Unemployment Types and Benefits

Unemployment Types and Benefits

Unemployment Types and Benefits

Unemployment, also known as joblessness, is a situation which describes the inability of people who are willing and able to work to find a job even in their active search. Simply put, unemployment is the state of being unemployed. This is yet another problem facing the present-day world.

The International Labor Organization reported in 2018 that over 3 million people of the world’s workforce were without a job.

Workers who were laid off and currently seeking another job are also referred to as unemployed.

This soul-wrenching problem is not one that can be easily dealt with.  Many factors come into play when it comes to combating unemployment issues. The state of the economy plays a major role in the rate of unemployment. This is seen in the alarming rise during economy recession.

During a recession, most employers are forced to reduce their payroll expenses by laying workers off so the company can thrive. This is the cause of the spike in the increased rate when a country faces a recession.

What could be the cause of unemployment? What effect does it have on the populace and the economy at large? Can this problem be solved?

This article is compiled to answer these questions and others relating to unemployment.

Unemployment Types and BenefitsTypes of Unemployment

Unemployment encompasses a lot more than being without a job. This makes it difficult to clearly define or classify it.

According to the Bureau of Labor Statistics (BLS), people who have not actively searched for jobs in the past four weeks are not classified as being unemployed even when they are willing and able to work. They are marginally attached to the labor force as such, they are not calculated in a country’s labor or workforce.

Also, discouraged workers (those who stopped looking for jobs because they feel there is no job out there for them or are waiting for the economy to improve before searching for jobs) are not regarded as unemployed.

But the real unemployment rate includes every unemployed person as opposed to that of BLS.

The different variables involved led to three broad categories – frictional, structural, and cyclical unemployment.

Let’s take a look at the three major types of unemployment and other categories.

  1. Frictional (Search) 

Frictional or search unemployment is observed in virtually every economy. It occurs during the transition period between leaving a job and getting another. Workers are bound to be unemployed between the time they got fired or quit and when they get a new job. The good news is that this kind of unemployment is usually short-lived unless the worker decides to remain unemployed.

The workers might decide to remain unemployed as seen in voluntary unemployment or are in search of better job offers.

  1. Structural

As technology continues to grow, so does the need to improve one’s skills. Structural unemployment occurs when workers are laid off because their skills do not match the modern technology, that is, their skills are outdated. Unlike frictional unemployment, this type of unemployment last for a long time and sometimes the workers get replaced by machines. Hence the reason it is sometimes referred to as technological unemployment. An example is seen in the reduction in the number of bank clerks as the use of cash point and other plastic cards increases.

  1. Cyclical 

Cyclical is also known as mass unemployment, occurs in a circle-like manner, hence the name – ‘cyclical’. Every country experiences a mass unemployment during recession and this rate drops when the economy improves. When a recession occurs again the employment rate drops leading to an increase in unemployment rate and this rate drops again when there is economic rate…and on goes the circle. The period of mass unemployment surrounding this cycle is what is known as cyclical unemployment.

  1. Hidden (Disguised)

Potential workers who are not included in the official unemployment statistics of a country make up the type of unemployment known as disguise or hidden unemployment. It occurs because of laws that say a worker must be actively searching for jobs to be considered unemployed. This means that the unemployed people who stopped seeking for jobs are not included in the unemployment statistics.  Even when they are willing and able to do work.

  1. Seasonal 

Some businesses are season-dependent. A business like an ice cream factory which records increased sales in summer will employ more workers in summer and lay them off in winter when sales start declining. This type of unemployment caused by seasonal changes is referred to as seasonal unemployment. It is usually short as it last between seasons.

  1. Casual 

Casual unemployment involves workers who are engaged in temporary jobs (unskilled labor) in which they work for a while and are jobless afterwards.

  1. Voluntary 

This occurs when workers decide to remain unemployed, either because they are satisfied with the unemployment benefits they receive or they have saved enough money from their past jobs to take care of their financial needs, or some other reasons.

  1. Residual 

Having a residue of unemployment is almost inevitable in every country. People who fall under this category are those who are unable to work due to some levels of incapacitation (unstable mental state, health issues, and physical disabilities) and those who are able and willing to work but have their names registered for unemployment benefits.

  1. Long-Term 

Any type of unemployment which has lasted for over a year is known as long-term unemployment.

Causes of Unemployment

The causes are not just with the government alone. They spread across many areas, including the workers, government, economy, and employers. As the types of unemployment differ, so does the causes. Here are some of the common causes in our world today.

