Explain the various types of unemployment triggered by the COVID-19 crisis.
The COVID-19 pandemic led to an unprecedented decline in employment in Singapore. In addition to weak external demand, a sharp drop in international tourist arrivals, and reduced domestic consumption, job losses were also driven by a rapid structural shift away from certain face-to-face service industries.
a. Explain the various types of unemployment triggered by the COVID-19 crisis. [10]
Introduction
The COVID-19 pandemic led to widespread job losses in Singapore, driven by factors such as weak external demand, a collapse in international visitor arrivals, declining domestic consumption, and structural shifts in the economy. These factors resulted in different forms of unemployment, including cyclical, structural, and frictional unemployment, each affecting the labour market in distinct ways. Cyclical unemployment emerged due to the sharp economic downturn, as firms cut jobs in response to reduced demand. Structural unemployment worsened as digital transformation accelerated, displacing workers in traditional face-to-face service industries. Meanwhile, frictional unemployment increased due to difficulties in job matching, as social distancing measures disrupted recruitment and internship processes.
Cyclical Unemployment
Cyclical unemployment in Singapore surged as a result of the economic contraction caused by the pandemic. The imposition of movement restrictions, both domestically and internationally, significantly reduced consumer spending and tourism-related activities. Given Singapore’s position as a global trade and financial hub, the pandemic caused a sharp decline in external demand, as supply chains were disrupted and global trade slowed.
Sectors heavily reliant on international visitors, such as hospitality, aviation, and retail, experienced a drastic fall in demand.
The decline in net exports (X-M) led to a leftward shift in aggregate demand (AD), reducing real national income (NY) from Y₀ to Y₁.
With falling revenues, businesses reduced hiring or laid off workers, increasing cyclical unemployment, which occurs when demand for labour falls due to economic downturns.
This form of unemployment highlighted the vulnerability of Singapore’s labour market to external economic shocks, as businesses faced challenges in sustaining employment levels amidst a severe contraction in demand.
Structural Unemployment
Structural unemployment in Singapore was exacerbated during the pandemic due to an accelerated shift away from face-to-face services. The pandemic accelerated digital transformation, changing consumer behavior and business operations as more services moved online.
Traditional service jobs in sectors such as retail, hospitality, and food & beverage saw reduced demand, leading to a surplus of workers with outdated skill sets.
In contrast, demand for workers in e-commerce, digital marketing, software development, and automation increased, creating a mismatch between the skills that workers possessed and the skills required in the evolving job market.
Since structural unemployment occurs when workers' skills no longer match industry demands, many displaced workers in low-skilled service sectors struggled to find new employment, while high-skilled positions in digital industries remained vacant. Government-led retraining programs and workforce upskilling initiatives became crucial in addressing this issue, helping workers transition into emerging industries.
Frictional Unemployment
The COVID-19 pandemic also led to a rise in frictional unemployment, which occurs when job seekers take time to find new employment due to delays in the matching process. The pandemic disrupted recruitment, hiring, and internship opportunities, making it harder for individuals to secure new jobs.
Social distancing measures and lockdowns restricted face-to-face interviews, forcing companies to shift to virtual hiring platforms.
While online recruitment methods helped facilitate remote hiring, the lack of physical interactions made it harder for employers to assess candidates, leading to delays in decision-making.
Internships and networking opportunities were also reduced, preventing students and job seekers from gaining practical work experience and industry connections.
Small and medium-sized enterprises (SMEs), which lacked resources for virtual hiring and training, faced additional challenges in adapting to remote recruitment, prolonging frictional unemployment.
The disruption in the flow of job market information between employers and job seekers resulted in longer periods of unemployment for many individuals, highlighting the challenges of job matching during the pandemic.
Conclusion
The COVID-19 pandemic led to a significant rise in cyclical, structural, and frictional unemployment in Singapore, affecting different segments of the labour market. Cyclical unemployment increased due to weak aggregate demand, as businesses cut jobs in response to the economic downturn. Structural unemployment worsened as digitalization and automation accelerated, creating a mismatch between workers' skills and job market demands. Frictional unemployment rose as hiring and job-seeking processes were disrupted, delaying job matches.
📘 June Crash Courses — Learn Faster. Write Better. Score Higher.
Model essays help — but mastering how to write them under pressure? That’s what gets you your first L3.
At Economics at Tuitiongenius (ETG), Singapore’s leading economics tuition centre founded by Mr Eugene Toh, we don’t just teach answers — we teach students to think, write, and perform with clarity and confidence.
🚀 June Holiday Intensive: Your A Level Game Plan Starts Here
Whether you’re in JC1 preparing for Promos or JC2 heading into Prelims or A Levels, this high-impact H2 economics tuition crash course is your chance to catch up, consolidate, and climb fast.
🧠 What’s Included:
📘 Micro & Macro Content Crashcourses
🗓 2 & 4 June 2025
✔ Master 8 key topics in 12 hours
✔ Attend onsite or get lifetime online access
✍️ Essay & Case Study Bootcamp
🗓 9 & 10 June 2025
✔ Work through 10 A Level Essays + 8 CSQs live
✔ Learn exam tactics, time-saving structures, and score-boosting evaluation
💥 Bundle & Save
Join both and you’ll:
✅ Save over $1000
✅ Get lifetime access to all recordings
✅ Receive printed materials delivered to your doorstep
🎯 For Students Who Want to:
Stop memorising and start understanding
Build writing confidence for Paper 1 & Paper 2
Learn from one of the most experienced economics tutors in Singapore
Whether you’re looking for economics tuition Singapore, JC economics tuition, or H2 economics tuition that actually moves the needle — this is the smart way to spend your June.
🔗 Register now at tuitiongenius.com/june
📲 WhatsApp us at 8168 3986 — we’ll help you get started right away
The June holidays won’t last forever. Let’s make them count — with ETG.