In industrialized countries in which most people can earn a living only by
working for others, being unable to find a job is a serious problem. Because of its human
costs in deprivation and a feeling of rejection and personal failure, the extent of
unemployment is widely used as a measure of workers' welfare. The proportion of
workers unemployed also shows how well a nation's human resources are used and serves
as an index of economic activity. Economists have described the types of unemployment
as frictional, structural, and cyclical.
The first form of unemployment is Frictional unemployment. Frictional
unemployment arises because workers seeking jobs do not find them immediately. While
looking for work they are counted as unemployed. The amount of frictional
unemployment depends on the frequency with which workers change jobs and the time it
takes to find new ones. Job changes occur often in the United States. A January 1983
survey showed that more than 25 percent of all workers had been with their current
employers one year or less. About a quarter of those unemployed at any particular time
are employed one month later. This means that a considerable degree of unemployment
in the United States is frictional and lasts only a short time. This type of unemployment
could be reduced somewhat by more efficient placement services. When workers are free
to quit their jobs, some frictional unemployment will always be present.
The second form of Unemployment is structural unemployment. Structural
unemployment arises from an imbalance between the kinds of workers wanted by
employers and the kinds of workers looking for jobs. The imbalances may be caused by
inadequacy in skills, location, or personal characteristics. Technological developments,
necessitate new skills in many industries, leaving those workers who have outdated skills
without a job. A plant in a declining industry may close down or move to another area,
throwing out of work those employees who are unable or unwilling to move. Workers
with inadequate education or training and young workers with little or no experience may
be unable to get jobs because employers believe that these employees would not produce
enough to be worth paying the legal minimum wage or the rate agreed on with the union.
On the other hand, even highly trained workers can be unemployed. This happened in the
United States in the early 1970s, when the large numbers of new graduates with doctoral
degrees in physics and mathematics exceeded the number of jobs available in those
fields. If employers practice illegal job discrimination against any group because of sex,
race, religion, age, or national origin, a high unemployment rate for these workers could
result even when jobs are plentiful. Structural unemployment shows up most prominently
in some cities, in some occupations or industries, for those with below average
educational attainments, and for some other groups in the labor force.
The third form of unemployment is cyclical unemployment.
Cyclical unemployment results from a general lack of demand for labor. When
the business cycle turns downward, demand for goods and services drops. Consequently,
workers are laid off. In the 19th century, the United States experienced depressions
roughly every 20 years. A long and severe depression occurred in the 1890s, when
unemployment reached about 18 percent of the civilian labor force, and four less severe
depressions occurred in the first quarter of the 20th century. The worst depression in
United States history was in the 1930s. At its height, one worker in four was unemployed,
and some remained out of work for years.
In industrialized countries, with unemployment insurance and other forms of
income maintenance, unemployment does not cause as great a hardship as it once did.
Measures to stabilize the economy have made economic downturns briefer and less
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