Unemployment is classified into three categories.
Frictional unemployment (workers who are simply moving between jobs)
Structural unemployment (workers who are in regions or industries that are in persistent slump)
Cyclical unemployment (workers who laid off when the overall economy suffers a downturn. In Pakistan unemployment is of structural and cyclical Understanding the sources of unemployment has proved one of the major challenges of modern macroeconomics. Voluntary unemployment may be or when qualified people chose not to work out the going wage rate unemployment occur. The key element in understanding involuntary unemployment is the inflexibility of wages in the face of economic shocks. The same situation is in Pakistan, inflexibility arises because of costs involved in administering the compensation system.
The upward creep in the natural rate arises mainly because of demographic trends particularly the higher proportion of teenagers in the labour force. In addition, government policies are also increasing unemployment rate i.e. Golden Shake Hand, ban on jobs increasing unemployment rate.
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