Despite the government trying to keep unemployment low, unemployment exists when people who are willing and able to work cannot find a job. Being jobless provides no money. Specifically, there are seven different types of unemployment:
- Cyclical unemployment
- Structural unemployment
- Frictional unemployment
- Technological unemployment
- Regional unemployment
- Seasonal unemployment
- Voluntary unemployment
1. Cyclical unemployment
Cyclical unemployment occurs when the country’s economy is going through a period of slow economic growth. Or, is in the economic recession stage of The Business Cycle. Businesses hiring less workers overall results from low demand in the economy for goods and services. Cyclical unemployment is the most severe type of unemployment. It affects all industries in the whole country.
Example 1: The Great Depression of 1929.
Example 2: The Dot-com Bubble burst in 2000 causing the unemployment rate in the US to exceed 5%.
Example 3: The Global Financial Crisis in 2008 causing the unemployment rate in the US to reach almost 10%.
Example 4: The Covid-19 Crisis in 2020 causing the unemployment rate in the US to grow as high as 15%.
2. Structural unemployment
Structural unemployment occurs when the demand for products in the certain industry continually falls. It is resulting in lower demand for workers in that particular industry. Structural changes in the economy happen all the time. So, it is very common to have changing labor demands in different industries. Some countries are simply developing with the economy growing rapidly.
Example 5: Deindustrialization in heavy manufacturing industries such as steel-making and shipbuilding was a major cause of structural unemployment in the UK. The collapse of the mining and many other heavy industries had caused job losses and many workers found it very difficult to find alternative jobs.
Example 6: The Rust-belt is an area of the northeast US which used to be a very prosperous center for manufacturing. However, the decline in manufacturing due to outsourcing production to China, and higher labour costs in the US, led to structural unemployment
3. Frictional unemployment
Frictional unemployment occurs when people do not have a job between leaving the current job and starting a new one. When changing the job, there is usually a time lag of a few weeks or months before starting another one. Usually, when labor turnover rates increase in the economy, then the level of frictional unemployment will increase too.
Example 7: Many investment bankers in New York, Singapore or London leave their current jobs to pursue an MBA degree in the hopes to get a considerable salary hike in the next job.
4. Technological unemployment
Technological unemployment occurs when improvements in technology force workers out of their jobs. It is either when machinery and robots are replacing workers completely, or when unskilled workers who performed manual jobs are finding it difficult to adapt to multi-tasking and meeting new technical requirements to operate sophisticated machines.
Example 8: The consulting firm McKinsey & Company suggested that by 2030, at least 1/3 of all of the employees in the United States, and 800 million globally, could be jobless due to automation, according to CNBC.
Example 9: Workers in some industries such as banking may find the demand for their services declining as consumers switch to online banking, or simply use ATMs to withdraw cash.
5. Regional unemployment
Regional unemployment occurs when there are different unemployment rates in different areas of a country. Usually, large cities with thriving economies have lower regional unemployment rates than small towns and rural areas where there are not that many job opportunities.
Example 10: For many years the UK suffered from a North-South divide where regions in the north faced much higher levels of unemployment than southern regions. For example, London located in the southern part of the UK has a booming job market.
6. Seasonal unemployment
Seasonal unemployment occurs when people who work in seasonal jobs such as fruit and vegetable picking become unemployed when the demand for their labor decreases. Seasonal unemployment usually happens when a specific time of the year ends such as Christmas or Chinese New Year, or a new season begins such as winter.
Example 11: There are many jobs being created during the Christmas holidays as the demand for the sales of Christmas trees, Christmas decorations or Santa hats increases. More sales personnel will be needed in supermarkets such as Walmart or Costco, in the department stores, or in retail stores located along busy shopping streets. And when the Christmas holidays are over, these workers may become unemployed for the rest of the year.
7. Voluntary unemployment
Voluntary unemployment occurs when people choose not to work. This type of unemployment usually happens when a worker decides to leave the job because of low wages or inadequate salary. The going pay is too low, therefore no longer financially attractive to support the worker’s lifestyle. So, the person becomes jobless by choice, not because of lack of employment opportunities.
Example 12: Since the Global Financial Crisis in 2008 and the economic recession that followed, wages in many developed economies as well as in many emerging economies have barely managed to keep up with inflation. A rising number of workers have decided to remain unemployed voluntarily. In most cases, because they have been able to get by without working relying on social security, according to Marketbusinessnews.com.
