What is unemployment
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Answer:
Unemployment, according to the OECD, is persons above a specified age not being in paid employment or self-employment but currently available for work during the reference period. Unemployment is measured by the unemployment rate, which is the number of people who are unemployed as a percentage of the labour force.
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Answer:
The term unemployment refers to a situation when a person who is actively searching for employment is unable to find work. Unemployment is considered to be a key measure of the health of the economy. The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force. Many governments offer unemployment insurance to certain unemployed individuals who meet eligibility requirements.
Types of Unemployment
There are basically four types of unemployment: (1) demand deficient, (2) frictional, (3) structural, and (4) voluntary unemployment.
1. Demand deficient unemployment
Demand deficit unemployment is the biggest cause of unemployment that typically happens during a recession. When companies experience a reduction in the demand for their products or services, they respond by cutting back on their production, making it necessary to reduce their workforce within the organization. In effect, workers are laid off.
2. Frictional unemployment
Frictional unemployment refers to those workers who are in between jobs. An example is a worker who recently quit or was fired and is looking for a job in an economy that is not experiencing a recession. It is not an unhealthy thing because it is usually caused by workers trying to find a job that is most suitable to their skills.
3. Structural unemployment
Structural unemployment happens when the skills set of a worker does not match the skills demanded by the jobs available, or alternatively when workers are available but are unable to reach the geographical location of the jobs.
An example is a teaching job that requires relocation to China, but the worker cannot secure a work visa due to certain visa restrictions. It can also happen when there is a technological change in the organization, such as workflow automation that displaces the need for human labor.
4. Voluntary unemployment
Voluntary unemployment happens when a worker decides to leave a job because it is no longer financially compelling. An example is a worker whose take-home pay is less than his or her cost of living.
Causes of Unemployment
Unemployment is caused by various reasons that come from both the demand side, or employer, and the supply side, or the worker.
Demand-side reductions may be caused by high interest rates, global recession, and financial crisis. From the supply side, frictional unemployment and structural employment play a great role.