What are the Various Types of Unemployment?

Unemployment Line

The subject of employment is always a tough one to tackle. For one thing, women weren’t even considered employable for much of our history. For another, unpaid workers like slaves, indentured servants were never part of the statistics. This leads to very skewed historical records, which makes it hard to fully appreciate the complexities of unemployment and how they affect us personally and culturally.

A Brief Introduction to the Complexities of Unemployment

In this era, mothers who do in-home child care as well as housekeeping, personal shopping, and other jobs that only ‘count’ if a stranger pays you for them are never added to employment rosters. Acknowledging that work as valid would mean someone has to address the lack of wages and it’s often easier to gloss over inconvenient data. Under the table, workers like the massive influx of illegal immigrants who do everything from janitorial work to picking fruit go unaccounted for.

Other illegal professions such as prostitutes and drug dealers aren’t included because despite the hours worked or wages earned, it’s easier to ignore than include. If you illegally do a legal job, then it ‘counts,’ but the reverse is never true. Society chooses to ignore some people, and statistics reflect the truth of that like a sad mirror. Many employers wrongfully classify their employees as freelance workers or otherwise fail to report wages paid for tax evasion purposes, and these are just a few examples.

As this is being written, the unemployment rate is low in the USA. Though not quite as low as the record 2.50% reported in May of 1953, we’re sitting at a respectable 3.6% this month according to one site. However, in 1982, more than one in ten Americans were unemployed toward the end of the year and far worse during the Great Depression. We don’t have statistics from that era, but there were so few jobs to go around that polyglots (People who speak more than two languages) with multiple degrees and a plethora of skills couldn’t get a job flipping burgers. Statistics aren’t everything, however, and it all depends on how you look at things. That said, let’s take a look at the easily identifiable forms of unemployment and their root causes.

Classical or Real Wage Unemployment

When the compensation required is more than a business is willing to pay, you have a classical unemployment. The problem of wages being too high may seem silly to most modern Americans. A strange example of this would be the situation that happened with the latest and final season of Sister Wives. The adults on the show had salaries higher than TLC was willing or able to pay given the ratings on the previous season. As a result, the cast had to propose taking a 3/4 pay cut to afford operating costs and stay employed.

Cyclical Unemployment

Economic changes drive cyclical unemployment. When things are going well for a country economically, companies have a higher demand for their services or products. This drives entire industries to hire more employees. More people working helps drive the upward trend because they have money to make purchases of their own.

When there’s an economic downswing, the same companies can no longer afford to maintain the higher levels of staff. Since they can’t pay and aren’t doing enough business to need so many employees, the hiring companies lay people off, or close. Obviously, this creates unemployment and increases the economic downturn because those employees are out of work and not spending as much money on products and services.

Frictional Unemployment

You might just as easily call this unemployment “Temporary Unemployment.” Frictional unemployment is what happens when workers are laid off, fired or quit and they’re between jobs, but actively hunting. Another form of frictional unemployment occurs when people are first entering or re-entering the workforce. Graduating students, parents on leave after a pregnancy, or professors who went on sabbatical are great examples of this. Frictional unemployment is intended to describe a short term situation. The frictionally unemployed make up a large percentage of those who are on SNAP or Family Assistance, formerly known as food stamps or welfare. Most of these people transition quickly back to the workforce. Sadly, this isn’t always the case which leads us to the next form of unemployment.

Long-Term Unemployment

Long-term unemployment can begin as any form of unemployment, though it often starts as seasonal or frictional unemployment. When a working adult is seeking for more than 27 weeks, it’s considered long-term. Several factors can contribute to long term unemployment. The most impractical of these is the unemployment itself. A surprising number of employers may pass over a candidate because they’ve been unemployed. Rather than thinking about how motivated a longer-term job seeker becomes, they pass them over for someone who still has a job they want to transition away from or someone who has just come to the area or graduated. As logic goes, this doesn’t really qualify. Though it’s unfortunate and wrongheaded, the struggle is genuine. Employer contributions to creating long term unemployment is a subject that might be visited to help reduce the problem.

Natural Unemployment

Consisting of elements from both the frictional and structural, natural unemployment is to be expected. There appears to be a small portion of any population which are ill-suited to working. Whether this is temperamental, voluntary, intellectual, or caused by some other factor, like unidentified mental illness, the fact remains that some people don’t work well. Most people need to work. Not only is it essential to maintain larger social constructs like cities and countries, but feeling fulfilled, helpful, useful, or at least occupied is something we get from work. As a society, we can only function as a whole when most members contribute in meaningful ways. Individually we need to be included in our group. As ‘pack animals’ that is our inclination anyhow, to work together in a group for our own advancement is beneficial to every individual. Acting counter to this is something that can only work for a small percentage of a populace. Otherwise, society would collapse.

Regional Unemployment

When industries that are grouped by geographic location decline it’s regional unemployment. A great example would be fishing. When an area with abundant fish runs out, and the fishermen who used that region can no longer support themselves because of the lack, it affects a whole region. The same can happen to miners when their vein of ore diminishes. Areas affected by global warming might also be considered if the most significant part of the business relied on the weather like tourist destinations.

