Frictional Unemployment

What comes in your mind when you think of frictional unemployment? We all know what unemployment is, right? And we all know what friction is...so what type of unemployment could it be? Relax, the term has got nothing to do with physics. In fact, it is the duration when a person is unemployed while searching for jobs which are more suitable for him / her. The time period when a person is transitioning from one job to another more suitable job, is known as the period of frictional unemployment. Since it is related to searching a better job, frictional unemployment is also known as Search Unemployment.

Definition of Frictional Unemployment

Frictional unemployment may occur due to both workers and employers as it basically works on the principal of demand and supply of work force. Any mismatch between the two leads to frictional unemployment. This phenomenon is not permanent, it is the temporary as people are unemployed only to find better prospects in a better job. Having said that, by definition, "frictional unemployment is the temporary unemployment which occurs naturally while a person is transitioning from one job to another more suitable job."

Frictional unemployment is something that always exists, even in the fully developed economies. It is natural for a person to quit one job to search for a better one. To understand the concept in a better way, have a look at some examples mentioned below.

• A fresh college graduate looking for a suitable job after passing out and not taking any random job till he / she finds something more suitable.
• Companies not hiring employees because there exists a mismatch between required skills and the jobs available.
• Many organizations that hire on seasonal basis will eventually lead to frictional unemployment during off season, while the employees would look for another suitable jobs.

What Causes Frictional Unemployment?

As mentioned earlier, the frictional unemployment rate can never be zero in an economy. And this fact is applicable even to the highest paying economies in the world. This is the reason why no economy reaches the state of full employment. This makes frictional unemployment different from other kinds of unemployment. Let us have a look at the causes of frictional unemployment.

• The relationship between workers and employers tends to be heterogeneous in some or the other way. This mismatch can lead to frictional unemployment, which makes it closely related to structural unemployment.
• Fresh graduates looking for a good job, but are not able to get it right away because of certain demands by the employers in terms of skills and experience, therefore resulting in frictional unemployment.
• Factors related to preference, work environment, skills, remuneration, location, work timings, etc., always rise a sense of dissatisfaction in the workers or employers. This is one of the main causes of frictional unemployment.
• There are many workers who wait to re enter their jobs. An example for the same would be homemakers, new mothers, etc.

Steps to Reduce Frictional Unemployment

Though the rate can never go down to zero, there are certain policies and solutions that can be applied to reduce the rate of frictional unemployment in an economy. These are discussed as follows.

• Proper educational advice to college students in terms of the job demands and skills required to get job faster.
• Reduction in employment discrimination
• Proper training facilities should be provided at schools and colleges.
• Attempts to reduce the difference between the gross income and the net income.
• Proper channel of information should be used to provide details of the available jobs and potential workers.
• If any biased approach exists in the work environment in terms of employees, job location etc, then proper action must be taken against it.
• More facilities should be provided to enable more flexibility and availability.

Though frictional unemployment is a type of unemployment, it is not considered to be bad. On the contrary, it is considered beneficial because it gives an opportunity to both the workers and the organizations to look for the best suitable options. If frictional unemployment didn't exist, then most of the people would have been working in the same jobs all their life, making it impossible to have a scope for growth, innovation and skill development. A little bit of friction is required to increase of the pace, and frictional unemployment gives us the opportunity to do the same.