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Types of Unemployment Economics IB
Types of Unemployment Economics IB
Economics HL
Type of
Unemploy
ment
Description
Solutions
Frictional
includes workers
who are either
searching for jobs or
waiting to take jobs
in the near future. It
is recognized as
natural
unemployment
(natural for people
to leave jobs in
hopes of finding a
better one)
[transitioning jobs,
recently graduating
students]
No negative
outcome in any
dynamic economy
People move
to another job
so they
become more
productive, as
they like it
more
More
contribution to
Diagram
Equilibrium/Disequil
ibrium
Equilibrium - People
are not willing or not
able to take the work
Nicole Bostan
Economics HL
Structural
economy
Short term
nature
it is caused by
changes in the
structure in demand
for consumer goods
and in technology.
The fall in demand
for a particular labor
has to be
permanent. This
category includes
workers who are
unemployed
because their skills
are not demanded
by employers
because they lack
sufficient skills to
obtain employment
or because they
cannot easily move
to locations where
jobs are available.
For example coal
miners, a job that
may disappear in a
region. They can't
take new types of
Equilibrium
Nicole Bostan
Economics HL
jobs such as
deregulations of labor market
software
applied
engineering.
Technology makes
certain labor
unnecessary, like
ATMs. Structural can
be also due to
lower-cost labor in
foreign countries.
Third cause can be
change in
consumers' taste
Seasonal
Equilibrium
Real wage
(classical)
Caused by trade
union and
government
intervention
(minimum wages)
Disequilibrium - Any
condition that prevent
the labor market from
clearing
Nicole Bostan
Economics HL
interfering in the
workers]
labor market. Trade
unions negotiate
higher wages
(above equilibrium).
Thus AS for labor is
greater than ADl ->
surplus of labor
Demand
Deficient
(cyclical)
Caused by the
recession phase of
the business cycle,
that is by a
deficiency of total
spending. As the
overall demand for
goods and services
decreases,
consumers spend
less, firms reduce
output, less labor is
needed, so
employment falls.
Wages are sticky
downwards,
meaning that while
workers' wages can
easily increase it is
less likely that real
Disequilibrium
Nicole Bostan
Economics HL
wages will
decrease.
Unemployment is
created at a-b,
where AS is greater
than AD because
wages are stuck at
We.