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Structural And Cyclical Unemployment

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Published: Tue, 25 Apr 2017

Unemployment has four types. There are frictional, structural, cyclical and seasonal unemployment. All the types of unemployment will occur in our country.

Structural unemployment means the unemployment arising from a persistent mismatch between the skills and attributes of workers and the requirements of jobs [1] . These changes simultaneously open new positions for trained workers. An example of structural unemployment is the technological revolution. Computers may have eliminated jobs, but they also opened up new positions for those who have the skills to operate the computers.

Structural unemployment was results from a mismatch between the skills needed by employers (skills, age, gender or location) and the skills possessed by workers. Rapidly changing in technology requires employees with the new skills at the same time it makes old skills obsolete. Structural unemployment also can exist in a strong economy that is near full employment. If 4 workers each take six months off to re-train before they start a new job, the unemployment statistics will record this as two unemployed workers [2] .

The main factor for structural unemployment, if there is a decrease in the demand for local products because of changes in people’s taste towards the imported products that available in the local markets and assuming this is permanent. This may caused the local manufacturers to reduce their output, thus more workers will be retrenched in the local manufacturing, as they are no longer needed in the factory while some of these workers that being retrenched will be unemployed.

Another factor of structural unemployment which is when an industry that is mostly concentrated in one area, this may cause more difficulties for people that came from different regions to look for more jobs opportunity. For example, the shipbuilding and mining industries were heavily concentrated in certain areas will have to take many years for employees to adapt and reduce the rate of structural unemployment.

This type of unemployment is also known as the chronic unemployment or long-term unemployment. Usually structural unemployment happens in the underdeveloped countries that located in some regions of Asia and Africa. This type of unemployment happens because of deficiency of capital resources supply to what demanded.

The problem that faced by labor in the underdeveloped countries is that they are lack of knowledge and skilled workers to update their skills from time to time due to accelerating process of economic growth. In short, structural unemployment arises from a mismatch between the job skills or attributes of workers and the requirements of jobs. Skills in utilizing information of technology has becoming more important in order to survive and the fast moving technology in the world right now and to become more competence to get rid from structural unemployment [3] .

In 2009, computer-generated three-dimensional animation, which was used in movie such as Shrek and Up, had become much more popular than traditional hand-drawn two-dimensional animation. Many people who were highly skilled in hand-drawn animation lost their job at Walt Disney Pictures, DreamWorks and other movie studios. To become employed again many of these people either became skilled in computer-generated animation or found new occupations. In the meantime, they were unemployed.

Another example is a decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry. Long time ago, many company uses the typewriters do to their job. When computer were introduced, all workers have a problem to learn something new. Some workers cannot accept the change will retired from their job and find the other jobs.

Cyclical Unemployment

Cyclical unemployment is also known as Keynesian unemployment or demand deficient unemployment) which was recognized by economists. This type of unemployment usually occur when many organization find their company no more having profits and sales are declining. Thus, they will cut budget on production side and employees start to lose their job due to the retrenchment that the organizations do to survive in the recession.

Cyclical unemployment refers to the unemployment that caused by a business cycle recession. Cyclical unemployment rate tend to be low, when business cycle reach to the peak bas economy achieved maximum of total output. When total output falls according to the gross domestic product (GDP), the business cycle is at lowest point and cyclical unemployment rate are increasing.

Besides that, cyclical unemployment is occurred due to insufficient working vacancies during vacancies for a numbers of people who are actively looking for job during recession period. The lack of employer demand comes from a lack of spending and consumption in the overall economy.

Changes of unemployment levels are related to cyclical economic changes in the market such as recession, recovery, growth and decline. For example, the housing sector employs more people for construction and sales during the non-writer months and housing booms.

Likewise, unemployment rises during times of economic slowdown and recession, as lower demand for services and goods causes business to lay-off workers and given less incentive to hire new workers. Unemployment that results from reduced demand for goods and services and varies inversely with economic activity.

Cyclical unemployment arises when the aggregate demand falls due to the productive capacity of the country. In a simpler meaning, when the aggregate demand falls behind the full employment level, it is not enough to produce total output like what had been produced in the full employment level. Less production can lead to excessive retrenchment of workers. Thus, Cyclical or Keynesian unemployment is characterized when economy facing shortage of jobs and can last as long as the cyclical depression periods.

Cyclical unemployment can be defined as a negative relationship between Gross Domestic Product (GDP) and unemployment rate. As Gross Domestic Product rise, unemployment rate increases. It has a strong effect on the ability for economy to regain control, since fewer jobs opportunities will cause less on consumption spending. Besides that, there is higher government spending in order to help those who are unemployed, and welfare as well as providing financial assistance. Usually, economic recovery will occur, but vary with each business cycle in different countries. Therefore this type of unemployment will only lasts for temporary based to the economic cycle, it will tend to cease over time when the economy moves out of the business cycle trough and begins to climb up into economic recovery and will then reach to the peak.

For example, Freightliner, which is the leading manufacturer of trucks and other commercial vehicles in North America, lay off workers from its heavy truck plants during the recession of 2001. As economy recovered from the recession, Freightliner began rehiring those workers. The Freightliner workers had experienced cyclical unemployment.

Due to globalization, slowdown in an economy will have an adverse on its trading partners. The recent economy slowdown in United States for examples leads to the decline in the exports manufacturing goods from Malaysia and further aggravated the problem of unemployment in Malaysia.


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