Types of Unemployment

Involuntary unemployment can be further divided into cyclical unemployment, seasonal unemployment, structural unemployment, frictional unemployment, natural rate of unemployment, disguised unemployment and under employment.

Cyclical Unemployment

• Cyclical or demand deficient unemployment occurs when the economy is in need of low workforce. When there is an economy-wide decline in aggregate demand for goods and services, employment declines and unemployment correspondingly increases. Cyclical unemployment mainly occurs during recession or depression. This form of unemployment is most commonly known as cyclical unemployment since unemployment moves with the trade cycle. For instance, during the recent global slowdown in late 2008, many workers around the globe lost their jobs.

Seasonal Unemployment

• This type of unemployment occurs in a particular time of the year or season and thus is known as seasonal unemployment. Seasonal unemployment is most common in industries like agriculture, tourism, hotel, catering etc.

Structural Unemployment

• Structural unemployment arises when the qualification of a person is not sufficient to meet his job responsibilities. It arises due to long term change in the pattern of demand that changes the basic structure of the economy. The person is not able to learn new technologies used in the new expanding economic sectors and they thus may be rendered permanently unemployed. For instance, when computers were introduced, many workers were dislodged because of a mismatch between the existing skills of the workers and the requirement of the job. Although jobs were available, there was a demand for a new kind of skill and qualification. So, persons with old skills did not get employment in the changed economic regime, and remain unemployed.

Frictional Unemployment

• Frictional unemployment occurs when a person is out of one job and is searching for another for different reasons such as seeking a better job, being fired from a current job, or having voluntarily quit a current job. It generally requires some time before a person can get the next job. During this time he is frictionally unemployed.

Natural rate of unemployment

• The sum total of frictional and structural unemployment is referred as the natural rate of unemployment.

Disguised Unemployment

• The unemployment which is not visible is said to be disguised unemployment. It occurs when a person doesn’t contribute anything to the output even when visibly working. This happens amongst family labor especially in agriculture who are engaged on land but are not contributing to the given level of output. Thus their marginal productivity is zero.

Underemployment

• When a person is engaged in the economic activity but that fail to provide him fully in accordance to his qualification and efforts. Thus it is a situation in which a person is employed but not in the desired capacity whether in terms of compensation, hours, or level of skill and experience. While not technically unemployed the underemployed often compete for available jobs.