Type-Voluntary and Type-Cyclical Unemployment in Modern World

Cite this

Type-Voluntary Unemployment

Unemployment is a state in which a person is trying to find a job but is having no luck. Unemployment is often regarded as a crucial economic indicator. The unemployment rate is calculated by dividing total jobless persons by whole employed persons as a general rule. Several governments provide unemployment insurance to eligible unemployed people. Unemployment is an important economic indicator since it shows whether people are able (or unable) to find meaningful employment and therefore contribute to the economy’s productive output (Layton, Robinson and Tucker, 2018). This calculation does not include people who quit employment for non-work-related reasons, such as retirement, further education, or disability. Because there are more jobless people, the overall economic output will be lower than it otherwise would be. During the time they are unemployed, unemployed people must maintain a minimum standard of living. In other words, when the unemployment rate is higher, the economy produces more minor, yet the demand for actual consumption does not decrease proportionally. For an economy to be in severe trouble, high unemployment must be sustained. This may lead to social and political instability.

On-Time Delivery!
Get your customized and 100% plagiarism-free paper done in as little as 3 hours
Let’s start
322 specialists online

The term voluntary unemployment is controversial since it implies that those who are jobless are lazy/work-shy. In our case, the two siblings are willingly not searching for work and are making half-hearted attempts to get work. As a result, unemployment benefits may be reduced, leading to poverty. Right-wingers are more inclined to believe that unemployment is a choice people make. Those on the left are more inclined to downplay “voluntary” unemployment and emphasize structural and social issues as the primary cause of unemployment. Another problem is that some claim that jobless people are economically inactive because they choose voluntary unemployment. In other words, they’ve dropped out of the labor force because they turned down jobs. This implies that they would turn down any employment opportunities. In reality, most people who choose to be unemployed do so because they are dissatisfied with their current work.

Overstating Voluntary Unemployment

Measuring the number of jobless people is never simple. For example, what about unemployed people who want to work but have given up searching for employment because of the scarcity of positions in their area? They, together with their families, maybe feeling the effects of joblessness. Due to their lack of employment activity, the survey classifies individuals as unemployed. Even if someone tells the Census Bureau they are eager to work and actively seeking employment; the truth is that they are not. They are classed as jobless, even though they are not actively looking for work. Other individuals may be employed, maybe performing yard work, child care, or housecleaning, but they are not informing the tax authorities of their earnings (Liu and Liu, 2012). They may claim to be jobless even if they have a job. However, although while unemployment rates dominate public and media discourse, economists at the Bureau of Labor Statistics conduct a broad range of surveys and analyses to understand the labor market as a whole better. The fact that economic data are prone to error is hardly breaking news. The unemployment rate, for example, is a flawed metric, but it may still be quite instructive if read intelligently.

Type-Cyclical Unemployment

Our fifty-year-old man is unwillingly unemployed. He has searched for work and has the will to work but has been retrenched due to closure of the factory. This is otherwise known as cyclical unemployment. Cyclical unemployment is a part of the total unemployment rate that occurs as a direct consequence of the economy going through ups and downs in cycles of expansion and contraction. During recessions, unemployment tends to increase, whereas, during booms, it tends to fall. When economies are in recession, the aim of studying economics and using different policy instruments is to reduce cyclical unemployment. Cyclical unemployment is a term that refers to the ups and downs, or cyclical patterns, in economic growth and output as measured by GDP (Forsythe and Wu, 2021). Business cycles usually go through two phases: a downturn, an upturn, and a second slump. Cyclic unemployment, according to economists, occurs when companies lack the demand for labor to hire all individuals who are unemployed at a given time. When demand for a product or service decreases, supply output may be reduced to compensate for the loss. Fewer workers are needed to fulfill the lower production volume requirement when supply levels are lowered. If workers are no longer required, the business will release them, leaving them without a job. A weak business cycle means more cyclical unemployment as economic production drops. Strong demand for labor means that cyclical unemployment is low while economic cycles are at their height.

Understating Cyclical Unemployment

The unemployment rate in today’s labor market vastly understates the lack of work possibilities. This is because there are many “missing employees”–potential workers who are unemployed or actively seeking work because of poor employment prospects. That is, they are individuals who, if job prospects were substantially more excellent, would be employed or actively seeking employment. They are not included in the unemployment rate because those who are not looking for work are only classified as unemployed if they are actively looking for work

Is One Type of Unemployment a More Serious Problem Than the Other?