Seasonal Unemployment

Seasonal unemployment is the simplest form to explain. Teachers who have no students in the summer months are seasonally unemployed. Other examples would include holiday gift wrappers, summer camp councilors and swimming pool lifeguards. Some farmers and farm hands are included because they don’t necessarily have full-time work between harvest and the next spring. Anyone who does a full-time job that doesn’t run all year, but does happen each year for the same timeframe would be seasonally unemployed.

Structural Unemployment

Changing needs in the economic situation creates an issue with matching skilled employees with available jobs. For example, when Lincoln freed the slaves to help push his agenda for industrialization, it created a shortage of jobs for free people because they lacked the skills necessary to do the work that was being offered. This led to an underclass of workers who were paid, but otherwise little better off than they had been before they were nominally freed. They were still forced to take the least skilled jobs for lesser pay because of the education gap created by their former slavery.

This eventually led to the current format for the public school system in the USA, which is excellent at teaching young people to follow the orders of a superior and even ask permission to use the restroom. Unfortunately, as technology advances, this system has done little to help guide the population toward STEM careers that will help keep the country moving forward.

Voluntary unemployment

Who would want to be unemployed? It seems counterintuitive at first, and yet there are numerous situations where becoming unemployed may be beneficial to the worker. Soon to be mothers who aren’t given any leave time obviously can’t be expected to schedule their delivery time for a weekend and waltz back into work on Monday. Alternately, people with excellent severance packages might choose to live off their severance for some time without any intention of seeking employment. Sometimes a person comes into a sum of money and decides to use it to live a life of leisure instead of staying with the workforce.

Not all people make good choices. There are also cases where someone may choose to be lazy. It’s surprisingly rare, but it does happen. Other factors like grief, un-recognized mental illnesses, or addiction can contribute to the choice, though we’re not sure we should call it entirely voluntary, it does fall into the category. The same can be said for people who choose to stay home because they have a spouse who attains great success, or a spouse who wants a ‘trophy’ husband or wife.

Other Unemployment Terms & Variations

There are some alternative definitions of what constitutes employment. Just as women weren’t always factored into the employment stats, some other groups don’t ‘qualify’ as unemployed. They don’t have full time, or in many cases, any work at all. Yet they are somewhat arbitrarily discluded from unemployment numbers.

BLS Categories

  • U-1 Persons unemployed 15 or more weeks
  • U-2 Job losers and temp workers
  • U-3 Official unemployment rate
  • U-4 Total official unemployed plus discouraged workers
  • U-5 Total official unemployed, plus marginally attached and discouraged workers
  • U-6 Total official unemployed, plus all persons marginally attached, part-time, and discouraged

Discouraged

Discouraged workers are true to their name. These potential employees have given up trying because they no longer believe there is work available to them. This group doesn’t include people who have self-removed from the workforce for other reasons like early retirement or unpaid stay at home parents. Disabled workers are also not counted among the discouraged because they are a category unto themselves.

Underemployment

Interestingly, people who work more than one job part-time are classed as underemployed. They aren’t alone, those who only work part-time at one job are underemployed too. Anyone who isn’t using their full skill set, their education or their full availability is technically in this group. Students who work nights, and all those folks who have degrees but don’t work in their field also land in this group along with anyone who was making less than $11.83/hr in 2018.

Marginally Attached

A marginally attached employee has sought work in the last year. They consider themselves available, and may also think of themselves as trying, though they haven’t attempted in a while.

Real Unemployment

The Bureau of Labor and Statistics uses different determining factors for the unemployment rate (U3) and Real Unemployment (U6). It may surprise you to learn that not all statistics are created equal, and they don’t always show the same numbers as can be seen when comparing to a site such as Trading Economics for example. This makes reporting a specific number dicey and confusing. It also allows people (like politicians, for example) to quote statistics that most closely match their needs rather than some exact magical number.

There is no perfect way to tell how many people are unemployed. A statistic is more like an estimate than a fact. Real unemployment is a term used by people who want to see the U6 used. The big difference is that the U6 is usually around twice the U3 rating. A U6 includes the underemployed, marginally attached and discouraged in the statistics since they also lack sufficient employment.

Solutions

Solving unemployment is something that has been tried in many ways, in many eras and places. It’s never simple and never universal even when people do everything they can. Socialists have attempted to assign jobs, which is one of the more intriguing endeavors in social engineering. No single system has ever provided 100% employment to the populace. Though it’s likely that all societies will continue to try, there’s some doubt as to whether it’s possible to motivate or even require all people to work.

Final Thoughts

The history of labor and unemployment is directly related to the history of successes and hardships in most nations. However, it works differently in different places. For example, some countries at war are largely non-fighting people who are forced to stay home to avoid trouble with the militant factions. Meanwhile, other countries place a considerable percentage of the population in their military and have the rest contribute to the war effort by employing them in factories. There’s no one correct or absolute way to look at unemployment, but we hope you’ve enjoyed learning more about how and why it happens.


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