Unemployment

UnemploymentIn industrialized countries in which most people can earn a living onlyby working for others, being unable to find a job is a serious problem.

Becauseof its human costs in deprivation and a feeling of rejection and personalfailure, the extent of unemployment is widely used as a measure of workers’welfare. The proportion of workers unemployed also shows how well a nation’shuman resources are used and serves as an index of economic activity. Economistshave described the types of unemployment as frictional, structural, and cyclical.The first form of unemployment is Frictional unemployment. Frictionalunemployment arises because workers seeking jobs do not find them immediately.While looking for work they are counted as unemployed. The amount of frictionalunemployment depends on the frequency with which workers change jobs and thetime it takes to find new ones. Job changes occur often in the United States.

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AJanuary 1983 survey showed that more than 25 percent of all workers had beenwith their current employers one year or less. About a quarter of thoseunemployed at any particular time are employed one month later. This means thata considerable degree of unemployment in the United States is frictional andlasts only a short time. This type of unemployment could be reduced somewhat bymore 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. Structuralunemployment arises from an imbalance between the kinds of workers wanted byemployers and the kinds of workers looking for jobs. The imbalances may becaused by inadequacy in skills, location, or personal characteristics.Technological developments, necessitate new skills in many industries, leavingthose workers who have outdated skills without a job. A plant in a decliningindustry may close down or move to another area, throwing out of work thoseemployees who are unable or unwilling to move. Workers with inadequate educationor training and young workers with little or no experience may be unable to getjobs because employers believe that these employees would not produce enough tobe worth paying the legal minimum wage or the rate agreed on with the union. Onthe other hand, even highly trained workers can be unemployed. This happened inthe United States in the early 1970s, when the large numbers of new graduateswith doctoral degrees in physics and mathematics exceeded the number of jobsavailable in those fields.

If employers practice illegal job discriminationagainst any group because of sex, race, religion, age, or national origin, ahigh unemployment rate for these workers could result even when jobs areplentiful. Structural unemployment shows up most prominently in some cities, insome occupations or industries, for those with below average educationalattainments, and for some other groups in the labor force. The third form ofunemployment 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 Statesexperienced depressions roughly every 20 years. A long and severe depressionoccurred in the 1890s, when unemployment reached about 18 percent of thecivilian labor force, and four less severe depressions occurred in the firstquarter of the 20th century. The worst depression in United States history wasin the 1930s. At its height, one worker in four was unemployed, and someremained out of work for years.

In industrialized countries, with unemployment insurance and other formsof income maintenance, unemployment does not cause as great a hardship as itonce did. Measures to stabilize the economy have made economic downturns brieferand less severe.