4 Types Of Unemployment

Describe the four types of unemployment.

Quick Answer
Frictional unemployment refers to unemployed people
who are switching jobs or looking for jobs for the first time.
Seasonal unemployment happens when people are out of
work due to the season, especially in fields such as
agriculture. Structural unemployment refers to jobs
becoming outdated due no longer needing a specific
skillset. Finally, in cyclical unemployment, people are out
of jobs as a result of the poor economy.

Expert Answers
pohnpei397 | Certified Educator

First, please note that economics texts sometimes refer to

only three types of unemployment.   The fourth, seasonal
unemployment, is sometimes omitted.  When we are using
a four-type typology, we say that the types of
unemployment are structural, frictional, cyclical, and
seasonal.
Frictional unemployment is a kind of unemployment that
occurs when people are “between jobs” or are looking for
their first jobs.  It is a kind of unemployment that occurs
when the economy is trying...

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Student Answers
bobbybrown | Student

1. Frictional unemployment: This is typically temporary

unemployment caused by the time people take to move
between jobs, e.g. graduates or people changing jobs. There
will always be some frictional unemployment in an
economy because information is not perfect and it takes
time to find work.

2. Structural unemployment: can be caused by

occupational immobility. This refers to the difficulties in
learning new skills applicable to a new industry, and
technological change, e.g. an unemployed farmer may
struggle to find work in high tech industries. In other
words, structural unemployment occurs when there is a
mismatch between job requirements and employee skills.

3. Classical or Real wage unemployment: This occurs

when wages in a competitive labour market are pushed
above the equilibrium, e.g. at W2 the supply of labour (Q3)
is greater than the demand for labour (Q2). Wages could be
pushed above the equilibrium level by minimum wages or
trade unions. This is sometimes known as ‘disequilibrium’
employment.

4. Voluntary unemployment: This occurs when people

choose to remain unemployed rather than take jobs
available. For example, if benefits are generous, people
may prefer to stay on benefits rather than get work.
Frictional unemployment is also a type of voluntary
unemployment as they are choosing to wait until they find
a better job.

5. Demand Deficient or ‘Cyclical Unemployment:

Demand deficient unemployment occurs when the
economy is below full capacity. For example, in a recession
Aggregate Demand (AD) will fall leading to a decline in
output and negative economic growth. With a fall in output
firms will employ fewer workers because they are
producing fewer goods. Also some firms will go out of