Explain the three main types of unemployment experienced within an economy. Provide at least one example demonstrating each type of unemployment
The three main types of unemployment experienced within an economy are:
1. Frictional Unemployment: This type of unemployment occurs when individuals are temporarily between jobs or are entering or re-entering the workforce. It is often a result of individuals voluntarily leaving their job to search for a better opportunity, or recent graduates looking for their first job. For example, a recent college graduate who quits their job to search for a position that is more aligned with their career goals would be considered frictionally unemployed.
2. Structural Unemployment: Structural unemployment occurs when there is a mismatch between the skills and qualifications of workers and the requirements of available jobs. This can happen due to changes in technology or shifts in the economy that lead to certain industries declining while others grow. For example, the decline of manufacturing jobs in the United States due to automation and outsourcing has led to structural unemployment for many workers in that industry.
3. Cyclical Unemployment: Cyclical unemployment is related to fluctuations in the business cycle and occurs when there is a general economic downturn or recession. During periods of low economic activity, businesses may lay off workers in order to cut costs, leading to higher unemployment rates. The global financial crisis of 2008 is a prime example of cyclical unemployment, as many businesses across various industries laid off employees in response to the economic downturn.