(a) Differentiate between unemployment and underemployment.
(b) With one example each, explain the following
(i) Seasonal unemployment
(ii) Structural unemployment
(iii) Frictional unemployment
(iv) Cyclical unemployment
Explanation
(a) Unemployment is a situation where people who are able and willing to work at the existing wage rate are unable to find work OR a situation where factors of production such as capital lie idle or cannot be put to productive use. While underemployment exists when labour is engaged is any form of occupation/work below its full potential OR a situation where resources like capital is not optimally used.
(b)(i) Seasonal unemployment: This refers to a fall in demand for labour at certain times of the year due to seasonal changes e.g when schools are on vacation, sellers in the school canteen become unemployed; farmers become unemployed during the dry season.
(ii) Structural unemployment: This occurs when there is a fall in the demand for the product of an industry leading to workers being permanently laid off. OR Structural unemployment occurs when there is a fall in the demand for the process of production changes, such that some workers become redundant e.g the use of earthmoving equipment has rendered labourers who use pick axes and shovels redundant in the construction industry; counting machines and ATMs have resulted in less people being employed as cashiers.
(iii) Frictional unemployment: This is unemployment caused by workers changing jobs or school leavers searching for jobs e.g a fresh graduate looking for a job.
(iv) Cyclical unemployment: This is the unemployment caused by a deficiency in aggregate demand leading to a deflationary phase of the business cycle e.g when aggregate demand falls, firms need to cut down on labour.