Smit Shah

Student Number: N01251128

Course: Management Economics – ECON-5015-0LA

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Instructor: Usman Malik

 

 

Question: How is unemployment measured? Discuss different types of unemployment. Give examples to illustrate your answer.

 

Answer:

 

The U.S. Department of Labor Statistic utilizes six measurements while computing the unemployment rate. The measures extend from U1 – U6 and were accounted from 1950 through 2010. They figure distinctive parts of unemployment. The measures are:

U1: The level of labor force unemployment for 15 weeks or more.

U2: The level of labor force who lost jobs or completed temporary work.

U3: The official unemployment rate that happens when individuals are without jobs and they have effectively searched for work within the past four weeks.

U4: The people described in U3 in addition to “disheartened laborers,” the individuals who have quit searching for work since flow financial conditions influence them to imagine that no work is accessible to them.

U5: The people described in U4 in addition to other “marginally attached workers,” “loosely attached workers,” or the individuals who “might want” and can work, yet have not searched for work as of late.

U6: The people described in U5 in addition to low maintenance laborers who need to work all day, however can’t because of monetary reasons, principally underemployment.

 

Following are the different types of Unemployment:

 

1.Natural Unemployment:

Natural unemployment, or the natural rate of unemployment, is the base or minimum unemployment rate coming about because of genuine, or voluntary, economic powers. Natural unemployment is the level of unemployment constantly present in an economy as enterprises grow contract, as mechanical advances happen, as new generations enter the labor force and as workers voluntarily search for better options.

Example:

The unemployment rate measures the rate of employable individuals for a country’s workforce who are beyond 16 years old and who have either lost their jobs or have unsuccessfully looked-for employment in the most recent month are still currently looking for work.

 

2.Frictional Unemployment:

Frictional unemployment is a temporary phenomenon. It might likewise come about when a few workers are temporarily out of work while changing jobs. It might likewise come about when the work is suspended because of strikes or lockouts. To some degree, also say that frictional unemployment is because of challenges in getting workers and vacancies together.

Example:

Regularly laborers must move for insignificant reasons previously they can search for new occupations. They may get married or should administer to elderly relatives. Different circumstances, they may have spared enough cash, so they can stop unfulfilling occupations. They have the privilege to look until the point that they find only the correct open doors.

 

3.Casual Unemployment:

In enterprises, for example, construction, catering or farming, where workers are utilized on an everyday premise, there are odds of casual unemployment happening because of short term contracts, which are limited whenever. Accordingly, when a laborer’s agreement closes after the consummation of work, he needs to discover an occupation somewhere else, which he is probably going to get contingent upon conditions or he may get a crisp contract with a similar firm when some new work is begun.

Example:

The workers who are discharged after the end of an agreement are included in the list of casual unemployment workers. The workers who are working in some agriculture industries, construction industries, catering industries, dockyards etc.

 

4.Seasonal Unemployment:

Seasonal unemployment happens when individuals are jobless under specific circumstances of the year since they work in enterprises where they are not required throughout the entire year.

There are few businesses and occupations, for example, agribusiness, the catering trade in holiday resorts, some agro-based exercises like sugar factories and rice plants, in which production activities are seasonal in nature. So, they offer employment for just a specific timeframe in a year. People occupied with such sort of work or activities may stay unemployed during the off-season. We call it seasonal unemployment.

Example:

Some businesses and occupations, such as farming, snow removal etc. are seasonal businesses or occupations in which worker are only able to work for a certain period of time and then after they have to go out and search for the new job.

 

5.Structural Unemployment:

Because of structural changes in the economy, structural unemployment may happen. Structural unemployment is caused by a decrease in demand for certain products or creations in a specific industry, and ensuing disinvestment and lessening in its labor necessities.

Example:

Technological advances have made structural unemployment in the daily paper industry. Online publicizing has drawn sponsors far from daily paper promotions. Online news media has drawn clients far from physical daily papers.

 

6.Technological Unemployment:

Technological unemployment is fundamentally made by presentation of machinery, improvement in methods of production, labor-saving devices, etc., some workers tend to be replaced by machines. Their unemployment is termed as technological unemployment.

Example:

A machine that mass produces shoes may make a shoemaker lose his business.

7.Cyclical Unemployment:

In industrially advanced capitalist countries this type of unemployment is found in recessionary and depressionary phases causes cyclical unemployment in these countries. During the contraction phase of a trade cycle in an economy, aggregate demand falls, and this leads to disinvestment, a decline in production and unemployment. The solution for cyclical unemployment lies in measures for increasing total expenditure in the economy, thereby pushing up the level of effective demand.

Example:

If there is a large drop-off of demand in a particular product than a company have to lay off workers to maintain profit margins.

 

8.Chronic Unemployment:

At the point when unemployment has a tendency to be a long-term highlight of a nation it called “chronic unemployment.” Underdeveloped nations experience the ill effects of chronic unemployment because of the endless loop of poverty. Absence of developed resources and their underutilization, high population growth, even rough condition of innovation, low capital arrangement etc. are the significant reasons for chronic unemployment in underdeveloped economies.

Example:

Slower economic growth, rapid population growth, seasonal agriculture, fall in the cottage industries, immobility of workforce and defective education system are the major reasons for the chronic unemployment.

 

9.Disguised Unemployment:

So far, the types of unemployment which we have discussed above are all related to open unemployment. Disguised   unemployment commonly refers to a situation of employment with surplus manpower in which some workers have zero marginal productivity so that their removal will not affect the volume of total output. Disguised unemployment in the strict sense, implies underemployment of labor.

Example:

To illustrate, suppose a family farm is properly organized and four persons are working on it. If, however, two more workers are employed on it and there is no change in output, we may say that these two workers are disguisedly unemployed.

 

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