  1. Immobility of Work Force

The workforce being unevenly distributed across a country is one of the major causes of unemployment today. Situations exist where industries or companies are clustered in a particular part of the country.  This makes it difficult for people far from such a location to apply or work in such companies. Most people, especially married people, find it difficult leaving their families or relocating to another part of the country in search of a job. They would rather stay with their family and remain unemployed.

Also, employees of a company which relocated would find it difficult relocating to the new location, making them unemployed until they find a new job in their locality.

  1. Employers’ Preference of ‘Rock-Star’ Workers

Before now, companies hired as many people as possible so the work is done faster and accurately. But the reverse is the case today.  Employers prefer ‘rock-star’ workers.  These are workers who are good at a lot of skills and abilities (all-rounder). They would rather hire a few competent workers than a truck-load of ‘average’ workers. They see no need for more employees as a task that is supposed to be shared among twenty employees is efficiently done by five ‘all-rounder’.

This also affects employed workers. An employer who discovers that a few employees can perform the task at hand would have no use of other employees present in the firm. In a bid to save more, they cut their payroll expenses.  This leads to a mass layoff of employees in such a company.

  1. Global Economic Crisis

Economic crisis experienced across the globe is a major reason for the rise in those who are unemployed.

Import and export of goods do not only help the economy, but it reduces the unemployment rate too.

The recent global economic crisis has caused many companies to reduce their production rate which invariably led to mass lay off of workers, causing an increase in the world’s job rate.

Also, the global economic crisis has led to a reduction in investment rate as there is not much money for people to invest, causing a reduction in production and sales of most firms and mass lay off of workers eventually.

  1. Workers Prefer Suitable Jobs

Most workers who were laid off from their former job prefer to remain unemployed until they find a suitable job – a job that befits their past level, salary, skills, and experience. This is the major cause of frictional unemployment as they would not jump at the first job they see but rather wait till they get a better job.

Some employed workers also quit their unfulfilling jobs and remain unemployed until they get a better one.

Education has a got a role to play in this workers’ preference for suitable jobs. Unlike the past century where few people are educated, literacy rate has increased both in the rural and urban areas, producing more capable workers for virtually the same amount of job opportunities.

A Ph.D. holder would not accept a job deserving for first-degree holders, he would rather remain unemployed.

  1. Advancement in Technology

It is no news that the world has become a global village. The advancement in technology has brought with it both benefits and disadvantages.

True, complex tasks are now done more accurately and faster but this has sent many people packing from their jobs.

Most employers have used machines to replace workers. A task which required a 20 man team is now done by machines in a split second.

Business intelligence tools and platforms have been used to replace analyst and other workers in many firms.

Artificial intelligence has also been used to replace personal assistance, IT department staffs, business analyst, marketers, and on goes the list.

Workers’ skills have become obsolete with the advancement of technology. As technology increases so do the need for improvement in workers’ skills leading to mass lay off of employees and a decrease in the number of workers hired too.

  1. Workers Choice to Remain Out of the Workforce

Volunteering not to work is yet another cause for the rise in the world’s unemployment rate.

Workers decide to remain unemployed for many different reasons;

  • Academic pursuit could make a person who is willing and able to work choose to remain employed.
  • Someone with a sick family member may decide to stop working or not to search for a job so he or she can take good care of the family member.
  • Unemployment insurance or benefits is yet another reason people choose to remain unemployed. The government provides them with just enough money to keep their finances together (pay student loan, rent, buy groceries, etc.) and they give up on the job search because they are satisfied with what they gain weekly or bi-weekly.
  • Workers who have saved enough money from their previous jobs may also decide to give up on job search as they have enough money to take care of their financial needs.
  • Some workers quit their jobs to set up a business of their own. They decide not to find another job because they have a source of income.
  • Those who have searched for jobs for months with no success might give up the search, as seen in discouraged workers, because they feel there is no job out there for them.
  • Workers who relocated might decide to remain unemployed until they find a new job or a suitable job in their new town
  1. Specialization of Job Opportunities

Nowadays, jobs come with specific requirements which if not met, the workers are not considered for the position. This has contributed greatly to the rise of those not working.

A job position which requires someone with a particular level of education would be difficult to obtain by workers without such academic level even when they meet all other requirements and can perform the task properly.

Sadly this is the case with most job opportunities these days, making the unemployment rate to rise even when there are available job vacancies.

  1. Economic Recession

This is one of the major causes of unemployment. When a country faces a recession, every sector of such country is affected including the labor market.

During recession, there is less money in circulation, making people spend less on purchase and invest less too. This leads to decreased production rate because the demand for goods is low. Most companies fold up during recession, causing all the employees to become unemployed. While others lay off workers as there is not much work to be done and to save more too.

