What are
the types of Unemployment?
1) Structural unemployment: Basically Bangladesh's
unemployment is structural in nature. It is associated with the inadequacy of
productive capacity to create enough jobs for all those able and willing to
work. In Bangladesh
not only the productive capacity much below the needed quantity, it is also found
increasing at a slow rate. As against this, addition to labour force is being
made at a first rate on account of the rapidly growing population. Thus, while
new productive jobs are on the increase, the rate of increasing being low the
absolute number of unemployed persons is rising from year to year.
2) Disguised unemployment: Disguised unemployment
implies that many workers are engaged in productive work. For example, in
Indian 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 In such a situation, even if many workers are withdrawn, the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 arte 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 farms actually hinder agricultural
works and thereby reduce production.
3) Cyclical unemployment: Cyclical unemployment in
caused by the trade or business cycles. It results from the profits and loss
and fluctuations in the deficiency of effective demand production is slowed
down and there is a general state of depression which causes unemployment
periods of cyclical unemployment is longer and it generally affects all
industries to a greater or smaller extent. unemployment is when workers
lose their jobs during downturns in the business cycle. It generally happens
when the economy contracts, as measured by Gross Domestic Product (
GDP).
If the economy contracts for two quarters or more, then it's in a
recession.
Cyclical unemployment is usually the cause of high
unemployment, when rates quickly grow to 8% or even 10% of the labor force.
It's known as cyclical because, when the economy
re-enters the expansion phase of the business
cycle, the unemployed will get rehired. Cyclical unemployment is
temporary -- although it could last anywhere from 18 months (the typical time
frame of a recession) to ten years (during a depression).
Causes
Cyclical unemployment results from a large drop-off of
demand.
It usually starts with less personal
consumption. When consumer demand for goods and services drops,
business revenues decline, and eventually companies have to lay off workers to
maintain profit
margins. Often there isn't enough production to keep the workers
busy.
The last thing a business wants to do is layoff
workers. It's a traumatic event, and a company could lose valuable employees
that it's invested a lot in. That's why, by the time cyclical unemployment
starts to climb, the economy is usually already in a recession. Businesses wait
until they're sure the downturn is severe before starting layoffs.
Examples
An example of cyclical unemployment is the loss of construction jobs during
the 2008
financial crisis. As the housing crisis unfolded, home builders stopped
constructing new homes. As many as 2 million construction workers lost their
jobs. Whenever home building starts up again, they will be able to go back to
work. (Source: CBS News, 2 Million
Construction Jobs Lost, June
16, 2011)
Someone can start out being cyclically unemployed, and wind up being being a
victim of structural
unemployment. During the recession, many factories switched to robots and
sophisticated computer equipment to run machinery. Workers now need to get
updated computer skills so they can manage the robots that now runs the
machinery they used to work on themselves. Unfortunately, fewer workers are
needed. Those that don't go back to school are structurally unemployed. That's
because their skills no longer match the needs of the workforce.
Cyclical Unemployment Rate
The cyclical unemployment
rate is the difference between the natural
unemployment rate and the current rate. The natural rate includes
structural, frictional, and surplus unemployment. Subtract those from the
unemployed and the labor force and, Voila!, you have the cyclical unemployment
rate. In real life, it's difficult to look at the data and determine why each
person is unemployed. Therefore, economists have come up with two other methods
to estimate how much of unemployment is cyclical.
The first, and most common, method is to take the unemployment rate during
the peak phase of the business
cycle, subtract it from the unemployment rate during the trough phase, and
chalk the rest up to cyclical unemployment.
The second is to compare the unemployment rate for recent college graduates
with the unemployment rate overall. If their rate is similar to the overall
rate, then most of the nation's unemployment is cyclical. Why? Recent college
graduates have new skills, and are able to move to wherever the jobs are.
Therefore, they have very little of the reasons for structural
unemployment. Using this method, researchers found that the most of the
unemployment in 2011 was cyclical. (Source: Bureau
of Labor Statistics, Current
unemployment:cyclical or structural?, March 21, 2011)
Solution
Because cyclical unemployment can so quickly spiral out of control, usually
the Federal government must step in to stop it. The first, and easiest,
response is with expansionary
monetary policy. The Federal
Reserve will start lowering interest
rates. This is like putting money into the pockets of families and
businesses. That's because it lowers all interest rates, making loans and even
credit card payments cheaper. Furthermore, just knowing that the Fed is taking
action may restore the confidence needed to boost demand.
If that's not enough, then expansionary fiscal policy
must be used. This takes longer, because usually the President and Congress
must vote on more spending. This raises the budget deficit.
It also re-ignites the bi-partisan debate as to whether tax cuts or spending
are more effective job creators. However, a U
Mass/Amherst study shows that the most cost effective unemployment
solution is spending on public works
projects to create construction jobs. This makes sense, since these jobs are
the most cyclical. The second is extending
unemployment benefits. Tax cuts, according to the research, is less
effective in creating the demand needed to stop cyclical unemployment. Article
updated February 25, 2015.
4) Seasonal unemployment: Seasonal unemployment
occurs at certain seasons of the year. It is a widespread phenomenon of Indian
villages basically associated with agriculture. Since agricultural work depends
upon Nature, therefore, in a certain period of the year there is heavy work,
while in the rest, the work is lean. For example, in the sowing and harvesting
period, the agriculturists may to engage themselves day and night.But the
period between the post harvest and pre sowing is almost workless, rendering
many without work. Thus, seasonal unemployment is largely visible after the end
of agricultural works.
5) 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.
6) 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 form 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.Hence it is called upon
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.
7) 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. She does not work on the prevalent or
prescribed wages. Either he wants higher wages or does not want to work at all.
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 characterise involuntary
unemployment, not voluntary as unemployment proper.