Types of Unemployment
- It is possible to classify the causes of unemployment into three categories
- Structural unemployment occurs when there is a mismatch between jobs and skills in the economy
- It usually happens as the structure of an economy changes e.g. the secondary sector is declining and the tertiary sector is growing
- There is no longer a need for a specific type of worker e.g. ship builders in Glasgow
- Many Western industries have relocated production to China causing structural unemployment in their economies
- Unless workers receive help to retrain, they are often left unemployed or underemployed
- Cyclical unemployment is caused by a fall of total (aggregate) demand in an economy
- This typically happens during a slow down or recession
- At least one of the components of real gross domestic product (rGDP) is falling (consumption, investment, government spending or net exports)
- The demand for labour is a demand derived from the demand for goods/services
- As output falls in the economy, firms lay off workers
- Frictional unemployment occurs when workers are between jobs
- This is usually short-term unemployment
- Workers have voluntarily left their previous job to search for another
