The Most Important Types of Unemployment in Developed Countries are listed below:
(i) Cyclical unemployment:
This type of unemployment is common to the developed world. It is caused by trade cycles. A trade cycle refers to a phenomenon of upswing and downswing that appear and disappear in trade and business. An upswing begins with the stage of recovery and ends with the stage of boom.
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It is marked for hectic activity and overwhelming optimism. In consequence, rising levels of employment, income, production, prices and increasing demand become common observations. On the contrary, the downswing follows the stage of boom and ends with depression.
The downswing, also known as recession is characterized for the existence of low level of business activities leading to widespread pessimism. It is marked for declining levels of production, investment, employment, income, prices and receding demand.
When depression finally sets in, markets get flooded with stocks of unsold goods and the household sector falls under massive unemployment. Such a state of unemployment is referred to as the cyclical unemployment.
(ii) Frictional unemployment:
Common generally in the developed countries, the frictional unemployment refers to a state of joblessness of people in-between two successive jobs. A worker quits a job to look for a better one and remains unemployed until the desired opportunity is found.
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The joblessness during the intervening period is referred to as the frictional unemployment. The practice is common only to the developed world where workers possess reserves of income saved by them in the past.
(iii) Voluntary unemployment:
A high level of income accrued and accumulated in the past help people to acquire income-earning assets. Many of them inherit such wealth from their ancestors. As a result, they willingly remain in unemployment called the voluntary unemployment. It arises mainly due to affluence of some wealthier sections of society.