Question

Classify each of the following unemployment situations as either (i) structural; (ii) frictional, or (iii) cyclical unemployment.

1. Paul lost his job because his skills become obsolete. His employment counselor at the labor office advises him to retrain.
2. Michael has just relocated to Seattle and he is now looking for a job.
3. A data-entry employee loses his job because it was permanently outsourced to India.
4. Unemployment increased during the Great Recession.
5. Mary graduated from college with an economics degree. She doesn’t have a job yet, but she has six interviews lined up.
6. Large numbers of construction workers lost their jobs after the collapse of the housing market.

Answer 1

a) Structural unemployment. Since the skills of Paul is obsolete and cannot satisfy the current category of labour demand. Thus it comes under structural unemployment.

b) Frictional Unemployment. It is voluntarily unemployment or job search unemployment when people search for a better job.

C) Structural unemployment. Because of outsourcing, a data entry employee cannot find jobs in other sector because he does not have the particular skills required for another job.

d) Cyclical unemployment. This occurs mainly because of changes in business cycle. During recession demand for goods and services decline so workers are laid off resulting in cyclical unemployment.

e) This type of unemployment comes under frictional unemployment.

f) structural unemployment. Since the collapse of houshousing market led workers to search for other jobs but the workers do not have appropriate skills.