You have probably talked about unemployment rates many times on the news, especially recently when the COVID-19 pandemic gripped the economy and tens of millions of Americans were unemployed. Many people also have personal experiences of unemployment, be it because they lost a job themselves or someone close to them.
Economists, when looking at a nation as a whole, distinguish between several different types of unemployment: The main types of unemployment are cyclical, abrasive and structural. In addition, many workers learn underemployment, another important measure to be aware of. We'll explain below how each of these features work along with some different types of unemployment.
Or read through for a full explanation of the different types of unemployment in the economy.
What is unemployment?
unemployment occurs when an employee who is willing and able to work cannot find a job. Unemployment rates can vary depending on the criteria the researchers use to define them. In general, however, unemployment figures exclude demographics such as children under 18, retirees, and people with permanent disabilities who cannot work.
A similar phenomenon underemployment, occurs when people have work but the work doesn't pay enough to make ends meet. This can also happen when a worker's skills are not being fully utilized by the job they currently have.
Unemployment is a broad category that encompasses many different situations. What types of unemployment are economists – and workers – interested in? Let's look at this now.
What types of unemployment are there?
There are many different types of unemployment in the economy that professionals and workers might be interested in. However, there are three types of unemployment that are most common.
Smooth unemployment is common. It naturally happens when someone is between jobs, just graduated from high school or college, and is looking for work or re-entering the world of work. Since there are always people looking for new jobs, there is always some level of frictional unemployment that is factored into the unemployment figures. For this reason, many economists consider frictional unemployment to be the least worrying type of unemployment.
This type of unemployment occurs because of the volatile nature of the market. In times of economic growth, more money is often in the hands of people. This includes employers who can hire more workers. When the economy is in a downturn or recession, employers struggle and often have to lay off some workers.
Government interventions can help reduce the damage caused by cyclical unemployment. For example, The Federal Reserve can cut interest ratesThis makes it cheaper for banks and businesses to borrow money. This can boost the economy and help employers retain workers while the economy is in a downturn.
When the workforce is not adequately trained for the jobs currently available, people face structural unemployment. If, for example, large cities use more public transport or self-driving electric vehicles in the future, traditional auto mechanics could be affected by structural unemployment.
Structural unemployment can be particularly worrying as retraining is expensive and, meanwhile, many previously employed workers have to rely on government aid programs to make ends meet.
Other types of unemployment
In addition to these three types of unemployment that are most commonly referred to, there are other types of unemployment that you may encounter or may experience:
Regional unemployment: This occurs when an industry moves out of one area or another local condition causes unemployment.
Seasonal unemployment: Some jobs are only available at certain times of the year. For example, ski instructors might face seasonal unemployment in the warmer months.
Voluntary unemployment: People can be voluntarily unemployed if they make enough money from other sources such as spouse, inheritance, or investments.
Classic unemployment: Classic unemployment occurs when the wage share is too high for employers to be able to afford so that there is a surplus of unemployed.
Another factor to consider is underemployment. As mentioned earlier, this occurs when workers have a job but it pays below a living wage or does not take full advantage of the worker’s skill level. Underemployment can arise due to a number of factors, such as the undervalued workforce in the market. It can also appear alongside the three types of unemployment mentioned above.
Underemployment can be a difficult problem for economists and policymakers (as well as workers) as unemployment rates seem to be low, while the actual unemployment figures can in fact be much higher when underemployed workers are taken into account. In some cases, even workers who have a full-time job cannot make ends meet due to the excessive cost of living in some cities and towns too low a minimum wage.
This means that while unemployment rates can be a useful measure to understand how well the economy is doing, there are often other factors that need to be studied to better understand the situation. Unemployment may appear to be low, but when many workers are underemployed, it is Low unemployment can be misleading.
Unemployment classifications of people affected by COVID-19
People affected by the COVID-19 recession may be unemployed. As many as 15% of Americans were laid off when the recession hit; Half of this number was still unemployed as of autumn 2020. Since this is such an extraordinary event, it can be difficult to say what type of unemployment it would fall under, although it could be some form of cyclical unemployment due to the fact that the economic recession brought it up .
To combat the worst personal effects of unemployment, regardless of the type, state governments run unemployment insurance programs. These programs usually require employees to pay a portion of their monthly income into the administration. then they have the right to claim benefits when they are dismissed. It is a socially funded insurance policy that protects people from financial hardship if they are laid off.
While workers may suffer from any of the types of unemployment listed above, the good news is that it doesn't matter when it comes to connecting with resources. The bad news is that as of autumn 2020, the government has not adopted any new stimulus packages to ease the burden of COVID-19 economically. However, individual states continue to administer their regular unemployment insurance benefits. Make sure you find your country's unemployment service and apply for benefits as soon as possible to protect your personal financial well-being.
Unemployment insurance usually only lasts a few months. So it's important to focus on finding a new job or other source of income while living on benefits. Re-evaluate your finances after losing your job can be a challenge, but it's important to remember that resources are available to you.
Types of unemployment: the main takeaways
Here is a brief overview of the explanations in this article.
There are 3 types of unemployment Most economists focus on:
Frictional unemployment: the natural unemployment people experience when they are between jobs.
Economic unemployment: When the economy is doing well, more jobs will be created. If it is a downturn, many people are laid off.
Structural unemployment: Sometimes the jobs available require different skills than what the workforce has been trained in – this is a bigger problem.
Besides unemployment Underemployment is an important measure also understand. This occurs when people work in jobs that are below their skill level, or when the market undervalues workers' laboratories so that they cannot make ends meet despite working full-time.
People whose livelihoods were affected by the COVID-19 pandemic may be affected a form of cyclical unemployment – However, it is important to note that these are exceptional circumstances.
Fortunately, Unemployment benefit is usually available laid-off workers regardless of the type of unemployment they might suffer from.
You can apply for unemployment benefit via your country's unemployment service.
Regardless of the type of unemployment you may have, keeping your personal finances under control is important. One way to do this is to create a budget. You can use the … Mint app Create a monthly spending plan, evaluate your various financial accounts, and manage outstanding debts – all in one convenient place.
Pew social trends | Labor Statistics Office | LISEP | Brookings | Benefits.gov
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