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Causes of Unemployment

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b) There are many causes to unemployment, which are split into categories. Frictional unemployment is transitional unemployment due to people moving between jobs such as workers entering the labour market, such as university graduates. It may take time to find an appropriate job. Many are only unemployed for a short time while looking for work. Structural unemployment occurs when people are made unemployed because of capital-labour substitution or when there is a long run decline in demand in their particular industry. ...read more.


Seasonal unemployment happens because certain industries see seasonal changes in demand and employment. Such examples include leisure and catering, retailing, tourism, agriculture and construction. Cyclical unemployment is involuntary unemployment due to a lack of aggregate demand. This type of unemployment is associated with the transition of the economy through the business cycle. When there is an economic recession, we expect to see a rising level of unemployment because of plant closures and worker layoffs. ...read more.


The diagram below illustrates the effect of the national minimum wage. Before the national minimum wage, demand was for 75 workers. After the introduction of the minimum wage rate, supply is 100 but the demand is only 50 leading to excess supply and unemployment increases. The supply of labour increased because more works make them selves available for higher paid employment. Technological unemployment is when unemployment is caused by technological progress. Machines replace the once labour intensive industries, as they are more efficient. Voluntary unemployment is workers who chose not to work at the going wage rate. ...read more.

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