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The Three Types of Unemployment and their Effect to the Firm

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1. Labor is an important factor of production for all firms. The most recent unemployment rate is estimated at 9% (January 2011). Economists have identified three types of unemployment. Which type would affect your firm. Explain.

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Solution Summary

The solution identifies three types of unemployment and how they affect a firm.

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Types
1. Structural unemployment
Structural unemployment occurs when there is a natural lack of the need for workers. Moffat (n.d.) said that "structural unemployment is a unemployment that comes from there being an absence of demand for the workers that are available".

There are basically two factors that cause structural unemployment: changes in technology and changes in the tastes of the consumers.
AmosWeb (n.d.) further explained that "Structural Unemployment is caused by a mismatch between workers' skills and the skills needed for available jobs. Structural unemployment essentially occurs because resources, especially labor, are configured (trained) for a given technology but the economy demands goods and services using another technology. Employers seek workers who have one type of skill and workers seeking employment have a different type of skill. This ...

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