Economics: Unemployment, Its Causes and Types

Table of Contents


Unemployment has become a major problem in almost every society. The challenges posed by unemployment are both social and economical in nature. Under normal circumstances, unemployment leads to despondency since a section of society lacks ways of earning a living.

This affects not only the economic status of the society but also the political and social aspects. It is against this background that a lot of efforts are put in place so as to address the issue of unemployment. Job creation is one sure way of ensuring that unemployment is under control.

This involves concerted efforts to bring about opportunities to work through which income can be generated. However, unemployment is of different types, and a better understanding of the same is crucial in the event of finding a meaningful solution.

Furthermore, unemployment is caused by several factors which are responsible for the whole situation. The aim of this paper is to navigate through the light of unemployment, thoroughly analyzing the causes and types of the same.


Unemployment refers to a situation in which qualified people are seeking employment but remain unemployed. This is primarily due to the scarcity of job opportunities or other different causes. Unemployment, therefore, leads to a lack of a source of income, thus affecting the economic condition of the society. Unemployment takes different forms and shapes (Harris, 2001).

The condition of unemployment differs from society to society, depending on the factors responsible for the situation. This brings out the fact that unemployment does not occur in a uniform manner; it rather takes different forms depending on the various forces in the social, economic, and political arenas.

Unemployment is a major problem that needs to be addressed by all means. However, a better understanding of the causes and types of unemployment is necessary for the event of finding an appropriate solution to the whole situation.

Types of Unemployment

Unemployment occurs in different forms. Under normal circumstances, the type of unemployment is denoted by the nature of factors that have brought about the situation. As a result, unemployment is categorized by forces that play a role in the creation of the situation (Hooks 2003).

Another important factor in the categorization of unemployment is the manner in which the situation occurs and for how long it occurs. In such a situation, certain forms of unemployment tend to be repetitive in nature, while others only take place once.

The seriousness of the unemployment problem also forms a good basis for its categorization. Under normal circumstances, unemployment is categorized in economic terms. Therefore the dynamics of economics play an important role in the whole scenario.

There are several types of unemployment that occur in different forms and are brought about by different situations and circumstances. The following are the types of unemployment;

  • Hidden unemployment
  • Cyclical unemployment
  • Seasonal unemployment
  • Long-term unemployment
  • Underemployment
  • Hardcore unemployment
  • Structural unemployment
  • Frictional unemployment

Hidden unemployment refers to cases of unemployment that are not represented in the official records of unemployment. This happens since many cases of unemployment are unreported, and statistics given by government agencies don’t represent them. Seasonal unemployment, on the other hand, refers to those jobs that are seasonal in nature.

These kinds of jobs only operate during certain times and not others (Abbot 2010). During the seasons, when the jobs are not on, the workers are considered unemployed. When there are certain structural changes in the status of the economy, there are kinds of changes that take place, which lead to loss of jobs and a reduction of opportunities for work.

This situation is referred to as structural unemployment. It is brought about by structural changes in the economy. Unemployment caused by personal reasons is called hardcore unemployment.

These reasons might be mental, psychological, or physical in nature. Individuals who engage in two different careers can find themselves unemployed due to the nature of their occupation. This kind of unemployment is called frictional unemployment. It is brought about by the conflict between two different jobs rendering people unemployed.

Causes of Unemployment

Unemployment is caused by several factors, and there is no single factor that is responsible for unemployment. As a result, there are a number of factors that combine to bring about a lack of opportunities and the fact of qualified people remaining unemployed (Symes 1995).

Fundamentally the causes of unemployment are economic in nature. As such, the plight of unemployment is brought about by factors that are inherently economic in nature. Economic forces and activities, to a large extent, determine the nature and cause of most unemployment problems. Also, factors that deal with labor and personnel are responsible for a large number of unemployment cases.

The following are causes of unemployment;

  • Economic growth
  • Technology
  • Seasons
  • Microeconomic policies
  • Constraints in economic growth

The process of economic growth has a lot of relevance to the plight of unemployment. Under normal circumstances, unemployment is an economic problem. The forces that bring about unemployment are economic in nature.

Economic growth, for instance, has a lot of significance to the whole situation of unemployment. The level of economic activity prevailing at any given moment has a lot of significance on the state of unemployment at the time.

During the process of economic growth, there is a trend that follows; this normally involves a decrease in employment opportunities. This automatically leads to a rise in the levels of unemployment. Therefore economic growth has a negative effect on the rate of unemployment in the economy. Technology also leads to high levels of unemployment; this is primarily due to the replacement of humans with machines.

With the increase in the innovation of technology, more tasks are performed by machines making it unnecessary to employ people. This makes people lose their jobs to machines since it becomes cheaper to use machines than employ people. Another factor in the same vein of technology is the use of the capital intensive mechanism. As a result, the jobs that can be performed by people are done by machines (Stretton 1999).

The role played by policies of microeconomic nature in the creation of unemployment in society cannot be underestimated. These policies normally lead to a sudden change in the economic environment making certain adjustments that lead to unemployment.

This happens when new policies are set out in place. During the initial times of implementation, the economic environment responds with fear and panic, thus causing a sudden disappearance of opportunities for career.

Constraints in economic growth lead to uncertainty among various economic players making the chances of unemployment to reduce. There is usually rampant unemployment during times of economic uncertainty. Two reasons, first, most companies won’t employ anyone during the times of economic constraints. Secondly, many companies lay off their staff during times of slackness and low economic activity.


Unemployment is a problem that is economic in nature. Most of the factors that bring about unemployment have an economic connotation. However, the effects of unemployment go beyond the economic arena. There are several types of unemployment that are grouped according to various factors that cause the plight.

Furthermore, unemployment is not caused by one single factor; there are several forces that cause unemployment in different ways. The paper has taken an analytical look at the whole concept of unemployment. Priority has been given to the causes and types of unemployment.

The paper thus found out that unemployment is caused by various forces that are economical, social, and political in nature. At the same time, the paper found out that there is a different categorization of unemployment. This is normally done with the purpose of defining the essence of the unemployment problem in question.


Abbot, L. (2010). Theories of the Labour Market and Employment: A Review. Washington: Industrial Systems Research.

Harris, N. (2001). Business economics: theory and application. London: Butterworth-Heinemann.

Hooks, J. (2003). Economics: fundamentals for financial services providers. Washington: Kogan Page Publishers.

Stretton, H. (1999). Economics: a new introduction. Washington: Pluto Press.

Symes, V. (1995). Unemployment in Europe: problems and policies. New York: Routledge.

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