The Unemployment Theoretical Background

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Unemployment Theoretical Background
I. Introduction:
Unemployment represents a loss in the Gross domestic product (GDP). It is a problem that needs to be solved, especially that it has its social costs as high levels of unemployment can cause civil unrest -it was one of the causes of the revolt in Egypt-. Economic literature provides an explanation for the unemployment problem, so we will discuss the unemployment’s concept and ways of its measurement, also its kinds and economic debates.
II. Unemployment concept and measurement :
Unemployment is a stock concept measured at a point in time, its level rises when inflows (the newly unemployed) exceed outflows (people getting new jobs).
There are three ways for a worker to be unemployed, some
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Types of unemployment :
According to the traditional classification, there are different types of unemployment, namely frictional unemployment, structural unemployment, seasonal unemployment and cyclical unemployment, which respectively states the reason behind each type of unemployment and the paradox that job vacancies and unemployment always coexisting (Hughes and Richard Perlman, 1984, p.26).
1) Frictional unemployment – it refers to the short periods of unemployment needed to match jobs and jobs seekers within the mainstream of the economy. Much of this short-term unemployment is voluntary. It represents people who have quit old jobs to look for new ones, people taking a week or so to move or go on vacation before starting a newly found job. Sometimes called “Search Unemployment”.
2) Structural unemployment – it refers to people who are spending long periods out of work, with little prospect of finding an adequate job. Due to the shifting structure of the economy, these workers face prolonged joblessness because it has made their skills obsolete. Its cure could take a much longer time, needed for reeducating the unemployed and training them to gain skills needed for vacancies, implying for the increasing cost that might not be available for the developing
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Cyclical unemployment is used to refer to the fluctuation in unemployment that is incurred by business cycles, more specifically, the unemployment caused by economic recessions. Its remedy is through following expansionary economic policies by encouraging investment, exports, and government expenditure, but on the other side this might not be effective in developing countries as it could lead to higher price levels, so it requires affecting the supply side -not the demand side only- by increasing production and productivity, leading to increase of income subsequently higher aggregate

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