GED Social Studies TestEconomicsMedium
A small town relies heavily on a single factory for employment. When the factory announces it will be closing due to declining demand for its product, a significant number of workers lose their jobs. This situation is an example of which type of unemployment?
- ACyclical unemployment
- BSeasonal unemployment
- CFrictional unemployment
- DStructural unemployment
Show answer & explanationAnswer & explanation
Correct answer: D. Structural unemployment
Structural unemployment occurs when there's a mismatch between the skills workers possess and the skills demanded by available jobs, or when industries decline. The factory closing due to declining demand for its product signifies a long-term shift in the economy, leading to structural unemployment for its workers.
Why the other options are wrong
- A. Cyclical unemployment is caused by downturns in the business cycle (recessions), affecting many industries simultaneously.
- B. Seasonal unemployment occurs due to predictable changes in demand for labor at different times of the year.
- C. Frictional unemployment is short-term, occurring when people are temporarily between jobs or searching for their first job.
Structural Unemployment
Unemployment resulting from a mismatch between the skills workers have and the skills needed for available jobs, or from long-term changes in the economy.
- Caused by fundamental changes in the economy or industry
- Often requires retraining for affected workers
- Can be long-lasting
Memory trick: Friction is short, Cycle is economic, Structure is long-term, Season is predictable.