 to 2009, during which time the unemployment rate in the United States rose from 4.4 percent in the spring of 2007 to 10 percent in the fall of 2009.35 Another sudden increase in unemployment took place from February to April in 2020, although the sudden rise in the U.S. unemployment rate from 3.5 percent to 14.7 percent was rooted in the abrupt shutdown of businesses and travel to reduce the spread of COVID-19—not the business cycle.

  Returning to our simple demand-and-supply model of Figure 14.2 , suppose that a temporary decline in aggregate demand leads to a shift in the labor demand curve to D1 . If real wages are inflexible downward, employment will fall to E1 , and E0 −E1 additional workers will become unemployed. This employment decline occurs when firms lay off workers (increasing Peu )36 and reduce the rate at which they replace those who quit or retire (decreasing Pne and Pue

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  eBook - ePub

  Modern Labor Economics

  Theory and Public Policy

  • Ronald G. Ehrenberg, Robert S. Smith(Authors)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  and if costs of occupational or geographic mobility were low, market adjustments would quickly eliminate this type of unemployment. In practice, however, these conditions may fail to hold, and structural unemployment may result.

  Occupational and Regional Unemployment Rate Differences

  A two-sector labor market model, represented by Figure 14.5 , can be used to illustrate how structural unemployment can arise. For the moment, we shall assume the sectors refer to markets for occupational classes of workers; later, we shall assume that they are two geographically separate labor markets.

  Occupational Imbalances Suppose that market A is the market for production workers in the automobile industry and market B is the market for skilled computer specialists, and suppose that initially both markets are in equilibrium. Given the demand and supply curves in both markets, (D 0 A , S 0 A ) and (D 0 B , S 0 B ), the equilibrium wage/employment combinations in the two sectors will be (W 0 A , E 0 A ) and (W 0 B , E 0 B ), respectively. Because of differences in training costs and nonpecuniary conditions of employment, the wages need not be equal in the two sectors.

  Figure 14.5 Structural Unemployment Due to Inflexible Wages and Costs of Adjustment

  Now, suppose that the demand for automobile workers falls to D 1 A as a result of foreign import competition, while the demand for computer specialists rises to D 1 B as a result of the increased use of computers. If real wages are inflexible downward in market A because of union contract provisions, social norms, or government legislation, employment of automobile workers will fall to E 1 A . Employment and wages of computer specialists will rise to E 1 B and W 1 B , respectively. Unemployment of E 0 A – E 1 A

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  The Industrial System (Routledge Revivals)

  An Inquiry into Earned and Unearned Income

  • J. Hobson(Author)
  • 2013(Publication Date)
  • Taylor & Francis

    (Publisher)

  Chapter XVIII Unemployment

  1.  Cyclical unemployment cannot be attributed to failure of wheat harvests, for (1) statistics show no correspondence between changes in world production of wheat and fluctuation of employment, (2) the effect of a shortage of wheat upon the aggregate employment could not be large. A simultaneous shortage of several important raw materials may appreciably affect employment, but statistical evidence does not indicate such shortage as a chief cause of cyclical unemployment

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  2.  Machinery or other improvements in an industry may cause an increase or decrease of employment in that trade or related trades, according to ‘elasticity of demand,’ but cannot account at any given time for any large proportion of displacement

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  3.  For the main cause of unemployment we must look to the action of the ‘unproductive surplus’ in stimulating automatic saving at a higher rate than is needed and can be used to assist in making provision against future consumption. Economic checks on over-saving only operate where much mischief is done. The unemployed problem is that of the existence of a simultaneous excess of all factors of production

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  4.  Analysis of the course of actual depressions confirms this interpretation. The psychological or ‘credit’ explanation turns ultimately on the known inability of business men to dispose of goods at profitable prices, i.e. the failure of consumption to keep pace with power of production

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  5.  The existence and amount of over-saving is concealed by the mechanism of investment. In depressed trade over-savings need not stand in a growing pool of idle capital: their owners may invest them, not in setting up new capital forms, but in acquiring property from impoverished owners

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  6.  This analysis furnishes a test of the efficacy of all remedies or palliatives of unemployment. The validity of remedies depends upon their power to stimulate consumption by increasing the proportion of spending power vested in the workers or in public bodies

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  Tackling Unemployment

  • Richard Layard(Author)
  • 1999(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Pissarides, C. and J. Haskel (1987) 'Long-term Unemployment', Working Paper, LSE, 983 (October). 7 Mismatch: A Framework for Thought (1990)* with R. Jackman and S. Savouri As everybody knows, unemployment rates differ widely between occupations and between regions, as well as across age, race and (sometimes) sex groups. The striking thing is how stable these differences are. In all countries unskilled people have much higher unemployment rates than skilled people. Similarly, youths have higher rates than adults. In addition in most countries (though not the United States) regional differences are highly persistent - with unemployment always above average, for example, in the North of England and the South of Italy. The first task is to document these differences (in section 1) and then to explain them (in section 2). An obvious question is why occupational and geographical mobility does not eliminate the differences between unemploy- ment rates in different occupations and different regions. We attempt to answer this question. Our main focus is thus on the persistent imbalance between the supply and demand for labour across skill groups, regions and age groups. But there are additional imbalances which are temporary. Suppose, for example, that there are two occupations which have the same average unemployment rate over time but in one year demand shifts from one occupation to the other; this will produce a temporary imbalance until corrected. 1 Such 'one-off structural shocks have aroused great interest in relation to the issue of real business cycles (see Lilien, 1982). They are also clearly of interest to the unemployed themselves. But they account for a fairly small fraction of the inequality among unemployment rates observed in the average year. In any event our framework encompasses both kinds of phenomena (since both reflect imbalances between the demand and supply of labour) and we shall refer to both by the generic title 'mismatch'.

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