What is Frictional Unemployment?

//What is Frictional Unemployment?
What is Frictional Unemployment? 2017-10-04T21:40:28+00:00

Definition: Frictional unemployment is the percentage of unemployed workers due to labor market turnovers. In other words, it’s the amount of the workforce that is switching from one job to the next.

What Does Frictional Unemployment Mean?

What is the definition of frictional unemployment? Frictional unemployment represents the time period that workers are looking for a job either as first-time seekers or in-between jobs, and it is an ongoing type of unemployment as it includes job transitions and workers entering and exiting the labor force. This type of unemployment exists because workers need to change jobs for several reasons before they start searching for new ones.

For example, if a worker is dissatisfied with the working schedule, he will quit his job before getting a new one, especially if he has the means to support himself in between. Furthermore, this type of unemployment may be the result of lack of resources or information. For example, a recent graduate may lack the resources to efficiently search for employment in a company within his field of interest, so he works at McDonald’s temporarily until he finds a more suitable job.

Let’s look at an example.

Example

Anna has just graduated from college with a Bachelor’s degree in construction engineering. She loves her major, and she cannot wait to join a construction company and be able to exercise in practice all the wonderful things that she has learned in college. However, in her State, construction rate is constantly decreasing, and there are hardly new jobs for new entrants like Anna. So, Anna joins McDonald’s to work for a living until she gets the job that she really likes.

Maria gave birth to a wonderful little boy seven years ago. Before becoming a mom, she worked as a sales assistant at a prominent advertising firm. Now, that her child goes to school, Maria considers reentering to the workforce to improve her financial situation.

Both are examples of frictional unemployment where people are actively looking for a job or are getting a job for a living. Note that when the economy enters a recession, this type of unemployment tends to decrease because people are afraid to quit their jobs.

Summary Definition

Define Frictional Unemployment: Frictional unemployment means the portion of unemployed individuals who are currently in the workforce but between jobs.