In industrialized countries in which most people can earn a living only
by working for others, being unable to find a job is a serious problem. Because
of its human costs in deprivation and a feeling of rejection and personal
failure, the extent of unemployment is widely used as a measure of workers’
welfare. The proportion of workers unemployed also shows how well a nation’s
human resources are used and serves as an index of economic activity. Economists
have described the types of unemployment as frictional, structural, and cyclical.
The first form of unemployment is Frictional unemployment.
unemployment arises because workers seeking jobs do not find them immediately.
While looking for work they are counted as unemployed. The amount of frictional
unemployment depends on the frequency with which workers change jobs and the
time it takes to find new ones. Job changes occur often in the United States. A
January 1983 survey showed that more than 25 percent of all workers had been
with their current employers one year or less. About a quarter of those
unemployed at any particular time are employed one month later.
This means that
a considerable degree of unemployment in the United States is frictional and
lasts only a short time. This type of unemployment could be reduced somewhat by
more efficient placement services. When workers are free to quit their jobs,
some frictional unemployment will always be present.
The second form of Unemployment is structural unemployment. Structural
unemployment arises from an imbalance between the kinds of workers wanted by
employers and the kinds of workers looking for jobs. The imbalances may be
caused by inadequacy in skills, location, or personal characteristics.
Technological developments, necessitate new skills in many industries, leaving
those workers who have outdated skills without a job. A plant in a declining
industry may close down or move to another area, throwing out of work those
employees who are unable or unwilling to move. Workers with inadequate education
or training and young workers with little or no experience may be unable to get
jobs because employers believe that these employees would not produce enough to
be worth paying the legal minimum wage or the rate agreed on with the union. On
the other hand, even highly trained workers can be unemployed. This happened in
the United States in the early 1970s, when the large numbers of new graduates
with doctoral degrees in physics and mathematics exceeded the number of jobs
available in those fields. If employers practice illegal job discrimination
against any group because of sex, race, religion, age, or national origin, a
high unemployment rate for these workers could result even when jobs are
Structural unemployment shows up most prominently in some cities, in
some occupations or industries, for those with below average educational
attainments, and for some other groups in the labor force. The third form of
unemployment is cyclical unemployment.
Cyclical unemployment results from a general lack of demand for labor.
When the business cycle turns downward, demand for goods and services drops.
Consequently, workers are laid off. In the 19th century, the United States
experienced depressions roughly every 20 years.
A long and severe depression
occurred in the 1890s, when unemployment reached about 18 percent of the
civilian labor force, and four less severe depressions occurred in the first
quarter of the 20th century. The worst depression in United States history was
in the 1930s. At its height, one worker in four was unemployed, and some
remained out of work for years.
In industrialized countries, with unemployment insurance and other forms
of income maintenance, unemployment does not cause as great a hardship as it
once did. Measures to stabilize the economy have made economic downturns briefer
and less severe.