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Economic Growth, Unemployment and Inflation: Question 6

Syllabus 4.5

Multiple choice AS 1 mark

A large online-retail warehouse has recently seen four of its former employees leave their jobs, for different reasons.

Which of these workers is unemployed for technological reasons?

Choose an answer to check it, then compare with the worked solution below.
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Worked solution

Step 1: Recall the types of unemployment

Frictional unemployment is short-term unemployment while a worker searches for or waits to start a new post after leaving a job voluntarily. Seasonal unemployment is a predictable, recurring pattern tied to the time of year. Cyclical (demand-deficient) unemployment is caused by a fall in aggregate demand across the whole economy during a downturn. Technological unemployment occurs when a worker’s specific job is displaced by new machinery, equipment or software capable of doing the same tasks, even though the wider firm or industry is not in decline and overall output is unaffected.

Step 2: Check option D against this definition

Farid’s role was not removed because the warehouse is struggling or shrinking. The stem states its total order volume was unaffected. Instead, a new fleet of robotic picking arms and sorting software was installed that can do exactly the tasks Farid used to do, only faster. His job disappeared because it was directly substituted by new technology, which is precisely technological unemployment.

Step 3: Rule out options A, B and C

  • Option A (Amina): she left her job voluntarily to relocate and is actively job-searching. This is frictional unemployment.
  • Option B (Ben): his contract ends predictably every year once the seasonal order surge passes. This is seasonal unemployment.
  • Option C (Carla): her role was lost because of an economy-wide fall in consumer spending, not because of new machinery. This is cyclical unemployment.

Final answer

Option D. Farid’s unemployment is technological: his specific tasks were taken over by newly installed robotic and software systems while the warehouse’s overall business was otherwise unchanged, unlike the frictional, seasonal and cyclical unemployment described in A, B and C.