Question

IDENTIFY THE TYPES AND CAUSES OF UNEMPLOYMENT AND ILLUSTRATE YOUR SOLUTION.

Answer 1

Types and causes:

No.1) Seasonal: unemployment may be seasonal, because workers may be jobless during a particular season in each period; such as painters are unemployed in rainy seasons, since there is no painting work in that season.

No.2) Cyclical: this type of unemployment happens because of circular flow in an economy. Suppose there is recession in the economy; therefore, workers are not demanded for work.

No.3) Structural: since skills of workers are out-dated, they become unemployed. This situation appears where there are massive technological improvements.

No.4) Frictional: this is the case when workers are searching for jobs but not getting right now. It happens in the normal course of staff turnover in the whole economy – workers are leaving jobs but they don’t get new jobs immediately.

Solutions:

No.1) In order to avoid seasonal unemployment, workers should learn and develop other skills side by side with the main expertise; suppose those painters may learn fishing which helps them remain employed in the rainy season.

No.2) In order to avoid cyclical unemployment, the government should come forward with fiscal policy or Federal Reserve should come forward with monetary policy so that the economy can end-up with recession and can start with expansion, which creates job opportunities.

No.3) In order to avoid structural unemployment, workers should learn new skills. Suppose manual workers learnt computer technology in 90’s in order to stay in employment.

No.4) In order to avoid frictional unemployment, worker should not leave the present job immediately but should wait for a new job; once it is available then he can leave. It is always better to have something in hand before leaving the existing one.