Frictional, Structural, and Cyclical Unemployment

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those workers who have outdated skills without a job.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