Chapter 34: Key Words

Cyclical Unemployment – Cyclical unemployment is when there is unemployment due to a lack of demand or a downturn in the whole economy

Economically Inactive – People who are without a job and aren’t actively seeking nor available for work

Employed – Someone who is with a job

Frictional Unemployment – When there is unemployment due to people being in the process of moving from one job to another (between jobs)

Regional Unemployment – When unemployment is concentrated in a particular region (of a country)

Seasonal Unemployment – When there is unemployment during certain periods in a year due to seasonal changes in production and consumer demand

Sectoral Unemployment – This is when unemployment occurs due to a decline in a particular sector or industry

Structural Unemployment – Structural unemployment is when there is a mismatch of skills in the economy due to a change in structure

Technological Unemployment – When work done by human capital before is replaced by technology and machines.

Unemployed – People who are without a job but are available and actively seeking work

Voluntary Unemployment – This is when unemployment occurs due to people who are willing and able for work chooses not to

Different Types of Unemployment

There are several different reasons as to why people may be unemployed and the different types of unemployment are  cyclical unemployment, structural unemployment, frictional unemployment, seasonal unemployment and voluntary unemployment.

Cyclical Unemployment

Cyclical unemployment is when there is unemployment due to a lack of demand or a downturn in the whole economy. Since there is a lack of demand in the whole economy, business activity slows down and results in a lack of demand for goods and services, as a result of this there is a lack of demand in labour as well thus causing unemployment.

Structural Unemployment

The structure of the economy will begin to change over time (which is where the word “structural” comes from) and some skills will be in higher demand than others. Structural unemployment is when there is a mismatch of skills in the economy, workers don’t have the skills required by the labour market and this can cause unemployment.

3 types of structural unemployment are:

• Sectoral Unemployment
  • This is when unemployment occurs due to a decline in a particular sector or industry
• Technological Unemployment
  • When work done by human capital beforehand is replaced by technology and machines.
• Regional Unemployment
  • When unemployment occurs or is concentrated in a particular region (of a country).

Frictional Unemployment

Frictional unemployment is a form of short-term unemployment and is considered the “least worrying” type of unemployment as it will always exist. Since there is always frictional unemployment, this means that the unemployment rate is never > 0%.

Frictional unemployment occurs due to people who are between jobs/moving from one job to another (e.g. quitting their jobs to find another, or may be a student straight out of university who is looking for the right opportunity, must wait a while until their new employment begins, etc). It is considered frictional unemployment if it is in intervals of up to 8 weeks.

Seasonal Unemployment

When there is unemployment for certain/particular times of the year due to seasonal changes in production and consumer demand. For example, in the hospitality industry, the demand for labour may be higher during the holiday season. Those who participate in this line of work are called seasonal workers and when they are out of work when the season ends they are considered seasonally unemployed.

Voluntary Unemployment

This is when unemployment occurs due to people who are willing and able for work chooses not to. They might not want to work as they may not be prepared or dislike the idea of working