unemployment and it effects on economy

1. TYPES
OF
UNEMPLOYMENT

2. In economics, unemployment refers to the condition of unwanted
job losses, or willing workers without jobs. The willingness of
the unemployed worker to be employed is the key to the idea.
A person who is :-
 Physically Fit
 Mentally sound
 Well qualified
 Willing to work at prevailing wage rate
BUT DOES NOT GET JOB, THIS SITUATION IS CALLED
UNEMPLOYMENT
What is Unemployment ?

3. Classification Of Unemployment
Unemployment can be broadly classified under two broad categories –
VOLUNTARY UNEMPLOYMENT - Unemployment that results when resources which are willing and
able to engage in production choose not to produce output. These are resources (especially labor) that decide
to leave one job, often in search of another.
 INVOLUNTARY UNEMPLOYMENT - The contrast to voluntary unemployment is involuntary
unemployment, in which resources are forced out of work. Involuntary unemployment is also known as
Forced Unemployment.

4. TYPES OF UNEMPLOYMENT
1. Seasonal Unemployment
2. Cyclical Unemployment
3. Technical Unemployment
4. Frictional Unemployment
5. Structural Unemployment
6. Disguised Unemployment

5. Seasonal Unemployment
Seasonal unemployment refers to a situation where a number of
persons are not able to find jobs during some months of the year.
EXAMPLE-: Agriculture is a seasonal activity. There is an increased demand for labour
at the time of sowing, harvesting, weeding and threshing. In between there is little or no
demand for labor. Agricultural labour finds himself unemployed during this period. This
is called seasonal unemployment.

6. Cyclical unemployment
Cyclical unemployment, occurs when there is not enough
aggregate demand in the economy to provide jobs for everyone
who wants to work.
Demand for goods and services fall, less production is needed
and less workers too.

7. Technical Unemployment
Unemployment caused by technological changes or new methods of production in an
industry or business.
Example: The evolution of the automobile assembly plant. In the beginning,
everything on the line was done by humans in order to build a car. The assembly line
itself was a great technological innovation. Today, robots are employed for much of the
hand-work humans used to do.

8. Frictional Unemployment
This is a type of voluntary unemployment that arises because of the time needed to
match job seekers with job openings. Just as friction always takes place before the
slider comes to its final position on the surface, people need time to find the best job,
thus voluntarily rubbing back and forth between choices and staying unemployed
Example: When you make up your mind and set off looking for a better job and
abandoning the current one, you are in the frictional unemployment labor force.

9. Structural Unemployment
This unemployment arises due to structural change in dynamic economy.
Unemployment caused by massive mismatch of skills or geographic location is noted
as structural unemployment.
Example: Heavy Manufacture (mining) - Manufacture now involves machines so
humans are no longer needed for the harder work.
Structural unemployment poses more of a problem because workers must seek jobs
elsewhere or must develop the skills demanded. The process is full of pain and
frustration, and may lead to negative impacts on society.

10. Disguised Unemployment
When more people are engaged in some activity than the number of
person required for that, this is called disguised unemployment
EXAMPLE:
An agricultural field require 3 laborers but people engaged in this activity is 6 then this
unemployment for 3 labors is called disguised unemployment

11. Cost Of Unemployment
Personal Cost -
Loss of paycheck - Loss of earnings to the unemployed
Loss of self esteem - Those who are unemployed will find it more difficult to get work in
future(this is known as hysteresis effect)
Increase in social problems - Areas of hig.h unemployment (especially youth
unemployment) tends to have more crime and vandalism

12. Cost Of Unemployment
Economic Cost -
Loss in output – Labour has productivity, high or low, depending on its skill and availability
of capital per labour. Therefore, unemployment means loss of output expected from the
employment of unemployed labour force.
Increased Govt borrowings. Tax revenue will fall because there are less people paying
Income Tax and VAT. Also the Govt will have to spend more on unemployment benefits.
Lower GDP for the economy - The economy will be below full capacity. This is inefficient
and will lead to lower output and incomes.

13. Thank You