Cyclicalunemployment Cyclical, or Keynesianunemployment, is unemployment that is caused by fluctuations in a country’seconomic activity. Appears when a nation, or a large part of it, falls intoperiods of recession and disappears when economic and productive expansionbegins to develop. It should be noted that the recession is that period, wherethe economic environment of a country declines, that is, decreasesconsiderably. When this enters the scene, the whole system is affected, sincebasic needs cannot be met within the territory, and large quantities ofproducts cannot be exported if they are also dependent on them. In economic terms, it is said thatcyclical unemployment is a fluctuation of the unemployment rate with respect toits natural rate, that is, the unemployment rate that cannot be reduced and isconsidered normal in an economy.The great losses of money makethat the employers decide to reduce the expenses of their company and most ofthe time, they begin by the massive dismissals (the entrance of money is muchsmaller than the exit of it).
One of the reasons why workers are also fired isbecause maybe the company does not have enough capital to pay them for the workthey do. Countries always seek to protect workers from situations like this, sothey urge companies to maintain the same number of job offers in times of recession.(Investopedia, 2018)(The Economic Times, 2018) (Dineshbakshi.com, 2018) As we see in the graph above, there is an equilibrium point between thedemand for workers and the supply for work. At this equilibrium point we seehow the number of workers and salaries are balanced as well. When the demanddecreases, and the line shifts to the left, we see a decrease in the number ofworkers and, in turn, a decrease in the average price of wages. How to determine the cyclicalunemployment rate The formula for the cyclicalunemployment rate accounts for the other two types of unemployment and theunemployment rate: Cyclical unemployment rate = Currentunemployment rate – (Frictional unemployment rate + Structural unemploymentrate)(CFI – Corporate Finance Institute, 2018) Causes of cyclicalunemployment Cyclical unemployment increaseswhen there is a fall in the economic activity of a country.
In times whencompanies reduce their sales and investment, the demand for work is alsoreduced, so some people are dismissed from their jobs while others cannot finda new job. It is expected that this type ofunemployment will be reduced as economic activity starts to reactivate. Unemployment is reached becausethe labor market does not work efficiently, and supply and demand are notbalanced. The different reasons why this canhappen: UnbalanceCompanies and workers caninfluence the salary. If wages are low, companies will demand more workers andworkers will be less motivated to work on low salaries. On the contrary, therewill be more people willing to work with higher the salaries.
RigidityThe worker and the employer arenot only interested in salary conditions. There are other conditions to takeinto account such as the legislation on dismissal, regulatory vacations orsocial benefits, such as medical insurance or restaurant tickets. Government interventionThe labor legislation must betaken into account. There are organisms that regulate it and among the topicsdiscussed we can find labor contracts, setting a minimum wage or compensationfor dismissal.(Baena, 2010) Seasonalunemployment Seasonalunemployment is a type of work agreement in which a person is routinelyemployed for part of the year but spends the remaining months or weeks withoutwork. This situation is more commonly associated with temporary jobs, dependenton time such as a lifeguard and some construction workers. Tourism jobs related to specificseasons (such as seaside resorts or ski centers), as well as more sporadicemployment in seasonal groups such as theater companies, may also fall intothis category. This type of work usuallyrevolves around fixed calendars that employees both know and understand exactlywhen they will be out of work.
In many cases, seasonal employees can accumulateunemployment benefits sponsored by the government in their season. Thedefining characteristic of seasonal unemployment is its predictability. Inalmost all cases, workers accept these types of jobs with full knowledge thatthey are only temporary. Employees are dismissed usually at a pre-establisheddate but, usually, the agreement is designed to be cyclical: most people whooccupy these jobs know that work will be waiting for them at some future time,and reapplying is not usually necessary. Unemployment related to climateJobs that depend on certainweather conditions are some of the most common candidates for temporaryunemployment.
Snow shovel operators, personal ski coaches, lifeguards and beachcontrollers are just some examples. Some types of construction work andexterior painting also fit into this category. Tourism and travel seasonsA number of jobs related totourism are limited to the “high” season of a certain place, whichmay subject to seasonal unemployment as well. Many of the most sought-afterdestinations in the world have certain times of the year that are much busierthan others.
Some of this has to do with the season: summer is almost always abusy time, but a lot is also related to weather patterns. Regions subject torain or suffocating heat are often less popular during these periods. Mosthotels and resorts will keep some employees during these “low”seasons, but they rarely run at full capacity. School employeesTeachers are one of the biggestexceptions to the seasonal unemployment rule. Most teachers work only duringthe academic year and enjoy summers that are basically free.
Teachers aredismissed before the summer months, however, nor are they considered”unemployed” during this time. Other school employees such as schooldrivers, cafeteria workers and librarians, to name a few, usually comes withinthis umbrella. Unemployment: Europevs. Latin America and the Caribbean Latin America and theCaribbean Unemployment grew for the thirdconsecutive year in Latin America and the Caribbean during this 2017 untilreaching 26.
4 million people, but the trend will change in 2018, according tothe annual report of the International Labor Organization (ILO). This increase in the number ofunemployed is mainly caused by the situation in Brazil, which concentrates 40%of the Latin American labor force and where the unemployment rate rose to 13.1%in the third quarter of 2017. The ILO predicted that by 2018the trend will reverse and unemployment in Latin America will fall for thefirst time in three years, since it is projected that the economy of the regionwill grow an average of 2%. Regarding the participation ofwomen, the ILO valued that women cover more than half of the labor force inLatin America, with a participation of 50.2%, which includes more than 115million women. However, he warned that the gender gap is persistent, and theparticipation and occupation rates of women are still lower than those of menby more than 20%. Likewise, the unemployment ratefor women stood at 10.
4% in 2017 at the third quarter and is still 1.4 timeshigher than that of men. (International Labor Organization, 2017) Europe Theunemployment rate in the Eurozone closed the year at 8.7%, one point less thanin December 2016 and the lowest level since January 2009. In the EU, unemployment remainsstable at 7.3 %, in comparison with the data for November and ends with adecrease of 9 tenths with respect to the previous year. The statistical office of theEuropean Union estimates that this 8.7% corresponds to about 18 millionunemployed people (14.
1 in the euro countries). Data for December 2016 show thatunemployment has fallen by more than 2 million people this year in the EU and bymore than 1.5 million in the Eurozone. Among the member states, thelowest unemployment rates were registered in the Czech Republic, with 2.3%,followed by Malta and Germany, with 3.6% unemployment.
Spain is positioned asthe second country with more unemployment in Europe, with 16.55%, behindGreece, which is targeted by 20.7% in October. Unemployment has fallen in all EUstates, except in Finland.
Spain is the fourth country with the highest declinein unemployment in Europe, by cutting its figure by more than 2 points, from18.5% to 16.4%. (Eurostat, 2018)