Corporations and businesses are often compelled to lay off workers, whether it’s restructuring, downsizing, or the firm going out of business. If you’ve ever lost your job for whatever reason, you’ve had to deal with some joblessness. Economists measure different types of unemployment to help them assess an economy’s health and assist governments and companies in navigating economic shifts. The most prevalent kind of unemployment is structural unemployment. It’s also the most debilitating kind of joblessness. Because it is not linked to the economic cycle, long-term unemployment is more challenging to recover from. It may have long-term consequences. If the economy and market circumstances change over time, structural unemployment may arise because the skills employers need, and people’s capabilities diverged. As a result of a decrease in demand for specific sectors’ output or changes in the manufacturing process, structural unemployment has reduced labor needs or even disinvestment. Workers who reside too far away from locations where jobs are accessible may be experiencing structural unemployment due to geography. Some external variables, such as government policy, competition, and technology, may exacerbate structural unemployment.

Yes, we can!
Our experts can deliver a custom Type-Voluntary and Type-Cyclical Unemployment in Modern World paper for only $13.00 $11/page
Learn More
322 specialists online

Impact of Covid-19 On Inflation and Employment

The coronavirus epidemic has caused a shock like no other in Australia’s history when it comes to economic activity. There are questions about the crisis’s size and endurance. On the other hand, its impact on inflation is less clear. There are opposing forces like the shutdown and the drop in oil prices, but upward pressures like the closure of companies and the overall decrease in output. The short-term effect of the coronavirus outbreak on inflation may already be seen in the statistics accessible between February and May. As can be seen from the first graph, inflation was slightly lower in February, before the Great Lockdown began in Australia, even though industrial goods prices rose sharply due to supply chain disruptions, where many factories had already shut down

With lockdown measures in place in most Australian nations, energy costs are down, as are the prices of the items that make up the core of inflation. In particular, industrial products and services saw a decrease in inflation. Non-processed food costs, on the other hand, have increased significantly. Prices may rise due to production and supply chain interruptions brought on by COVID-19’s outbreak over the medium run. Even yet, demand is declining at such a rapid pace that inflation is expected to stay low for the foreseeable future. Deflationary pressure will continue to be generated as long as demand and supply differ in different markets. It’s safe to assume, for example, that energy costs will stay below 2019 levels, contributing negatively to overall inflation all year long.

On the other hand, we expect core inflation to stay sluggish and below pre-shock levels for a long time to come due to the effect of the crisis on the labor market, which will restrict inflationary pressures. This is because of the price of products that make up core inflation. Savings rates, which seem to have risen during the lockdown, are expected to stay high until the uncertainty subsides. Because of the high level of ambiguity surrounding the present situation, businesses and people are behaving differently. People with greater earnings, for example, will save more as a safety net, which will help to keep inflation pressures down.

Last but not least, the coronavirus epidemic may have long-term implications for inflation due to the structural changes it may cause in our economy. Because of this crisis, businesses may have to reconsider the geographical distribution of their production structures since it has exposed the fragility of global supply networks, which are very susceptible to large shocks. Australia is also likely to promote the local production of strategic commodities like pharmaceuticals and food. As a result of this drive, globalization’s long-term deflationary trend may be reversed. Finally, the crisis may have a long-term effect on consumer and company behavior, causing them to be more cautious in their purchase and investment choices or for permanent modifications in consumer spending patterns to be implemented.

Impact of Monopoly On Inflation and Employment

Most Australians, even college graduates, have less wealth and earn less money now than they did a generation ago after accounting for inflation. Economic and politicians are paying greater attention to one of the numerous reasons for this overall downward mobility in large segments of the Australian population. This redistribution’s underlying mechanics are straightforward. Because combined companies often eliminate employment when they merge, consolidation implies fewer jobs for everyone. It is also more difficult for entrepreneurs to establish successful new businesses in a market dominated by concentrated industries, which reduces one of the most significant drivers of new employment creation. Because fewer businesses are competing for each worker due to consolidation, salaries are being pushed down.

Layoffs are a good indicator of the impact of consolidation on the workforce. Entrepreneurs may be discouraged from starting new businesses by monopolies and other highly concentrated firms. Due to increased concentration in the Australian market starting in the late ’70s, the rate of new company creation has been cut in half on a per capita basis. America has much less employment than it would otherwise have due to a lack of new companies to take their place when existing ones fail. A lack of competition for various kinds of employees, particularly in local markets, is another side effect of monopolization. It has been discovered that hospital ownership in 90 percent of metro regions is now so concentrated that antitrust authorities have traditionally viewed this as the threshold for when intervention is required to prevent inefficiency and collusion, as an example. There will be fewer hospitals vying for nurses and other healthcare workers due to the extensive consolidation. Several recent class-action lawsuits claim that this has enabled hospitals to collude in price-fixing schemes. A single buyer acquires “monopsony power” when there is only one remaining in a market with numerous sellers. Workers in a community where a single company dominates have few if any job options. Unless they wish to be unemployed, they must accept the salary that their company provides. Even though certain monopolies are simpler to organize, unions are starting to understand that workers are still at a disadvantage because of the monopoly’s control over labor.

