What are the three types of unemployment? Unemployment is seen by some as undesirable. Are all three types of unemployment undesirable? Could the advent of the Internet completely eliminate frictional unemployment? Are all three types of unemployment undesirable? Explain.
People may find themselves unemployed for different reasons. The unemployment rate is measured as the percentage of the labor force not working but seeking work. Economists distinguish three types of unemployment: frictional unemployment, structural unemployment, and cyclical unemployment (Rittenberg).
Frictional unemployment occurs because it takes time for employers and workers to find each other (Rittenberg, ch 5). Throughout the course of the year in the labor market, some workers change jobs. When they do, it takes time to match up potential employees with new employers. Example: Worker doesn’t like his boss at McDonalds. So, he/she quits and goes applies at another fast food restaurant.
Structural unemployment occurs because the results from a mismatch between worker qualifications and the characteristics employers require (Rittenberg, ch 5). Example: a general laborer is laid off. He or she doesn’t have the skills for the technical jobs available.
Cyclical unemployment is unemployment is excess of the unemployment that exists at the natural level of employment (Rittenberg, ch 5). Example: When the business cycle for construction workers goes from boom to bust.
Of course all three types of unemployment would be considered undesirable, since no one wants to be without a job for any of the giving reasoning under each describe unemployment type.
The first two exist at all times, even when the economy operates at its potential. These two types of unemployment together determine the natural rate of unemployment. In the long run, the economy will operate at potential, and the unemployment rate will be the natural rate of unemployment.
Rittenberg, L., & Tregarthen, T. (2009). Principles of Macroeconomics. Irvington, NY: Flat World Knowledge.