Unemployment is believed to be one of the most serious social and economic problems in many countries of the world. Usually unemployment is considered as problem if percentage of unemployed persons becomes too high. Government can apply special policy influencing unemployment rate as well as entire economy.
According to the Experimental Economics Center (2006) data there are few main types of unemployment: structural, frictional and cyclical. Structural unemployment is caused by long-term changes in economic structure such as change of technologies, disappearing of some jobs and creation of new ones and others. Frictional unemployment occurs when persons try to find job that would the most suitable for them and is mostly caused by lack of information on available jobs. Such persons usually are unemployed voluntary. Cyclical unemployment is caused by macroeconomic situation and is determined by current phase of economic cycle. Unemployment is minimal during economic boom and is the highest during economic crisis or depression.
National governments have certain tools that allow influencing economic situation. There are two major types of government policies that can be applied. These are fiscal and monetary policy. Monetary policy includes setting base interest rates and influencing supply of money. Central bank can increase interest rate to decrease inflation but economic growth will weaken. Fiscal policy is determined by amounts government spending and taxation rates. It is believed that for example increasing of government spending usually stimulates economic growth and rise of employment.
As a conclusion it can be stated that there are three main types of employment that have different causes. They are structural, frictional and cyclical. To influence economy as well as unemployment government can apply two major types of economic policy: monetary and fiscal ones.
Reference
Experimental Economics Center (2006). Types of Unemployment. Retrieved October 23,
2012 from http://www.econport.org/content/handbook/Unemployment/Types.html
Pettinger T. (2011). Difference Between Monetary and Fiscal Policy. Retrieved October 23,
2012 from http://www.economicshelp.org/blog/1850/economics/difference-between-
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