2.

Unemployment classification

a/ Sort by origin
- Temporary unemployment: occurs when some workers are in the process of
looking for work or looking for other better jobs that suit their needs and
interests. In most markets, prices adjust to balance supply and demand. In an
ideal labor market, wages would adjust to eliminate unemployment. However,
the reality shows that even when the economy works well, unemployment still
exists. Temporary unemployment is caused by a normal shift in the labor
market. For example, after graduating from college, you need to have the time
needed to find a job. During that time you are counted as unemployed. This type
of unemployment is called temporary unemployment.
- Structural unemployment: occurs when there is an imbalance between labor
supply and demand (between skills, occupations, regions...). For example, a
level 7 worker can work for more than 25 years in the textile industry but can
become unemployed at the age of 50 when the textile industry is shrinking due
to competition from abroad. This worker may have to learn a new skill that the
economy is in demand at the time. However, businesses may not want to hire
and train older workers, so this worker becomes a victim of structural
unemployment.
- Cyclical Unemployment: Cyclical unemployment occurs when aggregate
demand is not enough to match the full potential output of the economy or
actual output is lower than potential output and this causes a recession. .
Cyclical unemployment can be measured as the number of people who could be
employed at potential output minus the number of people currently employed in
the economy. When cyclical unemployment is zero, all current unemployment
is temporary, structural or classical unemployment, and then the unemployment
rate is the natural rate of unemployment. In the long run, the economy can
return to full employment on its own through adjustments in wages and prices,
so cyclical unemployment will disappear on its own. However, in the short run,
cyclical unemployment is the fraction of total unemployment that the
Government can help reduce by using fiscal and monetary policy to increase
aggregate demand, not by waiting for wages and prices to fall.

- Unemployment due to external factors: occurs when the fixed wage is higher
than the actual equilibrium wage in the labor market. This type of
unemployment is influenced by socio-political factors.

b. Sort by type:
- Unemployment by sex (Male-Female)
- Unemployment by age (Age - Occupation)
- Unemployment by territory (urban, rural, etc.)
- Unemployment by ethnicity, race
c. Sort by reason
Unemployment due to causes can be divided into 4 categories as follows:
- Quitting: are people who voluntarily resign for many reasons such as low
salary, unsuitable work, ...
- Loss of work: are those who are laid off by the production and business unit
for some reason.
- Newcomers: are those who are added to the labor force for the first time but
have not yet found a job and are actively looking for work.
- Returning: are those who used to have a job, then quit, now want to return to
work but have not found a job.

d. Sort by nature:
• Voluntary unemployment: The number of employees who are voluntarily
unemployed because their jobs and wages are not consistent with their will.
• Involuntary unemployment (or cyclical unemployment): Caused by the
economic cycle, also called unemployment due to lack of demand (according to
Keynesianism).

e. Sort by cause:
If classified by causes, unemployment is divided into two large categories,
which are natural unemployment and cyclical unemployment. Each of these
types of unemployment is further divided into several other sub-categories:

Natural Unemployment: The normal unemployment rate of all economies. This

type of unemployment will not disappear, but almost always exists in society,
even if the labor market is stable, it will not disappear. The natural level of
unemployment occurs when the labor market reaches equilibrium. At
equilibrium, natural unemployment is equal to the total number of voluntary
unemployed.
Natural unemployment includes types such as:

*Temporary unemployment/friction unemployment: Appears when workers

change jobs and are unemployed for a short time (from the time they leave their
old job until they find a new one).

*Structural unemployment: It is a form of long-term unemployment, appearing

due to the decline of some industries or due to changes in production processes
that make workers unable to adapt. They are forced to look to other
occupations  or other places to find work.
*Seasonal unemployment: Some jobs such as part-time summer jobs or seasonal
recreation (water parks, ice skating, skiing) only last for a certain time of the
year. When this period of time is over, the person doing the work will

Cyclical Unemployment: is the unemployment rate corresponding to each stage

in the economic cycle. This type of unemployment is caused by a rigid wage
state. It is a form of unemployment that does not last forever, which will
disappear if certain prerequisites are met.
There are two types of cyclical unemployment:
High cyclical unemployment occurs during economic downturns.
Low cyclical unemployment occurs when economic development expands.

f/ Classification of unemployment according to classical theory:

The Classical Model assumes that real wages adjust to equalize the labor
market, ensuring full employment. This is consistent with the market
equilibrium approach, where prices will adjust to ensure a balance between
supply and demand. However, the reality shows that unemployment always
exists. Classical economists argue that different forces in the labor market,
including legal, institutional and traditional, can prevent real wages from
adjusting enough to maintain full employment. do. If real wages cannot fall to
full employment, unemployment will arise. This type of unemployment is often
referred to as classical unemployment. Three main reasons can cause real wages
to be higher than the market equilibrium level in modern economies: minimum
wage laws; union activities; and effective wages. All three of these theories
explain why real wages can remain “so high” that some workers may become
unemployed.
Minimum wage law:
Assume that because the minimum wage law forces wages to remain above the
equilibrium wage, the quantity of labor supplied increases LS and the quantity
demanded of labor falls to LD. The excess supply of labor (LS - LD) is the
increase in the number of unemployed people. Thus, the minimum wage
increases the income of employed workers, but reduces the income of some
workers who cannot find a job due to this regulation.

- Unions and collective bargaining:

In Western Europe and North America, a union is an association of workers that collectively
negotiate with employers (or employers) about wages and working conditions. If the union
and the business fail to come to an agreement, the union can go on strike - that is,
withdrawing labor services from the business. Due to union requirements, wages may rise
above the equilibrium wage. This causes the supply of labor to increase and the quantity of
labor demanded to decrease and causes unemployment. Just like the Minimum Wage Law,
those who are employed benefit, but those who are unemployed lose. Economists sometimes
describe the situation as a conflict between insiders and outsiders. The workers who join the
union are insiders; and the unemployed are the outsiders. If the insiders are strong enough,
the outsiders may still not be hired by the business even with lower wages

-The theory of efficient wages:

The next reason why the economy always has unemployment is proposed by the theory of
efficient wages. According to this theory, firms will be more efficient if they pay wages
above the market equilibrium because it can benefit firms to keep wages high even when
there is an oversupply of labor. .