What this lesson teaches
I can explain frictional, structural, cyclical and seasonal unemployment.
Syllabus K343, 4.6.3. Causes/types of unemployment: frictional unemployment; structural unemployment; cyclical unemployment; seasonal unemployment
Make a guess
During a recession, hotel staff with good skills lose their jobs as tourists stop coming. Is this structural unemployment?
- Yes. Losing a job means the worker's skills no longer fit.
- Yes, because hotels are a declining industry.
- No. It is cyclical, caused by a fall in demand.
Show the answer
No. It is cyclical, caused by a fall in demand.
The jobs vanished because spending fell, not because skills became outdated. They return when demand recovers.
Unemployment can be frictional, structural, cyclical or seasonal, and each has a different cause.
Frictional unemployment happens when people are between jobs. A worker who leaves one job, or a graduate who has just finished school, takes time to search, apply and accept an offer. It is usually short, it is always present, and it can even help, because people who search find jobs that suit their skills. Better job-matching services shorten it.
Structural unemployment happens when the structure of the economy changes. An industry shrinks, perhaps because of new technology or cheaper foreign rivals. Its workers lack the skills, or live in the wrong place, for the jobs that are growing. Older workers with one narrow skill are hit hardest. It can last a long time, so the fix is retraining, such as Singapore's SkillsFuture courses.
Cyclical unemployment happens when total demand falls, as in a recession. Households and firms spend less, so firms sell less and need fewer workers, and lay some off. Workers in industries that sell to the public, such as retail, travel and construction, are often hit first. It falls again when demand recovers, and fiscal or monetary policy that raises demand can speed this up.
Seasonal unemployment happens when demand for workers rises and falls with the seasons or the calendar. Tourism workers in the off-season, farm workers after harvest and extra shop staff hired for festive sales are examples. It is predictable, so workers can plan for it, but their income is uneven through the year.
Sort these
Which type of unemployment is each case?
Groups: Frictional, Structural, Cyclical, Seasonal.
- Bank tellers lose their jobs as customers switch to banking apps
- Hotels cut staff as a global downturn keeps tourists away
- Shipyard workers in a town where the yard closed cannot find similar work nearby
- A nurse leaves one hospital and takes three weeks to start at another
- A furniture factory lays off staff as orders fall during a recession
- Durian stall helpers have no work once the harvest ends
Show the answer
Frictional
- A nurse leaves one hospital and takes three weeks to start at another She is between jobs for a short time; the work exists and she will soon be in it.
Structural
- Bank tellers lose their jobs as customers switch to banking apps Technology has shrunk their industry, and their skills do not match the jobs that are growing.
- Shipyard workers in a town where the yard closed cannot find similar work nearby The industry has gone, and the workers are in the wrong place with the wrong skills for the new jobs.
Cyclical
- Hotels cut staff as a global downturn keeps tourists away A fall in total spending, not a change in skills or seasons, is behind these job losses.
- A furniture factory lays off staff as orders fall during a recession Total demand in the economy has fallen, so firms across many industries need fewer workers.
Seasonal
- Durian stall helpers have no work once the harvest ends Demand for their labour rises and falls with the time of year.
- Frictional
- Between jobs; short-term.
- Structural
- Industry decline and skill mismatch; long-term.
- Cyclical
- Fall in total demand in a recession.
- Seasonal
- Demand for labour varies with the season.
Worked example: Naming the type in Singapore cases
Identify the type of unemployment in each case and say who is affected.
- A polytechnic graduate spends two months choosing between job offers: frictional. The graduate, briefly.
- Bank tellers lose their jobs as customers move to banking apps: structural. Workers whose skills are no longer needed, until they retrain.
- In 2020, travel agents and hotel staff were laid off when COVID-19 stopped tourism: cyclical, because demand for travel collapsed. Workers in travel, hotels and retail.
- Extra staff hired for the year-end festive sales are let go in January: seasonal. Temporary retail workers.
Watch out for this
Structural unemployment is caused by a recession.
A recession causes cyclical unemployment. Structural unemployment comes from long-term changes in industries and the skills they need.
Check your understanding
Printing workers lose their jobs as more people read news online. Which type of unemployment is this?
- Cyclical
- Structural
- Frictional
Show the answer
Structural
Right. A lasting change in the economy has reduced demand for their skills.
Check your understanding
A printing worker loses her job as readers switch to reading news online. She lacks the skills for jobs in growing industries. What type of unemployment is this?
- Structural unemployment
- Cyclical unemployment
- Frictional unemployment
- Seasonal unemployment
Show the answer
Structural unemployment
Right. Demand has moved away from her industry for good, and her skills no longer match the jobs available.