Types of Unemployment

Readers Question: What are the types of unemployment?

Firstly, we can make a distinction between:

• Supply side unemployment (the natural rate of unemployment). These are usually microeconomic imbalances in labour markets.
• Demand side unemployment (Unemployment caused by lack of aggregate demand in the economy). In the coming recession, we can expect demand deficient unemployment (sometimes called cyclical unemployment) to increase significantly.

Amongst Supply side unemployment Different types include:

• Frictional – when people are in between jobs.
• Structural – Unemployment due to occupational or geographical immobilities. Often occurs after structural change in the economy. E.g. closure of mines, left many miners struggling to find suitable work.
• Real Wage Unemployment. e.g. powerful trades unions bargaining for wages above the equilibrium. (this may be exacerbated by fall in aggregate demand)
• Voluntary unemployment. Some debate exists over this form of unemployment. But, arguably high benefits may encourage some to stay on benefits rather than take low paid jobs.
• Seasonal Unemployment

See also causes of Natural Rate of Unemployment to change

• Reasons for youth unemployment