Question

In: Economics

how was frictional unemployment and structural unemployment differrent from cyclical unemployment ?

how was frictional unemployment and structural unemployment differrent from cyclical unemployment ?

Solutions

Expert Solution

Cyclical Unemployment:
It is the unemployment caused by the upswings and downswings of business cycles in the economy.
During an upswing (expansionary phase of a business cycle) unemployment goes down
During a downswing (contractionary phase of a business cycle) unemployment goes up.
This kind of unemployment, which fluctuates with business cycles is called cyclical unemployment.

Examples:
1) Selena lost her job as an architect during the recession as businesses cut back on their spending ( job loss due to contraction or recession in the business cycle).
2) Another example of cyclical unemployment was the large layoffs created in construction, real estate, and mortgage around 2007.

Frictional Unemployment:
It is unemployment between jobs.
It is also unemployment in the interim period between my graduating from school and finding the best fitting job for me.
It is unemployment caused by labor mobility.

Examples:
People move from place to place, or from job to job.
In between these movements, they generally have some time off.
They are frictional unemployed, in those interim periods.
Henri has recently moved from New York to Birmingham and is looking for a job (in between jobs).
The job search period, trying to find the best fit for themselves.

Structural Unemployment:
It is unemployment due to lack of skills demanded by the market place.

Example:
Warren lost his job as a cashier due to the creation and use of self check out counters (job skills mismatch or replaced by technology).
Additional Information (Optional):
Structural unemployment is the worst kind of unemployment to get rid of. This kind of unemployment is mostly seen when the economy is surging in terms of rapid technological changes.


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