Categories of unemployment (Essay Sample)

Categories of Unemployment
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Categories of unemployment
Unemployment is among the leading challenges that most economies in world are facing presently. According to the International Labour Organization, unemployment refers to a situation where individual are without jobs despite having actively searched for one within a period of more than one month (Weiss, 2010). It has been approximated that about 2000 million people in the entire world are unemployed. The cause of unemployment is a controversial issue as various economists have come up with different theories explaining this problem (Warner, 2009). As such, there are various categories of unemployment, depending on school of taught. This essay will be focusing on analyzing the various categories of unemployment, the type of unemployment that is principally responsible for the current high unemployment rate, and the type of unemployment that represents the greatest long-term threat to the economy.
As mentioned above, there are various categories of unemployment. However, the major categories include structural unemployment, frictional unemployment, and cyclical unemployment. Structural unemployment is a kind of unemployment that emerge as a result of a disparity or inequality between labor market demand and the skills of the workers that looking for employment opportunities (Weiss, 2010). Despite the availability of equal or more number of vacancies than the unemployed individuals, they may not have the required skills or they may be not located in areas where these vacancies are available. The major cause of structural unemployment is the labor market’s dynamics which are also inflexible. According to a good number of economists, structural unemployment is the product of a change in the fundamental composition of the economy. While this changes leads to unemployment for some people, it also opens new opportunities for other people particularly the trained workers. For instance, while a change of technology will make some people jobless, it opens opportunities for those who have knowledge of the new technology (McLaughlin, 2011). Structural unemployment is closely related to frictional unemployment, and the major difference is that structural unemployment lasts longer.
Frictional unemployment is a type of unemployment that occurs during the time when individuals are changing over from one job to another, or searching for a new job. This explains why this type of unemployment is sometimes referred to as search unemployment. As mentioned above, it is closely related with structural unemployment; only that structural unemployment lasts for a longer period. Frictional unemployment can be voluntary or involuntary. The major cause of frictional unemployment is the heterogeneous nature of both jobs and workers, causing a mismatch regarding the features of demand and supply (Warner, 2009). In most cases the mismatch relates to taste, attitude, location, worktime, payment, skills, as well as other factors. Various economists argue that there is a correlation between frictional unemployment and full employment. Perhaps, the two concepts are often applied by economists in explaining the reason why full employment will never be attained in the economy. Based on the involuntary or voluntary nature of this category of unemployment, a good number of economists assert that frictional unemployment is always present within the economy.
Cyclical unemployment results from a deficit in aggregate demand within the economy to an extent that the available demand is not enough to generate jobs for all individuals willing to work. Cyclical unemployment is also commonly known as deficient-demand unemployment or Keynesian unemployment. The term “cyclical” refers to a series of events that occurs eventually leading to unemployment. The demand for services and goods in the economy declines, production reduces hence the need for fewer employees, wages becomes sticky, eventually high rates of unemployment occurs (Weiss, 2010). Besides, the name of this type of unemployment relates to the ever changing business cycles. According to the Keynesian school of thought, cyclical unemployment can be easily resolved through the interventions of the government. These interventions include expansionary monetary policy, and deficit spending that is aimed at boosting demand and employment.
Various economists have given different views concerning the current unemployment rate. However, most of them tend to agree that cyclical unemployment is responsible for the high rates of unemployment that is experienced within this country as well as other parts of the world. Recently, the country experienced various shifts, such as failure in the financial markets, within various components of the economy, particularly those related to demand (Warner, 2009). As a result, demand of various products in the economy declined, negatively affecting the production sector. To reduce the resu...