Unemployment Associated with Full Employment

According to Gardner, “Frictional Unemployment is the unemployment associated with the changing of jobs in dynamic economy”.

In simple words, it's the gap time between leaving one job and starting a new one.​

Why does it happen?

• A worker quits their job to look for a better one ("greener pastures")​
• A fresh graduate just enters the job market and is searching for their first job​
• Workers don't have information about available jobs nearby​
• Workers can't or won't move to where jobs are (immobility of labour)​
• Factories temporarily stop due to power cuts, raw material shortages, or broken machinery​

Key features

• Short-term (days to a few months)
• Usually voluntary — the worker chose to switch​
• Normal and healthy in a growing economy​

Easy Example

Rahul finishes his B.Com from a Mumbai college. He spends 6 weeks sending applications and attending interviews before he lands a job. During those 6 weeks, he is frictionally unemployed.​

According to Gardner, “Structural unemployment is the unemployment that results from the long term decline of certain industries.”

In simple words: It happens when the economy itself changes — old industries shut down and workers with old skills can't fit into new ones.​

Why does it happen?

• Workers were trained for old industries (like handloom weaving), but those skills are no longer needed​
• There is a shortage of capital, land, or infrastructure, so even willing workers have no work​
• Production methods change permanently — whole factories close down for good​
• The economy shifts from agriculture → manufacturing → services, but workers don't shift with it​

Key features

• Long-term — can last for years
• Often, involuntary workers want to work but can't​
• Cannot be fixed just by spending more money — workers need retraining​

Easy Example

When power looms were introduced in textile factories, handloom weavers lost their jobs permanently. Their skill — weaving by hand — was no longer needed. This is structural unemployment.​

Meaning

This type comes and goes with the seasons. Some industries only have work during certain times of the year — when that season ends, workers become unemployed.​

In simple words: No season = no work = seasonal unemployment.​

Why does it happen?

• Weather changes affect industries like farming, tourism, and outdoor construction​
• Fashion and taste change — demand for certain goods rises and falls by season​
• Certain products are only needed at certain times of the year​

Key features

• Predictable and recurring — both workers and employers know it will happen
• Temporary — work comes back when the season returns​
• Considered compatible with full employment because it's a natural, expected pattern​

Easy Examples

Meaning

This happens when machines or new technology replace human workers.
In simple words: A machine now does the job that a human used to do, so that the human loses their job.​

Why does it happen?

• Factory owners install machines that do the work of many people​
• Software and computers replace manual work, such as data entry or calculations​
• AI and automation are increasingly replacing routine and even complex tasks​

Key features

• Can be long-term — workers need to learn new skills to get back to work​
• Often, involuntary workers did not choose to lose their jobs​
• BUT: In the long run, new technology also creates new types of jobs (this is why the Luddite Fallacy is wrong)

Easy Examples