Q.4 Classify each of the following unemployment situations as either (i) structural; (ii) frictional, or (iii)...

Q.4 Classify each of the following unemployment situations as either (i) structural; (ii) frictional, or (iii) cyclical unemployment.

Paul lost his job because his skills become obsolete. His employment counselor at the labor office advises him to retrain.
Michael has just relocated to Seattle and he is now looking for a job.
A data-entry employee loses his job because it was permanently outsourced to India.
Unemployment increased during the Great Recession.
Mary graduated from college with an economics degree. She doesn’t have a job yet, but she has six interviews lined up.
Large numbers of construction workers lost their jobs after the collapse of the housing market.

Expert Solution

a. It shall be noted that Structural unemployment is a form of involuntary unemployment caused by a mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (also known as the skills gap). Structural unemployment is often brought about by technological changes that make the job skills of many workers obsolete. Paul lost his job because his skills become obsolete. His employment counselor at the labor office advises him to retrain. Hence, unemployment is Structural unemployment.

b.Michael has just relocated to Seattle and he is now looking for a job. This is search-unemployment. This is hence, frictional unemployment

c. It shall be noted that there is permanent outsourcing of data-entry jobs to India. This is a structural change. A data-entry employee loses his job because it was permanently outsourced to India. This unemployment is structural unemployment.

d. Unemployment rises during the Great Recession is cyclical unemployment. Recession is a phase in the business cycle.

e. Mary is in labor force and is actively looking for a job with six interviews lined up. This is frictional unemployment.

f. It shall be noted that the housing market collapse is not due to the business cycle. However, it has resulted in loss of jobs for construction workers. Unemployment is structural unemployment.

Rahul Sunny answered 2 years ago

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