Types of Unemployment

Types of Unemployment

• Structural Unemployment – Mismatch in skills and demand for labor (because of the structure of the economy). Example: Textile workers getting replaced by faster machines.
• Frictional Unemployment – Unemployment between jobs. Example: If you quit your job and are looking for a new job for the next three months, in that period you are considered in the frictional unemployment.
• Seasonal Unemployment - Unemployment due to different seasons (sometimes included in the frictional unemployment). Example: In the summer there is seasonal unemployment at ski resorts.

• Cyclical Unemployment – Unemployment due to business cycles (recessionary and inflationary gaps) Example: In a recession there is high cyclical unemployment.

• Employment Insurance (EI) - a government program that protects workers’ incomes when they become unemployed. Firms have to pay part of the EI so sometimes it can lead to

  higher

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  unemployment
• Minimum Wage Laws - this can lead to

  higher

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  unemployment.

• Union - a worker association that bargains with employers over wages and working conditions Example: The National Education Association (NEA) of the United States is the biggest union in the country with more than 3 million members (it represents public school teachers and other faculty members).

• Collective Bargaining - the process by which unions and firms agree on the terms of employment Example: A union can fight to get employees more paid vacations or health benefits.
• Efficiency Wages - above-equilibrium wages paid by firms in order to increase worker productivity Example: If the equilibrium wage for a job is $15 per hour, the company pay their workers $17 per hour to get them to be more motivated and work harder.

Example: Types of Unemployment