Types of Unemployment

What are Types of Unemployment?

The types of unemployment indicate what causes unemployment. In addition to voluntary and involuntary unemployment, the types of unemployment can be divided into the following four categories:

  • frictional unemployment
  • seasonal unemployment
  • cyclical unemployment
  • structural unemployment

This lesson covers the types of unemployment. You will find out why it is important to differentiate between the individual types of unemployment and what causes the various types of unemployment. Then the types of unemployment are presented. To deepen your knowledge, you can answer a few exercise questions after the text.

English: types of unemployment

Why is it important to distinguish between types of unemployment?

If people are out of work, they do not have enough money at their disposal. The payment of unemployment benefits also puts a strain on the social systems. Society suffers from excessive unemployment because not enough wage tax and social security contributions are collected. The projects that are to be paid for with this money must be financed elsewhere. The gross domestic product also falls as unemployment rises.

To cope with these problems, unemployment must be prevented or at least restricted. Countermeasures can only be initiated if the causes are known. For this reason, unemployment is classified into different types.

Voluntary and involuntary unemployment

Those people who turn down the opportunity to start a new job are voluntarily unemployed. Those who refuse a job cite the reason that they cannot be expected to take up the new job. This may have to do with pay, type of work, and distance from home.


The tax clerk Z. has successfully completed her training in a tax office. The firm owner would like to keep the successful graduate employed in a branch. To do this, Ms. Z. would have to move from Hamburg to Stuttgart.

Ms. Z.’s family and friends live in Hamburg. She considers it unreasonable to accept a job in southern Germany. As long as she has not found a new job, she is voluntarily unemployed.

Involuntary unemployment is a labor market problem. The demand for work exceeds the supply. In the case of involuntary unemployment, the amount of the salary, the distance to the job and the type of work are irrelevant.

Types of unemployment: demand and supply of work

Frictional unemployment

According to homethodology.com, frictional unemployment is caused by the fact that the job is changed frequently and a new job is not found immediately. It is also known as search unemployment.

It is characteristic of frictional unemployment that it is never long-term. Since a job seeker does not always find a new job straight away, frictional unemployment can never be avoided 100%. If the employee resigns himself, he is voluntarily unemployed. If the employee is terminated by the employer, there is involuntary unemployment.

Seasonal unemployment

Seasonal unemployment depends on a certain period (e.g. time of year). The employer can only offer his goods or services at a certain time. In the other months, the employees are supported or made redundant by government subsidies.

Types of Unemployment

Example: roofing company in winter

In winter it is too dangerous for a roofer to climb onto a roof. That is why many companies register short-time work in the winter months. The roofers receive seasonal short-time work allowance (Saison-KUG). The KUG season is only paid during the bad weather period on the building site. The bad weather season begins on December 1st and ends on March 31st of the following year.

Economic unemployment

The cyclical unemployment depends on the overall economic development of an economy. Declines in production and a decrease in demand favor cyclical unemployment. First of all, the poor order situation is compensated for by reducing overtime and short-time working. If the unfortunate economic situation persists over a longer period of time, the economy is heading for a recession. In extreme cases, mass layoffs can no longer be prevented.

If the economic situation recovers, this will only have a sluggish effect on the labor market. Unemployment is only gradually falling.

Structural unemployment

Structural unemployment is directly related to consumer behavior. If demand declines to such an extent that buyers no longer need certain goods, staff are laid off.

Structural unemployment does not refer to the entire labor market of an economy. It is predominant in those regions where more work is in demand than it is offered. The public sector acts against this phenomenon. B. counteracted by job creation measures.