Major corporations sometimes augment their monopsony dominance by an agreement not to recruit one other’s employees, as well. Consolidated economies, where it is simpler to guarantee that one’s rivals do not leave the deal, are conducive to these cartels’ formation. Apple, Google, Intel, and Adobe all agreed not to recruit each other’s workers between 2005 and 2009, as a result of which many of Silicon Valley’s best engineers had their salaries slashed significantly. By agreeing to eliminate the competitive hiring that helps boost wages, the businesses defrauded tens of thousands of employees out of billions of dollars. Non-compete provisions are another way dominating companies exploit their monopoly power. Limiting where individuals may work after leaving their previous position lowers salaries by reducing the number of companies willing to compete for employees. However, in other parts of the world, they are very prevalent. About 30 million of the country’s 170 million employees are now protected by non-compete agreements. A third of engineers have non-compete agreements stipulating their employment. Still, anecdotal evidence suggests that non-compete arrangements are prevalent among lower-skilled workers, such as the “packers” at Amazon who are only briefly working there.

Cut 15% OFF your first order
We’ll deliver a custom Human Resource Management paper tailored to your requirements with a good discount
Use discount
322 specialists online

In today’s gig economy, a growing number of Australians are working as independent contractors, which reduces their negotiating power. Many towns’ taxi drivers have no choice but to work for Uber or Lyft since there are only two businesses they may drive. In the same way, in increasingly consolidated media sectors, independent writers and creative content creators have fewer and fewer options for selling their products. The result is that they stop being price makers and start becoming price takers. Indeed, many Australian employees are forced to accept lower wages and worsening working conditions, including eliminating benefits and employment rights. In today’s market, there are additional elements that have reduced labor’s negotiating strength. But they are probably less significant than many people believe. Due to weaker productivity growth now than in the 1950s and 1960s. Similarly, despite a rise in immigration, the labor force has expanded slower than in prior decades due to low birth rates and an ageing Baby Boomer generation. Additionally, most Australians labor in service industries like health care and education, where import competition is negligible to nonexistent. Even yet, as the Australian economy becomes more monopolized, it has a ripple effect that can be seen among virtually all employees.

Australians have overcome similar problems in the past. Many people worried about worker safety when industries consolidated in the late 1800s and early 1900s. A monopoly demands the price of labor without fear of strikes since it permits no rivals in its sector, which was stated when justifying the law. So both Democratic and Republican governments smashed corporate monopolies and supported workers’ freedom to organize to confront this threat. A bipartisan coalition that strengthened antitrust enforcement against business monopolies while exempting unions from antitrust restrictions. Antimonopoly legislation and labor activism were important factors in mid-20th century Australian society to improve overall prosperity and decrease income inequity. To restore this equilibrium, Australia must once again employ public policy to maintain the completeness and prevent the cornering of markets after the collapse of conventional antimonopoly legislation a generation ago.


Forsythe, E. and Wu, J.-C. (2021) ‘Explaining Demographic Heterogeneity in Cyclical Unemployment’, Labour Economics, 69, p. 101955.

Layton, A., Robinson, T. and Tucker, I. (2018) Economics for today. Cengage AU.

Liu, J. and Liu, C. (2012) ‘Investigating the housing market fluctuation under an expansionary monetary policy in Australia’, Pacific Rim Property Research Journal, 18(1), pp. 81–89.

Cite this paper

Select style


BusinessEssay. (2022, September 16). Type-Voluntary and Type-Cyclical Unemployment in Modern World. Retrieved from https://business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/


BusinessEssay. (2022, September 16). Type-Voluntary and Type-Cyclical Unemployment in Modern World. https://business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/

Work Cited

"Type-Voluntary and Type-Cyclical Unemployment in Modern World." BusinessEssay, 16 Sept. 2022, business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/.


BusinessEssay. (2022) 'Type-Voluntary and Type-Cyclical Unemployment in Modern World'. 16 September.


BusinessEssay. 2022. "Type-Voluntary and Type-Cyclical Unemployment in Modern World." September 16, 2022. https://business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/.

1. BusinessEssay. "Type-Voluntary and Type-Cyclical Unemployment in Modern World." September 16, 2022. https://business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/.


BusinessEssay. "Type-Voluntary and Type-Cyclical Unemployment in Modern World." September 16, 2022. https://business-essay.com/type-voluntary-and-type-cyclical-unemployment-in-modern-world/.