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Forms of Unemployment

Just as there are different types of employment - with their various impacts on the economy - so, too, does unemployment vary. So, also, do economic theories differ in their interpretations of the character of unemployment and, more importantly, in their responses to unemployment. This paper will examine two of the mainstream economic theories and how they consider unemployment: "Keynesian" macroeconomics as propounded by John Maynard Keynes, and "Monetarism" as put forth by Milton Friedman.

There are three basic forms of unemployment:

Frictional unemployment arises from the "normal"* process of turnover in the labor market: as new workers enter the market and search for work, and as existing workers quit one job to look for a better one.

Cyclical unemployment is that which varies with business conditions; for example, workers are laid off when business is bad - then rehired when conditions improve. Closely related to cyclical unemployment is Seasonal unemployment (sometimes considered a fourth category in itself); seasonal unemployment occurs in agriculture, construction, and other industries that are more active at some times of the year than at others. Seasonal unemployment is predictable; cyclical unemployment is not.

Structural unemployment, caused by imperfect labor-market adjustment, is the most intractable of the main types: workers and resources do not move freely to places where they are needed. Many workers who lost their jobs in the coal industry - in the U.S. Appalachian region in the 1960s, in the north of Great Britain in the '80s - lacked skills useful for other local industries. Moving to another part of the country was difficult for most (housing costs, family connections, transport), and new industries did not come into the region that would employ them.

Together, frictional and structural unemployment compose what is known as the "natural rate of unemployment". This is the rate of une...

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Forms of Unemployment. (2000, January 01). In Retrieved 12:46, February 20, 2017, from