Monday 5 October

Kinds of unemployment:

Frictional unemployment is that unemployment that arises naturally as workers and jobs find each other; information is not perfect, so workers have to search for jobs (and employers for employees) and often these searches take time, during which some workers are unemployed. It reflects the normal functioning of real-world labor markets, namely that adjustments in the market take time.

Structural unemployment occurs because jobseekers have characteristics, such as age, sex, education, experience, skills, geographic residence, etc, which can be thought of as a structure of the potential workforce; job openings also have a structure in terms of employers' desired age, sex, education, experience, skill, location, etc of their employees. If the structure of characteristics of potential workers does not match the structure of desired characteristics of employees, there is likely to be some structural unemployment -- people who are unemployed because nobody wants their skills, experience, etc, where they are -- although there may be job openings for other kinds of workers there, or for workers like them, elsewhere. Structural unemployment can persist for long periods of time (consider Apalachia), because migration is expensive and difficult except for the young, and changing other characteristics is difficult or impossible (training, skills, maybe can be changed by retraining; but experience, age, sex, marital status, etc, are not usually changeable).

Cyclical unemployment is that unemployment attributable to a lack of overall aggregate demand for labor -- i.e. in total, there are fewer jobs available than persons looking for jobs.

Obviously, these three categories are not absolutely clear-cut separate -- there can be ambiguity about the extent to which a particular individual's unemployment is frictional, structural, or cyclical. However, it is also often fairly easy to see which is the dominant cause.

1. Mary got fired from her job with Macdonalds for giving french fries to her friends and has not yet found another job, although she is looking. This is frictional – normal process of being between jobs.

2. John moved to Tallahassee when his wife entered a graduate program at FSU, but so far has not found a job yet despite looking. In Cleveland, he was a tool and die designer, but now he would do almost anything. This is intended to get classified as structural; his skills/experience are not appropriate to the jobs available in Tallahassee.

3. Jacob moved to Atlanta in 1981, but was out of work all through 1982 despite being willing to do anything for money -- nobody seemed to be hiring then. Cyclical – "nobody seemed to be hiring"

4. Because the State closed Apalachicola Bay to oystering, Fred has no work, and cannot find any because with the net ban, things are bad in Franklin County. Structural again – his experience/skills do not match local openings, although there is also a hint of cyclical about it – "things are bad" – but not really, because it is local – "in Franklin County."

5. Louise graduated in August, but has not yet found a job that has hours that fit with her triathlon training. Frictional – she’s looking, but she’s being picky.

6. Stanley graduated in August, and is spending the time until Christmas rewriting all his songs before moving to Nashville to try to sell them. Not in the labor force – right now, he has no gainful activity, nothing he is doing that is bringing in income (although he hopes for it eventually).