A look at the main causes of unemployment – including: demand deficient, structural, frictional and real wage unemployment.
Main types of unemployment
1. Frictional unemployment
This is unemployment caused by the time people take to move between jobs, e.g. graduates or people changing jobs. There will always be some frictional unemployment in an economy because information isn’t perfect and it takes time to find work.
2. Structural unemployment
This occurs due to a mismatch of skills in the labour market it can be caused by:
- Occupational immobilities. This refers to the difficulties in learning new skills applicable to a new industry, and technological change, e.g. an unemployed farmer may struggle to find work in high tech industries.
- Geographical immobilities. This refers to the difficulty in moving regions to get a job, e.g. there may be jobs in London, but it could be difficult to find suitable accommodation or schooling for their children.
- Technological change. If there is the development of labour saving technology in some industries, then there will be a fall in demand for labour.
- Structural change in the economy. The decline of the coal mines due to a lack of competitiveness meant that many coal miners were unemployed, however they found it difficult to get jobs in new industries such as computers.
