Theory question 105
Labour Market(a) Differentiate between unemployment and underemployment.
(b) With one example each, explain the following: (i) seasonal unemployment; (ii) structural unemployment; (iii) frictional unemployment; (iv) cyclical unemployment.
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(a) Unemployment is when people who are willing and able to work at the current wage cannot find jobs. Underemployment is when people work below their capacity: fewer hours than they want, or in jobs below their skills (e.g. an engineer driving a taxi).
(b)(i) Seasonal: caused by seasonal changes in demand or weather, e.g. farm labourers in the dry season.
(ii) Structural: caused by long-term changes in the structure of the economy or technology, e.g. typists replaced by computers, coal miners when oil replaced coal.
(iii) Frictional: short-term, while workers move between jobs or search for jobs, e.g. a graduate looking for a first job.
(iv) Cyclical: caused by a fall in total demand during a recession/depression, e.g. factory workers laid off in an economic slump.
Give one clear real-life example for each type.