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major causes of unemployment
The causes of unemployment can be described under four main categories: - Seasonal unemployment - Frictional unemployment - Structural unemployment - Cyclical unemployment
Seasonal unemployment
Seasonal unemployment happens due to regular and predictable seasonal changes in employment / labour demand. Seasonal unemployment affects certain industries more than others. For example it is a common feature of employment in these industries:
• Catering and leisure • Construction • Retailing • Tourism • Agriculture
Frictional unemployment
Frictional unemployment is transitional unemployment due to people moving between jobs: For example, redundant workers or people joining the labour market for the first time such as university graduates may take time searching to find the work they want at an acceptable wage or salary.
Imperfect information in the labour market may make frictional unemployment worse if the jobless are unaware of the available jobs. Incentives problems can also cause some frictional unemployment as some people looking for a new job may stay out of work if they believe the tax and benefit system will reduce the net increase in income from taking work. When this happens there are disincentives for the unemployed to accept work – this is known as the unemployment trap.
Structural unemployment
Structural unemployment occurs when there is a long run decline in demand in an industry leading to a reduction in employment because of international competition. Globalisation is a fact of life and inevitably it leads to changes in the patterns of trade between countries from year to year.
For example, the UK has probably now lost forever, its cost advantage in manufacturing goods such as motor cars, household goods and audio-visual equipment, indeed our manufacturing industry has lost over 500,000 jobs in the last five years alone as production has shifted to lower-cost centres in Eastern Europe and emerging markets in Far East Asia. Many of these workers may suffer from a period of structural unemployment, particularly if they are in regions of above-average unemployment where job opportunities are scarce.
You can see the effect of structural unemployment on the UK’s manufacturing sector in the chart further below.
Seasonal unemployment
Seasonal unemployment happens due to regular and predictable seasonal changes in employment / labour demand. Seasonal unemployment affects certain industries more than others. For example it is a common feature of employment in these industries:
• Catering and leisure • Construction • Retailing • Tourism • Agriculture
Frictional unemployment
Frictional unemployment is transitional unemployment due to people moving between jobs: For example, redundant workers or people joining the labour market for the first time such as university graduates may take time searching to find the work they want at an acceptable wage or salary.
Imperfect information in the labour market may make frictional unemployment worse if the jobless are unaware of the available jobs. Incentives problems can also cause some frictional unemployment as some people looking for a new job may stay out of work if they believe the tax and benefit system will reduce the net increase in income from taking work. When this happens there are disincentives for the unemployed to accept work – this is known as the unemployment trap.
Structural unemployment
Structural unemployment occurs when there is a long run decline in demand in an industry leading to a reduction in employment because of international competition. Globalisation is a fact of life and inevitably it leads to changes in the patterns of trade between countries from year to year.
For example, the UK has probably now lost forever, its cost advantage in manufacturing goods such as motor cars, household goods and audio-visual equipment, indeed our manufacturing industry has lost over 500,000 jobs in the last five years alone as production has shifted to lower-cost centres in Eastern Europe and emerging markets in Far East Asia. Many of these workers may suffer from a period of structural unemployment, particularly if they are in regions of above-average unemployment where job opportunities are scarce.
You can see the effect of structural unemployment on the UK’s manufacturing sector in the chart further below.
Tuesday, May 4, 2010
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