economics - types of unemployment

Question 1

Cyclical unemployment

Answer 1

Goes with business cycle (economy’s cyclical structure) - at top little unemployment, at bottom cyclical unemployment occurs
The demand for labour is derived - slow growth (GDP drops) = no demand for G+S, therefore no demand for employment.

Cyclical unemployment is caused by a downturn in the business cycle. It occurs because
the demand for labour is a derived demand. When there is a downturn in the business
cycle, demand for goods and services falls. Firms are forced to cut back production and
will lay off some workers in order to maintain their profit levels.
Cyclical unemployment will be reduced when there is an upturn in the business cycle.
Aggregate demand rises, increasing demand for a firm’s goods and services, and so firms
will increase their demand for labour in order to increase their production levels. As demand
for labour increases, more jobs become available and the level of unemployment falls.

Question 2

Structural unemployment

Answer 2

Structural unemployment occurs because of a mismatch between the skills demanded by
employers and those possessed by unemployed people. Restructuring of the economy from
old industries to emerging industries and the introduction of new technology will usually
increase the level of structural unemployment. Those workers who were laid off in the
declining old industries may find that their particular skills are not appropriate in newer
industries where the type of skills required may be different. So even if the unemployed
person wants to work, and the firms in the new industry require more labour, the mismatch
of skills means that the structurally unemployed cannot find work.

Question 3

Long-term unemployment

Answer 3

To be classified as long-term unemployed, an individual must have been unemployed
for a period of 12 months or more. Generally, the longer a person is out of work, the
harder it becomes for them to get a job. The long-term unemployed may have started
out originally as cyclically unemployed persons. An economic downturn may have caused
a person to lose their job. However, during an economic recovery the economy may not
grow quickly enough to eliminate all cyclical unemployment, and some people may find
themselves unemployed for more than 12 months. After a long period of unemployment,
a person may lose their job-related skills, while employers will also be more reluctant to
hire someone who has been out of work for a long time.

Question 4

Seasonal unemployment

Answer 4

Seasonal unemployment occurs because of the seasonal nature of some jobs (that is, changes
in the labour market that occur regularly each year, independent of the business cycle).
Examples include tourist-related jobs and jobs associated with holiday seasons, such
as plump older men working as shopping centre Santa Clauses at Christmas. Seasonal
unemployment also rises during the December–March period of each year when new
school leavers are seeking jobs and enter the labour force.

Question 5

Frictional unemployment

Answer 5

In between jobs (period looking for next or waiting to start)

Frictional unemployment occurs as people change jobs, moving from one job to another. It
usually takes some time to move between jobs as individuals must search for employment
opportunities, attend job interviews and complete any administrative details. There will
always be a small level of frictional unemployment in the labour market, although improving
the efficiency of job placement services can reduce the level of frictional unemployment.

Question 6

Hidden unemployment

Answer 6

e.g. house spouses - opted out of the workforce bc it is too difficult to look for a job

Hidden unemployment refers to those individuals who are not counted in the official
unemployment figures because they have given up actively seeking work or have gone back
to school.

Hidden unemployment usually rises during a prolonged economic downturn.
Slower growth in aggregate demand means that the prospects of finding a job are very low,
and some individuals become discouraged from continuing to seek work. Since the hidden
unemployed are no longer actively seeking work, they are not officially unemployed, but
they are still considered to be a part of the unemployment problem since they would
work if labour market conditions were better. A rise in hidden unemployment will be
reflected in a fall in the labour force participation rate rather than as an increase in the
official unemployment rate.

Question 7

Underemployment

Answer 7

Ppl who want full time job but can only get a part time job, have to get multiple part times to make up hours.

ndividuals who have part-time or casual jobs but would like to work more hours per
week are said to be underemployed. Technically, these workers are not unemployed.
However, they are a significant problem in the labour market since they represent under-
utilised labour resources – the workers are ready and willing to work more hours, but
the conditions in the labour market mean that they cannot. Estimates of the level of
underemployment in Australia have risen significantly in recent decades, as an increasing
share of jobs have been created on a part-time or casual basis. (This is discussed in more
detail in section 10.6).

Question 8

Hard-core unemployment

Answer 8

Hard-core unemployment refers to those individuals who might be considered unsuitable
for work because of personal reasons such as mental illness, physical disabilities or drug
addiction.