Unemployment

Frictional Unemployment
Frictional unemployment is a type of unemployment that occurs when
individuals are unable to find work because they are transitioning between
jobs, changing careers, or are new to the labor market.Frictional
unemployment is a normal and natural part of the labor market and is not
caused by any structural problems in the economy.

Types of frictional unemployment

1. Voluntary unemployment: This type of frictional unemployment
occurs when individuals are unwilling to accept a job that pays less
than their reservation wage, which is the minimum amount of money
they are willing to accept for a job.

2. Search unemployment: This type of frictional unemployment occurs

when the people take time looking for a job they are willing to accept.

3. Casual unemployment: This type of frictional unemployment occurs

when people have left one short term job before they take up another
short term job e.g. actors.

4. Seasonal unemployment: This type of frictional unemployment

occurs at particular times of the year when demand for workers falls
e.g there is not a lot of work for farmers in winter.

Consequences of frictional unemployment

● Increased job turnover
● Increased job search time and effort
● Reduced productivity and efficiency in the labor market
● Pressure on business to improve job quality and working conditions
● Higher wages for workers
● Increased government support for unemployment benefits and job
training programmes
Structural Unemployment
Structural unemployment is caused by underlying structural changes in the
economy, such as technological advancements, changes in the global
economy, or shifts in the demand for different types of labor. Structural
unemployment occurs when there are mismatches between the skills and
qualifications of the unemployed and the skills and qualifications required
for available jobs.

Types of structural unemployment

1. Regional unemployment: This arises from a decline in job vacancies
in a particular area of the country.

2. Technological unemployment: This occurs when advances in

technology make certain jobs obsolete and result in the displacement
of workers.

3. International unemployment: This occurs when a country loses its

international competitiveness in producing a product or products.

Consequences of structural unemployment

● Reduced economic growth
● Increased poverty
● Widening income inequality
● Reduced consumer spending

Cyclical Unemployment
Cyclical unemployment is caused by fluctuations in the business cycle,
which refers to the ups and downs in economic activity. Cyclical
unemployment occurs when there is a decrease in overall demand for
goods and services, leading to a decrease in production and employment.
This type of unemployment is typically the result of a recession, and it
tends to be more temporary in nature.

Consequences of cyclical unemployment

● Reduced economic growth
● Reduced consumer spending
● Increased poverty and income inequality
Consequences of Unemployment
1. Reduced income: Unemployed individuals do not earn a regular
income, leading to reduced income and financial hardship.

2. Increased poverty: Unemployment can contribute to poverty,

particularly among low-skilled workers and other vulnerable groups.

3. Reduced consumer spending: Unemployed individuals have less

disposable income to spend on goods and services, which can lead
to reduced economic growth.

4. Increased income inequality: Unemployment can widen income

inequality, as those who are employed tend to earn higher incomes
than those who are unemployed.

5. Poor mental health: Unemployment can have negative impacts on mental

health, including stress, anxiety, and depression.

6. Decreased productivity: Unemployment can reduce the overall

productivity of the economy, as unemployed workers are not
contributing to the production of goods and services.

7. Decreased tax revenue: Unemployment can lead to a decrease in tax

revenue, as unemployed individuals have less disposable income to
spend on goods and services.