2.4.2.1 Definition of unemployment

Unemployment refers to a situation in which individuals who are willing and able to work and actively seeking employment are unable to find suitable jobs. It represents a state of joblessness within the labor force of an economy. The unemployment rate is a commonly used measure that expresses the proportion of the labor force that is unemployed.

Key components of unemployment:

1. Labor Force: The labor force consists of individuals who are either employed or unemployed and actively seeking employment. It does not include those who are not seeking employment, such as students, retirees, and discouraged workers (people who have given up looking for work).
2. Employed: Individuals who are employed are currently working for pay, either full-time or part-time, or have a job but are temporarily absent due to illness, vacation, or other reasons.
3. Unemployed: Individuals are considered unemployed if they are not currently working, are available for work, and have actively looked for work within a specific period (usually the past four weeks).
4. Unemployment Rate: The unemployment rate is calculated as the number of unemployed individuals divided by the total labor force, expressed as a percentage. It is a commonly used indicator of labor market health and economic conditions.

Types of unemployment:

1. Frictional Unemployment: This type of unemployment arises from the normal turnover in the labor market as individuals move between jobs or enter the workforce for the first time. Frictional unemployment is considered temporary and occurs even in a healthy economy with strong job opportunities.
2. Structural Unemployment: Structural unemployment occurs when there is a mismatch between the skills and qualifications of job seekers and the available job opportunities. It may result from changes in technology, shifts in industry demand, or changes in consumer preferences. Addressing structural unemployment often requires retraining or upskilling the workforce.
3. Cyclical Unemployment: Cyclical unemployment is associated with the business cycle and fluctuates with economic conditions. It arises during periods of economic downturns and recession when aggregate demand for goods and services decreases, leading to a decline in job opportunities.
4. Seasonal Unemployment: Seasonal unemployment occurs when certain industries or occupations experience predictable fluctuations in demand throughout the year. Workers in seasonal jobs, such as agriculture, tourism, or retail, may be unemployed during off-peak seasons.
5. Disguised Unemployment: Disguised unemployment refers to a situation where individuals appear to be employed but are not productively contributing to the economy. It often occurs in informal sectors or subsistence agriculture, where multiple people perform tasks that could be handled by fewer workers.