Unemployment can be due to various reasons, some of which are, seasonal layoffs, racial discrimination, technological advancements and changes in the industries, fluctuations in economies, and lack of required skills by the worker. Seasonal layoffs occur in the field of agriculture. The increased focus on automation due to growing technology has also increased the level of unemployment.
Unemployment in developing countries is usually caused urban migration that leads the industrial development required to employ these migrants. In developed industrial nations the main cause of unemployment is due to depressions and economic recessions. "The Great Depression brought massive impoverishment. At its depths in 1933, the unemployment rate skyrocketed to over 25 per cent, a dramatic increase from the unemployment rate of slightly over 4 per cent four years earlier" (Frager and Patrias 80).
Different policies of unemployment are suggested by different schools of economic thought. For example, Monetarists believe that employment will increase in the long run if inflation is controlled and growth and investment is encouraged. Keynesians believe that emphasis should be given to smoothing business cycles by controlling aggregate demand.
Frictional unemployment arises when a person is searching for a job after quitting one job. Generally when a person quits one job it requires some time before he gets another job. During this time he is said to be frictionally unemployed. The problem of frictional unemployment can be minimized with the creation of competent labor markets. If this is done the time period between shifting jobs is negligible. When an economy is developed frictional unemployment is reduced as the possibility of getting a job faster is high.
When a person is not qualified enough to meet the requirements of his job structural unemployment arises. In simple words, when the marginal revenue earned by an employee is less than the minimum wage paid to the employee for the particular job, it gives rise to structural unemployment. The level of structural unemployment depends on a number of factors. Structural unemployment will be lower if the mobility of labor across different jobs is higher. It also depends on the structure of n industry and the growth rate of an economy.
Classical unemployment is also known as real wage unemployment. When the equilibrium full employment level falls below the wages, it gives rise to classical unemployment. In a situation where classical unemployment exists the wages are not flexible downwards, this implies that unemployment will persist for a longer time. Therefore, such wages should be set in the trade unions with manipulations.
Cyclical unemployment is also called demand deficient unemployment. Cyclical unemployment takes place when the demand of workforce by the economy is low. Keynesian economists believe that this type of unemployment takes place because of disequilibrium in the economy. The name cyclical unemployment comes from the fact that this unemployment moves with the trade cycle. When the economy is in boom the demand for labor increases, and when there is an economic crisis or recession the demand for la