Frictional Unemployment

What comes to your mind when you think of the word 'frictional'? We all know what unemployment is, right? Relax, the term has got nothing to do with physics.

In fact, it is the temporary phase of joblessness when a person is transitioning from one job to another. This duration is known as the period of frictional unemployment. Since it is related to searching for a better job, it is also known as Search Unemployment.

Frictional unemployment may occur due to both workers and employers, as it basically works on the principal of demand and supply of the work force. Any mismatch between the two leads to this phase.

This phenomenon is not permanent, but temporary, as people are unemployed only to find better prospects. 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 one."

This type of 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 another that gives him/her a chance to grow as a professional. To understand the concept in a better way, have a look at some examples mentioned here.

✦ A fresh college graduate looking for a suitable job after passing out, and not taking any random job till he/she finds something more worthy.

✦ Companies not hiring employees because there exists a mismatch between the required skills and jobs available.

✦ Many organizations that hire on seasonal basis, lead to frictional unemployment during off season.

The rate of frictional unemployment can never be zero in an economy. And this fact is applicable even in the highest-paying economies in the world. The desire to grow, explore, and switch to employers that provide higher job satisfaction―in terms of money, appreciation, and perks―is a natural human instinct.

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 its causes.

✦ The relationship between workers and employers tends to be heterogeneous in some way or the other. This mismatch can lead to frictional unemployment, which makes it related to structural unemployment.

✦ Fresh graduates unable to get a job soon enough because of certain demands by the employers in terms of skills and experience, is a significant factor.

✦ Factors related to preference, work environment, skills, remuneration, location, work timings, etc., always arise a sense of dissatisfaction among the workers, or perhaps, even employers.

✦ There are many workers who wait to re-enter their jobs. An example for the same would be homemakers, new mothers, and the like.

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 job demands and skills required, to get a job faster.

✦ Reduction in employment discrimination.

✦ Proper training facilities at schools and colleges.

✦ Attempts to reduce the difference between the gross income and net income.

✦ Proper channel of information to provide details of the available jobs and potential workers.

✦ The need to take proper action in case of any biased approach in the work environment, in terms of employees, job location, and the like.

✦ More facilities to enable flexibility and availability.

Frictional unemployment is considered to be beneficial because it gives an opportunity to both the workers and organizations, i.e, to look for the best suitable options.

If it didn't exist, then most 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 the pace, and frictional unemployment gives us the opportunity to do the same.