As unemployment is a universal problem and is found in every country more or less, therefore, it is categorized into a number of types. The chief among them are stated below:
1. Structural Unemployment:
The Glossary of Economics Terms defines structural unemployment as:
“Structural unemployment is an unemployment that comes from there being an absence of demand for the workers that are available.”
Structural Unemployment, one of the three types of unemployment, is connected with the disparity of jobs and workers owing to deficient in of skills or simply the wrong area desired for work. Structural unemployment depends on the social requirements of the economy and dynamic changes in the economy. For example, advances in technology and changes in market conditions often turn many skills outdated; this usually increases the unemployment rate. For example, laborers who worked on cotton fields found their jobs obsolete with Eli Whitney’s patenting of the cotton gin. Similarly, with the rise of computers, many jobs in manual book keeping have been replaced by highly efficient software. Workers who find themselves in this situation find that they need to acquire new skills in order to obtain a new job.
2. Frictional Unemployment:
The Glossary of Economics Terms defines frictional unemployment as:
“Frictional unemployment is unemployment that comes from people moving between jobs, careers, and locations.” Contrast structural unemployment.
Frictional Unemployment is always present in the economy, resulting from temporary transitions made by workers and employers or from workers and employers having inconsistent or imperfect information. This kind of unemployment is closely related to structural unemployment due to its reliance on the dynamics of the economy. It is caused because unemployed workers may not always take the first job offer they receive because of the wages and necessary skills. This type of unemployment is also caused by failing firms, poor job performance, or obsolete skills. This may also be caused by workers who will quit their jobs in order to move to different parts of the country.
Frictional unemployment can be seen as a transaction cost of trying to find a new job; it is the result of imperfect information on available jobs. For instance, a case of frictional unemployment would be a college student quitting their fast-food restaurant job to get ready to find a job in their field after graduation. Unlike structural unemployment this process would not be long due to skills the college graduate has to offer a potential firm.
3. Cyclical Unemployment:
The Glossary of Economics Terms defines cyclical unemployment as:
“Cyclical unemployment occurs when the unemployment rate moves in the opposite direction as the GDP growth rate. So when GDP growth is small (or negative) unemployment is high.”
Unemployment that is attributed to economic contraction is called cyclical unemployment. The economy has the capacity to generate jobs which increases economic growth. Therefore, an increasing economy typically has lower levels of unemployment. On the other hand, according to cyclical unemployment an economy that is in a recession faces higher levels of unemployment. When this happens there are more unemployed workers than job openings due to the breakdown of the economy. This type of unemployment is greatly concentrated on the activity in the economy.
4. Seasonal Unemployment:
Seasonal unemployment is unemployment due to changes in the season – such as a lack of demand for department store Santa Clauses in January. Seasonal unemployment is a form of structural unemployment, as the structure of the economy changes from month to month.
Seasonal Unemployment is a type of unemployment that occurs due to the seasonal nature of the job is known as seasonal unemployment. The industries that are affected by seasonal unemployment are hospitality and tourism industries and also the fruit picking and catering industries.
5. Classical Unemployment:
Classical unemployment is also known as the real wages unemployment or disequilibrium unemployment. This type of unemployment occurs when trade unions and labor organization bargain for higher wages, which leads to fall in the demand for labor.
6. Disguised unemployment:
Disguised unemployment implies that many workers are engaged in productive work. For example, in Indian /Pakistani villages, where most of unemployment exists in this form, people are found to be apparently engaged in agricultural works. But such employment is mostly a work sharing device i.e., the existing work is shared by the large number of workers. In such a situation, even if many workers are withdrawn, the same work will continue to be done by fewer people.
It follows that all the workers are not needed to maintain the existing level of production. The contribution of such workers to production is nothing. It is found that the very large numbers of workers on Indian/Pakistani‘s farms actually hinder agricultural works and thereby reduce production.
7. Underemployment:
Underemployment usually refers to that state in which the self employed working people are not working according to their capacity. For example, a diploma holder in engineering, if for wants of an appropriate job, start any business may be said to be underemployed. Apparently, he may be deemed as working and earning in a productive activity and in this sense contributing something to production.
But in reality he is not working to his capability, or to his full capacity. He is, therefore, not full employed. This type of unemployment is mostly visible in urban areas.
8. Open Unemployment:
Open unemployment is a condition in which people have no work to do. They are able to work and are also willing to work but there is no work for them. They are found partly in villages, but very largely in cities. Most of them come to the cities from villages in search of jobs, many originate in cities themselves. Such employment can be seen and counted in terms of the number of such persons.
Therefore it is called open unemployment. Open unemployment is to be distinguished from disguised unemployment and underemployment in that while in the case of former unemployment workers are totally idle, but in the latter two types of unemployment they appear to be working and do not seem to be away their time.
9. Voluntary Unemployment:
Voluntary unemployment occurs when a working persons willingly withdraws himself from work. This type of unemployment may be caused due to a number of reasons. For example, one may quarrel with the employer and resign or one may have permanent source of unearned income, absentee workers, and strikers and so on. In voluntary unemployment, a person is out of job of his own desire. He does not work on the prevalent or prescribed wages. Either he wants higher wages or does not want to work at all.
10. Involuntary unemployment:
Involuntary unemployment occurs when at a particular time the number of worker is more than the number of jobs. Obviously this state of affairs arises because of the insufficiency or non availability of work. It is customary to characterize involuntary unemployment, not voluntary as unemployment proper.
11. Hidden unemployment
Whatever the published figures for unemployment, there are bound to be people who are interested in taking paid work but who, for one reason or another, are not classified as unemployed.
An example of this is discouraged workers – people who have effectively given up active search for jobs perhaps because they have been out of work for a long time and have lost both the motivation to apply for jobs and also the skills required.
The poverty trap can also act to increase hidden unemployment. Jobless workers may not apply for jobs because of financial disincentives created by the interaction of the income tax and state benefits system.
This kind of unemployment problem arises when the wages rise above the equilibrium full employment level. In such a situation the wages are not flexible downwards which will imply that unemployment would continue for long. Such wages may be set by manipulations in the trade union.
