Question

Match the following pairs :

Unemployment	Reason
a) Structural	1. Recession
b) Frictional	2. Transition from one job to another
c) Cyclical	3. New technology

1. a-1, b-2, c-3
2. a-3, b-2, c-1
3. a-2, b-3, c-1
4. a-3, b-1, c-2

Answer 1

Correct Answer - Option 2 : a-3, b-2, c-1

The correct answer is a-3, b-2, c-1.

• A Person who is not gainfully employed in any productive activity and who is actively searching for employment is unable to find work is said to be unemployed. 
• In economics, unemployment is to be studied with respect to
  • Nature of job
  • Working-age group
  • Demand for and supply of labour
  • Prevailing wage rate
• The National Sample Survey Organization (NSSO) provides three different estimates of employment and unemployment based on different approaches/reference periods used to classify an individual’s activity status.
  1. Usual status approach with a reference period of 365 days preceding the date of the survey.
  2. Current weekly status approach with a reference period of seven days preceding the date of the survey.
  3. Current daily status approach with each day of the seven days preceding the date of the survey as the reference period.
• In order to find out whether an individual is employed or unemployed, it needs to be first determined whether s/he belongs to the ‘Labour Force’ or not, which in turn depends on the Activity Status of the individual during the chosen reference period.
  • The labour force (also called the workforce) is the total number of people employed or seeking employment in a country or region.
• Activity Status refers to the activity situation in which the individual is found during the reference period with respect to his participation in economic or non-economic activities.
• The NSSO defines the following three broad Activity Status 
  • Working (engaged in economic activity) i.e. ‘Employed’.
  • Seeking or available for work i.e. ‘Unemployed’.
  • Neither seeking nor available for work.
• Unemployment rate = (Unemployed  Workers / Total labor force) X 100
• Work participation rate = (Total Workers) / Total Population) X 100

 

• Types of Unemployment :
  • Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand. 
    • Example - Recession of 2008-2010
  • Structural unemployment comes through a technological change in the structure of the economy in which labour markets operate. 
    • Example - Automation of manufacturing, Artificial intelligence.
  • Frictional unemployment occurs as a result of people voluntarily changing jobs within an economy. 
    • Example - Searching for a new job, recruiting new workers, and matching the right workers to the right jobs all take time and effort, resulting in frictional unemployment.
  • Disguised unemployment is unemployment that does not affect aggregate economic output.
    • Disguised unemployment occurred usually in developing countries whose large populations create a surplus in the labour force.
    • Example - Agriculture (a farm where more people are working than required. The additional workers do not add any value to the output)