INDIVIDUAL ASSIGMENT
Management Economics - ECON-5015-RLC
Question 2
How is unemployment measured? Discuss different types of
unemployment. Give examples to illustrate your answer.
What is Unemployment?
Unemployment is a term used to determine people in the labour force who are currently
unemployed. It is often expressed as a rate which is called the unemployment rate and is measure
by expressing the number of unemployed people in an economies labour force as a percentage of
the entire labour force. (Lovewell, 2020)
How is the unemployment rate measure?
As discussed above, the unemployment rate is measured by expressing the number of
unemployed people in the labour force as a percentage of the entire labour force.
The labour force is calculated by the number of individuals who either have jobs or are actively
seeking employment in the labour force population. (Individuals 15 years of age and older
excludes individuals unable to be employed such as prisoners, psychiatric patients as well as
members of the arms forces.) (Lovewell, 2020)
The formula to measure the unemployment rate is as follows:
𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑟𝑎𝑡𝑒 (%) =
𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝑖𝑛 𝑡ℎ𝑒 𝑙𝑎𝑏𝑜𝑢𝑟 𝑓𝑜𝑟𝑐𝑒
× 100
𝑙𝑎𝑏𝑜𝑢𝑟 𝑓𝑜𝑢𝑟𝑐𝑒
Different Types of Unemployment
Unemployment can be sub-categories into 4 main types. They are as follows:
1.
2.
3.
4.
Frictional unemployment
Structural unemployment
Cyclical Unemployment
Seasonal Unemployment
1. Frictional Unemployment
This type of unemployment is unemployment among people between jobs or people looking for
their first job.
An example of this type of unemployment is the unemployment that arises as a result of an
executive of an organization leaving the organization for a new company they are to start as a
assistant manager. During the transition period this employee will fall under frictional
unemployment. (Lovewell, 2020)
2. Structural unemployment
This type of unemployment is caused as a result of a mismatch between the people and inability
for the unemployed to fill the available jobs as a result of inadequate skills, the advancement in
technological requirement or a change in consumer needs.
In simple terms, it is when the skills unemployed people have does not match the required skills
for the available jobs. (Lovewell, 2020)
An example for such unemployment is when a worker in a car manufacturing factory loses their
employment due to automation of the workers tasks with the advancement of technology.
3. Cyclical Unemployment
Cyclical unemployment is caused because of an economic recession. Unemployment tends to fall
once the economic conditions improve. (Lovewell, 2020)
For example, unemployment caused by the covid-19 pandemic in the hospitality industry
because of wide-spread infections and lockdowns. However, as the economy improves
unemployment spikes caused by the pandemic will fall.
4. Seasonal Unemployment
This is common in industries where the demand is seasonal. Unemployment of this nature is
caused when demand is low for the particular season and thereby forcing businesses to terminate
employment for this period. (Lovewell, 2020)
One such example is the unemployment faced by constructions workers during winter as
construction becomes difficult with the weather conditions.
References
Lovewell, M. (2020). Understanding Economics - A Contemporary Perspective (8 ed.). Toronto,
Canada: McGraw-Hill Ryerson.