Types Of Unemployment

A temporary state of affairs in which a person doesn’t have a job, or is not able to make a living from work due to multiple reasons like layoffs, is called unemployment. Unemployment is one indicator of economic stability in a country. All governments and agencies around the world infuse the system in multiple programs and schemes to improve unemployment situations in their respective regions.

This is why unemployment has been divided into multiple categories (based on multiple factors) to aid in research. The economic impact of unemployment is the most common way to define it. Let’s look at the economic principles that underlie different types of unemployment.

types of unemployment

What Is Unemployment?

Unemployment refers to a state in which individuals who seek work cannot find it and is an essential indicator of economic health.

Here are some key points about unemployment to keep in mind:

Wages may vary widely across industries or companies and technological innovations can replace human labor altogether, leading to unemployment.

Wage increases tend to come about through economic stimulus packages such as unemployment benefits or wage subsidies from governments or local authorities; therefore it is essential that workers have enough employment options available in their current job markets or due to technological advancements that allow for automation or advancements that lead to reduced human employment rates.

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Unemployment can be classified as either frictional, cyclical, structural, or institutional unemployment.
Measurement: Unemployment data is collected and published by government agencies through various methods; its official rate measures how many unemployed individuals there are as a proportion of total labor force members.

Eligibility for Benefits: Many governments provide unemployed individuals with some support through unemployment insurance if they meet certain requirements.
Note that while unemployment may appear straightforward, economists categorize it into various groups.

How is the unemployment rate measured?

Unemployment occurs when someone who wants to work but lacks paid employment cannot find one. To measure unemployment rates accurately requires identifying who constitutes the labour force – that includes both employed and unemployed people – and measuring which percentage are unemployed within this group. Determining which members have jobs requires making practical judgments such as how much paid work someone must undertake before being considered employed as well as counting how many have or don’t.

What are the main types of unemployment?

Frictional unemployment

This is when workers (who have left their job voluntarily) move to another job. While some workers leave after they find a job, others quit looking for work. It will take some time to find a job that is right for them. They might consider taking up a college degree to improve their chances of landing a better job.

Economically, frictional unemployment is not a concern because it occurs in smaller numbers and lasts only a few weeks. Rapid technological and government advancements have made it possible to achieve rapid progress in technology. These policies have removed the stigma of unemployment in the past two decades. This category also includes recent college graduates who are looking for work.

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Structural unemployment

This could be due to a variety of factors, including lower demand for education and skills in the job market. This category includes workers with a certain skill set that is more in demand than jobs. Wages that are not in line with market standards also fall under this category. Structural employment can be caused by technological advancement or finding lower-paying jobs in other regions.

Seasonal employment is also included in this category, as the skills that a worker has are only in demand for a specific period. This is due to the nature of their job. Example Lifeguard at a resort on the beach. Because structural employment can be active for long periods of time, it is a concern.

Cyclical Unemployment

Massive job losses in down economic phases are very common. However, during stable upward economic growth, millions of jobs are created due to optimism. Cyclical unemployment refers to the fluctuations in the economy’s business cycles. It is not unusual for jobs to drop during recessions due to a fall in demand. However, they will rise during stable economic growth.

Cyclical employment can have a direct impact on economic stability, which can lead to the creation or destruction of millions of job opportunities.

Other Types of Unemployment


Underemployment occurs when people are employed, yet would like and are available to work additional hours. The ABS defines two categories of underemployed people: part-time workers who wish for additional hours; and those typically employed full time but working part-time hours instead.

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Hidden unemployment

However, such people do not appear in official ABS labour market statistics but could still work if given the chance. For example, someone may have looked for work but eventually gave up hope and stopped searching; yet still want to work (sometimes known as discouraged workers).

Seasonal unemployment

Seasonal patterns affect many jobs throughout the year, such as ski instructors, fruit pickers and holiday-related positions. To counteract seasonality in its data, ABS publishes seasonally adjusted labour market statistics that remove seasonal patterns in data.

Voluntary and involuntary employment

This basic classification of employment refers to the “reason” for leaving the job. If a worker quit voluntarily to pursue better opportunities/aspirations, it is termed Voluntary unemployment. On the other side, Involuntary unemployment is when a worker is laid off by their employer.

Unemployment insurance for jobless workers

Workers who become unemployed for involuntary reasons, such as layoffs, can receive weekly monetary compensation from the labor department of their respective states. This is calculated on the basis of the last drawn salary. You can get unemployment insurance for up to 26 weeks in all 50 states and D.C.

Types of Unemployment FAQ

What is cyclical unemployment?

Cyclical unemployment is closely related to the business cycle and occurs when there are business expansionary or contractionary cycles in the economy.

What is seasonal unemployment?

Seasonal unemployment is a type of frictional unemployment that occurs when certain industries or jobs are only available during certain times of the year.

What is voluntary unemployment?

Voluntary unemployment occurs when an individual chooses not to work.

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