Unemployment

The population mass is divided into three categories for studying unemployment.

• Employed: This category includes those who work as paid employees, work in their own business, or work as unpaid workers in a family member’s business. Both full-time and part-time workers are counted. This category also includes those who were not working but who had jobs from which they were temporarily absent because of, for example, vacation, illness, or bad weather.
• Unemployed: This category includes those who are not employed, but are available for work, and have tried to find employment during the previous four weeks. It also includes those waiting to be recalled to a job from which they have been laid off.
• Not in Labor Force: Students, home-makers, retirees etc. Home-makers are NOT unemployed!

Normal Unemployment is the usual rate of unemployment present in an economy. Cynical Unemployment refers to the variations around this mean rate. This is closely associated with the short-term economic activities and events.

Note that it is difficult to distinguish between the unemployed and the people not in the labor force. It is common for people to interchange between both states, such as a student finishing his studies or an early retiree being forced to look for a job to make ends meet. Also, Discouraged Workers the people not in the labor force, but wiling to work (they’ve left the force due to continuous rejections).

Duration and Types of Unemployment

Most spells of unemployment are short, but most unemployment observed at any given time is long-term.

That is, over time, most of the unemployed people find a job within a short period of time. However, at a given point of time, the number of unemployed who have not found a job for a long time is larger.

There are a few types of unemployment defined which try to answer this question.

• Frictional Unemployment: This is caused due to the time taken to match an employer to the prospective employee with the right skill set. This is thought to be the main cause of short-term unemployment.
• Structural Unemployment: This occurs when the wages are higher than the equilibrium price, causing excess in the labor that is willing to do the job (look at the demand-supply graph). The wages are usually set higher because of minimum-wage-laws, unions, and efficiency wages.