Types of Unemployment
Economics: IB Diploma, topic 2.3.3
Types of Unemployment
There are many different types of unemployment. These types can also be voluntary or involuntary.
Frictional unemployment
- Frictional unemployment happens when people are between jobs.
- Most economies will always have some level of frictional unemployment and it isn't a huge concern for governments.
- In fact, it can even be a positive sign for an economy because it may indicate that workers are willing to take risks by moving in search of better pay or a job they are better suited to.
Structural unemployment
- This happens when there is a mismatch between the skills that workers have and the skills that firms are looking for.
- This is linked to changes in an economy over time and the changing demands of firms.
- For example, de-industrialisation and the closure of the coal mines in the UK in the 1980s led to high levels of unemployment in the affected areas.
Cyclical unemployment
- Cyclical unemployment is unemployment that is related to the business cycle. It is caused by the economy moving from expansion to recession, and is short term.
- This is also known as Demand Deficient or Keynesian unemployment.
Seasonal unemployment
- Unemployment due to the seasons of the year (e.g. ski instructors in the summer).
Test yourself on Types of Unemployment
Which of the following is NOT a type of unemployment?