Chapter 10: Problem 327

Classify unemployment based on its cause. Describe and give examples for each. Which of the three do you think is the most desirable?

Short Answer

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There are three main types of unemployment: frictional, structural, and cyclical. Frictional unemployment occurs when people are between jobs or searching for their first job, and is a natural part of a healthy job market. Structural unemployment results from a mismatch between workers' skill sets and available job requirements, often due to technological advancements or shifts in the economy. Cyclical unemployment is tied to the business cycle and occurs when job opportunities decrease during economic downturns. Among these, frictional unemployment is the most desirable, as it reflects a well-matched and flexible job market.

Step by step solution

Identifying Types of Unemployment

There are three main causes or types of unemployment: frictional, structural, and cyclical.

Explain Frictional Unemployment

Frictional unemployment occurs when people are between jobs or looking for their first job. It's a natural part of the job market, as individuals will often need some time to search for the best job that matches their skills and preferences. Examples of frictional unemployment include: 1. Recent graduates searching for a job that suits their qualifications. 2. An individual who has quit their job to look for a better opportunity.

Explain Structural Unemployment

Structural unemployment results from a mismatch between the skill sets of the available workforce and the skill requirements of available jobs. This type of unemployment might happen, for example, when technological advancements or shifts in the economy cause some industries to decline, and the workers within these industries face difficulties to adapt and find new jobs in growing fields. Examples of structural unemployment include: 1. A factory worker who loses their job due to automation and struggles to find a new job in a sector that requires different skills. 2. Workers in the coal mining industry who experience job loss due to the increase in renewable energy.

Explain Cyclical Unemployment

Cyclical unemployment occurs when there is a decrease in job opportunities due to a downturn in the business cycle, such as a recession. This type of unemployment is linked to the overall health of the economy and tends to rise during economic downturns and fall during economic upturns. Examples of cyclical unemployment include: 1. Workers who lose their jobs during a recession. 2. Employees in a company that goes bankrupt during an economic downturn.

Identifying the Most Desirable Type of Unemployment

Among the three types of unemployment, frictional unemployment is the most desirable. Frictional unemployment is a natural part of a healthy job market, as it results from the movement of people between jobs or the search for new opportunities. It suggests that people are taking the time to find the right job fit for them, leading to a more satisfied and well-matched workforce. Furthermore, a certain level of frictional unemployment allows for greater flexibility and adaptability of the job market, allowing companies and employees to find the best fits for their needs.