Unemployment - Term Overview

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Unemployment means lack of employment. This is a mismatch in the labor market, where the supply of labor (by workers) is higher than the demand for labor (by companies).

When there are more people willing to offer their work to companies than available jobs, a situation of unemployment occurs. When there are people who don't have a job, it's known as unemployment or unemployment.

To calculate the unemployment rate of a place, those people who, being of working age (between 16 and 65 years old) and actively seeking, cannot find a job, that is, what is known as the active population are taken.

Having a high unemployment rate is a serious problem for a country as it directly affects economic growth, in addition to the problem for people who are unemployed. Thus, the effects of unemployment, on the one hand, can be economic, such as a decrease in real production, a decrease in demand and an increase in the public deficit. But it can also cause social effects like psychological effects or discriminatory effects.

According to the World Bank, the unemployment rate is the proportion of the workforce that doesn't have a job but is looking for work and is available to do so. Definitions for calculating the workforce and the unemployment rate may vary slightly depending on the country.

Types of unemployment

We can differentiate different types of unemployment that also explain the causes.

  • Seasonal unemployment: It's caused by changes in the demand for work by companies due to the season of the year, seasonality or other seasonal factors.
  • Frictional unemployment: It's voluntary. People who, being able to work, decide to take time to train, rest or look for the job that best suits their qualifications and tastes. It's independent of the proper functioning of the labor market.
  • Structural unemployment: It's due to mismatches between the qualification or location of the workforce and the qualification required by the employer. Training and recycling programs or adaptation to new technologies are some of the measures that are carried out to reduce this type of unemployment.
  • Cyclical unemployment: Occurs when workers, and in general the other productive factors, are left idle due to the moment of the cycle that is being traversed, in which economic activity isn't enough to use productive factors.
  • Hidden unemployment: Occurs when there are people who have a job but their productive capacity is being underused.

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