Unemployment

A basic understanding of economics tells us that unemployment is a problem of the entire society.

To define unemployment, we start with the idea of the labor force. The population is divided into two parts, those in and those out of the labour force. Those out of the labor force are categorized as unable to be employed, in school, housekeeping, or “other.” Everyone else between ages 16 and 65 is in the labor force. The labor force itself is divided into two groups, those employed and those unemployed but looking for work. The latter group, those unemployed but looking for work, is what we call unemployed.

Unemployment may be defined as a situation in which people who are qualified for job, and willing to accept the going wage rate cannot find jobs without considerable delay. There are three important aspects to this definition.

First, a person has to be qualified for a job. A person is not involuntarily unemployed if one seeks that one is precluded from obtaining because of lack of training, experience, and education. For example, one cannot be considered an unemployed truck driver if he is unable to drive a truck.

Second, a person is not considered unemployed if he or she is not seeking a job willing to work at the market wage rate. Some can decide to withdraw their labour services because they prefer leisure to work at a market rate. These people represent a type of unemployment, but not the kind that usually presents a problem.

Third, it may take time to find a job that a person is qualified for and is willing to accept at the going wage rate. However, the delay should probably not extend beyond a 30- or 60-day period for most occupations. Some may believe that this time period is too long for people to be without jobs.

The major types of unemployment are frictional, seasonal, cyclical, and structural. Frictional unemployment includes those people in the process of relocating from one job to another. They might be moving across country, or taking a vacation between jobs, or finding their first job. At any point in time, about 4 percent of the labor force is frictionally unemployed. They are counted as unemployed, but they are not a source of concern. These people are only out of a job for a short time, and they are voluntarily unemployed.

Seasonal unemployment is also expected. Workers are laid off during the off season. Lifeguards on the lake shore in Chicago are employed in the summer and not the winter, ski instructors on the bunny slope in Vermont find the opposite true. There may be fewer construction jobs during the winter months. Since these individuals are out of work for a major portion of a year, their lack of employment is of greater concern than is that for individuals who are frictionally unemployed.

Cyclical unemployment is not expected and is a serious concern for society.

Cyclical unemployment occurs when the economy slows down, and there are more unemployed people than there are available jobs. Then we have people who desire to work on one hand, and a desire for the products that these people could produce on the other, but the economic system cannot seem to make the two meet.

Structural unemployment concerns the attempt to put square pegs into round holes. Translated into human terms, structural unemployment occurs when there are many people unemployed while there are many jobs available, but the unemployed lack the necessary qualifications for the jobs. Structural unemployment results from economic changes that cause the demand for specific kinds of labour to be low relative to the supply in particular markets and regions of the economy.

Typically, there are many job offerings but usually at specified levels of accountants, programmers, managers, and engineers — all requiring experience, of course. These are not the skills possessed by the majority of the unemployed.

Structural unemployment is becoming an increasing problem in our rapidly changing industrial society. New skills become more rapidly obsolete as society and its technology and demands change. Structural unemployment may be one of the most pressing unemployment problems that we face.

Voluntary unemployment exists when people choose not to work, often because they cannot find jobs that pay enough money (e.g. more than social security benefits).

Classical unemployment is the lost of jobs caused when wages are too high.