Question

What are the basic sources of unemployment? Explain each of them briefly!

Answer 1

The four key types or sources of the unemployment of resources, especially labor, are cyclical, seasonal, frictional, and structural.

Cyclical Unemployment- The general decline in macroeconomic activity during a cycle of contraction can be attributed to cyclical unemployment. If demand for total output is increasing, less resources would be required if the overall production is sold. As the economy declines, cyclical unemployment continues to increase and then falls during a recovery and expansion that follows. One of the principal objectives of macroeconomic policy since the Great Depression of the 1930s has been the reduction or elimination of cyclical unemployment. By avoiding business cycle contractions through the timely application of expansionary fiscal or monetary policy, cyclical unemployment can be eliminated (or at least reduced).

Seasonal Unemployment- Seasonal unemployment is caused by relatively steady and predictable decreases, often corresponding to the seasons of the year, in particular in industries or occupations. During the winter months many construction workers experience unemployment. During the summer months, school teachers are faced with unemployment. Farm workers are employed differently with seasonal planting and harvesting.
As the seasons are relatively regular and predictable, they are usually regarded as part of "employment conditions" and have been largely neglected in the study of the macroeconomics.

Frictional Unemployment- Frictional unemployment occurs as resources are moving from production to output. Frictional unemployment takes place when switching from output to output takes time. It depends on the availability of information and the degree of spatial separation to match resources and production.

Structural Unemployment- That is because resources are not technically equipped, qualified or training needed in manufacturing. Structural unemployment takes place because resources are not. In North Carolina, for example , the construction company needs a craftsman, but the only unemployed person available is a plumber. The plumber has structural unemployment when the only jobs available to the plumbers are carpentry.

Natural Unemployment- Natural bi-products of a stable rising economy are called frictional and Structural joblessness. Although improved data, training and education can reduce them, total elimination is unlikely and likely unwanted. The tendency to have a certain degree of frictional and structural unemployment for an economy gives rise to the idea of natural joblessness.