Why does unemployment exist? There is a variety of reasons. First, seasonal unemployment occurs because the business of many employers (for instance, resort hotels, farming, and construction) is seasonal in nature. Workers are laid off temporarily.
Second, technological unemployment occurs when new labor-saving machines or processes replace old ones. When particular jobs and skills are made obsolete, workers must find other types of jobs and learn new skills. The growing use of automation has caused considerable technological unemployment.
Third, continual changes in a nation’s pattern of demand for products force some firms or industries to reduce production and employment, while other firms
or industries (perhaps in other parts of the country) expand production and recruit new workers. The workers who lose their jobs cannot always find new jobs immediately. In some cases, an entire region in which a declining industry is concentrated becomes a ‘depression area.’ Because workers are reluctant to move from their established homes, regional unemployment can be an especially severe problem.Fourth, in individual cases, persons may be unable or unwilling to perform satisfactorily in their jobs and may be discharged or they may dislike their jobs and quit voluntarily. In
either case, the result is unemployment until a new, suitable job is found. In these four unemployment, joblessness is of a temporary nature and exists only because it usually takes some time to match unemployed persons with existing job vacancies. Unemployment of these sorts is often called frictional or transitional unemployment.In addition, there is cyclical unemployment. For the past century and half, industrial nations have experienced recurring cycles in which periods of prosperity and high rates of economic activity have been followed by slack periods, known as recessions or depressions. In these slack periods, a general falling off in the demand for goods and services has caused general reduction in sales, production, and employment.
The alternation of good times and bad times has come to be known as the business cycle. For this reason, the resulting unemployment has been termed “cyclical unemployment.” During the period of subnormal employment, which usually lasts a year or more, workers who lose their jobs find alternative job opportunities unusually scarce or nonexistent.