This singular cause accounts for over 50% of unemployment rise.

  1. New Workers Entering the Work Force

The unemployment rate also increases when new workers enter the workforce.

Examples include; Fresh graduates who just started looking for jobs, re-entering of pregnant women who quit their jobs until after delivery, those who left to care for sick relatives, etc.

When these individuals start seeking jobs actively, they increase the unemployment as proposed by the Bureau of Labor Statistics.

Effects of Being Unemployed

The pain of being unemployed is only understood by people who have gone through it. Not knowing when or where the next paycheck would come from has a grave effect on workers and the economy too.

Some of the consequences or effect of unemployment include;
  • It leads to emotional destruction – increased depression, illness, and suicide rate among workers.
  • Unemployment reduces or stunts the economic growth of a country.
  • A high Unemployment rate means there will be fewer customers spending and investing.  Thus, decreasing its growth and deepening the economic recession.
  • It leads to a financial crisis as workers have no source of income. This can make them homeless as there is no money to pay rent and make them incur more debts too.
  • A high rate of unemployment in a country leads to an increase in the crime rate.  The populace would involve themselves in one crime or the other as a means for survival
  • Long-term unemployment makes workers lose their skills because they have been unemployed for a very long time. Their skills become outdated when there is economic growth and they find a job
  • An increase in the unemployment rate may bring about insecurity among employees.  They are not sure who will be affected in the next lay off.
  • It leads to a waste of human resources as these resources are not put to efficient use.
  • The high unemployment rate in a country may lead to migration of workers to other countries with better job opportunities.
  • Underemployment may arise also as workers are desperate to get a job whether it is suitable for their academic level, experience, skills past salary, and level or not.
  • Unemployment poses a threat to the peace of a country.

Solutions to Unemployment

Unemployment has proven to be a big issue disturbing countries across the world.  Developed and undeveloped countries alike. It will be difficult combating this problem as it cuts across various sectors of the economy. But we have to keep trying and someday we might just escape unemployment for good.  It may help to get legal counsel, as they may have some ideas on whether you have a case in the event that you were fired, laid off or discriminated against.

Some of the solutions for unemployment include:
  • More jobs should be created as the population increases so there will be enough jobs to match the number of the populace.
  • Wages should be made to match the amount of work done so that workers will be happy and willing to work.
  • People should be encouraged to broaden their horizon. Too many people fighting to get a particular position also leads to unemployment as the position can contain just a few people.
  • Controlling the population rate of a country will go a long way combating this issue of unemployment.
  • Skill acquisition should be added to the school’s curriculum.  This will allow students to learn skills that they could work with after graduation.  Thus, they would not depend on white collar jobs.
  • Increase in the geographical and occupational mobility of labor will reduce the unemployment rate drastically.
  • Employment taxes should also be reduced so there will be an increase in labor demand.
  • An adjustment should be made to unemployment benefits.  Many workers use that as a source of income and forego the idea of seeking for jobs.

Other Related Questions

Can I exhaust my unemployment benefits?

Unemployment benefits paid to workers who are actively seeking a job with no success yet usually last only for the benefit year, which is one year.

What can I do when I run out of benefits?

You have got limited chances here. You could file for an extension or start a business of your own. Self-Employment Assistance Program (SEAP) is set up by the government to train people receiving benefits. Find out about the SEAP in your state and learn a skill that you could use to establish a business of your own

Some states also provide food or cash assistance. You could familiarize yourself with that of your state to know if you are eligible or not.

Can the high unemployment rate affect workers that are employed?

Yes, it can. Many employees stick with an unsuitable and unfulfilling job because of the fear of not getting another job if they quit.

Workers who remain after a lay off are compelled to pick up the slack. They do more jobs for the same or less pay even.

Does recession have any effect on the unemployment rate?

Economy recession affects the unemployment rate of any country. During recession, there is a decrease in business sales and revenues which make employers find means to lower their cost and lay off is one of such means, leading to an increase in unemployment rate.

Would being unemployed affect my chances of getting citizenship in another country?

Being unemployed does not disqualify you from applying for citizenship and you can earn the unemployment benefit of that country if you continue filing claims.

Can I transfer unemployment from different states?

Relocating to a new state does not stop your unemployment benefits provided you remain eligible and fill out the necessary paperwork.

Note that your new state does not automatically take up the responsibility of paying your benefits, so you should accurately fill the paperwork involved and engage in activities that make you remain eligible to claim the unemployment benefits.