Chapter 7: Problem 7

Many college students graduate from college before they have found a job. When graduates begin to look for a job, they are counted as what category of unemployed?

Short Answer

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Recent college graduates who begin looking for a job after completing their education fall under the category of frictional unemployment. This type of unemployment occurs when people are temporarily between jobs or searching for a job and includes individuals entering the job market for the first time.

Step by step solution

Identify the types of unemployment

There are four main types of unemployment: 1. Frictional Unemployment: This type occurs when people are temporarily between jobs or searching for a job. It includes individuals who have recently completed education and are entering the job market for the first time. 2. Structural Unemployment: This type occurs when the skills and abilities of workers do not match the requirements of available jobs. This could be due to technological advancements, industry changes, or regional economic shifts. 3. Cyclical Unemployment: This type of unemployment is related to the business cycle. During economic downturns, companies may lay off workers, and job opportunities become scarce. 4. Seasonal Unemployment: This type of unemployment is related to jobs that are dependent on specific times of the year, such as tourism or agriculture industries. These jobs may not be available year-round, causing periods of unemployment for workers in those fields.

Determine the category of unemployment for recent college graduates

From the above definitions, we can conclude that recent college graduates who begin looking for a job after completing their education fall under the category of frictional unemployment. Frictional unemployment is normal and expected as individuals transition between various stages of their career, such as entering the job market for the first time, changing jobs, or reentering the job market after a period of absence. So, when college graduates start searching for a job after completing their education, they can be considered frictionally unemployed.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Frictional Unemployment

Frictional unemployment occurs when individuals are temporarily transitioning between jobs or entering the workforce for the first time. It's a natural form of unemployment because the job search process can take time, and there's always going to be some movement within the labor market.

Take, for example, recent college graduates. They often have not secured employment by the time they finish their studies. As they start looking for jobs, they're classified under frictional unemployment. It's important to note that this type is not due to economic downturns but rather personal choice or life circumstances leading to short-term joblessness. It's seen as the least harmful type of unemployment because it is usually of short duration and can even suggest a healthy, dynamic economy where individuals have the freedom to seek out jobs that better suit their skills and preferences.

Structural Unemployment

Structural unemployment is caused by a deeper, longer-lasting shift in the economy that affects how industries and labor markets work. This type of unemployment arises when there's a mismatch between the skills of workers and the needs of employers.

Oftentimes, large-scale changes like technological advances, globalization, or shifts in consumer preferences can render certain skills obsolete. Workers affected by structural unemployment may require retraining or relocating to secure employment in a new field or location. For instance, as automation becomes more prevalent, factory workers might need to learn new, tech-related skills to remain employable.

Cyclical Unemployment

Cyclical unemployment is directly related to the health of an economy—it rises during economic downturns and falls during periods of growth. It's a symptom of the natural expansion and contraction phases of the business cycle.

During recessions, consumer demand drops, leading companies to reduce their workforce to cut costs. Consequently, workers laid off due to such economic setbacks are considered cyclically unemployed. Their chance of reemployment often depends on economic recovery. Policymakers use fiscal and monetary policy tools to reduce cyclical unemployment and stabilize the economy.

Seasonal Unemployment

Seasonal unemployment happens when certain jobs are only needed, or available, at particular times of the year. Industries like tourism, agriculture, and retail (especially during holiday seasons) often experience this type of unemployment because they rely on climatic conditions or consumer patterns tied to specific seasons.

For example, ski instructors likely face unemployment during the summer months when demand for skiing wanes, and agricultural workers may be unemployed after the harvest season. This type of unemployment is predictable and often temporary, with workers understanding that their jobs depend on the season. Efforts to mitigate the impact of seasonal unemployment can include training affected individuals for roles in other industries or offering seasonal contracts that ensure a return to employment when the season comes around again.