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What Is Frictional Unemployment? Examples, Causes, and Effects

Frictional Unemployment
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Did you know that when workers are jobless and looking for work in a healthy economy, whether they leave voluntarily or are fired, is classified by economists as frictional unemployment?

Typically, two primary criteria are required for an individual to be classified as unemployed. First, they must have no current employment. Second, they must be actively seeking a new job.

As you can see, in this case, frictional unemployment covers the requirements. Not only this, but frictional unemployment differentiates from other types of unemployment because it’s part of normal labor turnover.

Moreover, according to economists, four causes create this type of unemployment. In this article, we will talk about what is frictional unemployment, which are the four causes and more. So, let’s get started. 

What is Frictional Unemployment 

This type of unemployment occurs when employees leave their jobs to find a better one. However, they still haven’t yet found new jobs. Moreover, workers may have voluntarily left their careers, or they could have been fired. Typically, a higher percentage of individuals leaves their position voluntarily. 

Usually, there are different causes for them to do so. For instance, some individuals might need to move to another city, town, or even country. On the other hand, the individual may have saved up enough money and is now in search of a better job. 

Furthermore, frictional unemployment is a natural part of the job search process. It is unavoidable. Typically, this type of unemployment is short-term.

According to economists, frictional unemployment is the lowest rate of unemployment in a growing economy. Moreover, this type of unemployment is even considered good for the economy. 

Why? Well, it gives individuals the chance to find a better job where they will probably be happier and more productive. Also, frictional unemployment is considered to be one of the components of natural unemployment.

Causes of Frictional Unemployment 

According to economists and experts in this field, four causes create this type of unemployment. So, let’s take a look at which are the four reasons. 

Voluntarily leaving the workforce – Even though it might be logical for workers to hold on to their existing jobs, there are still individuals who prefer to quit their unfulfilling jobs before having found new ones. 

Individuals who relocate and are in search of a new job – Often, workers must move for unrelated to their job reasons. For instance, an individual who has recently married then decides to move to be near their spouse’s job. 

New workers entering the workforce –

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College graduates who are in search of their first jobs are a great example of frictional unemployment. 

Job seekers who are re-entering the workforce – Nowadays, it is common for workers to take time off to care for their relatives. So, all family caregivers who are returning to the labor force are a cause of frictional unemployment. 

Effects

When it comes to the impact of frictional unemployment, the news is good because it isn’t harmful to the economy. In fact, the higher the frictional unemployment rate is, the more workers are moving toward better job positions. But what exactly are the effects frictional unemployment has on individuals and society? Let’s take a look. 

  1. Frictional unemployment benefits the economy.
  2. Companies would have the opportunity to find skilled and qualified workers. 
  3. Labor costs could rise, creating cost-push inflation. 
  4. It is possible that worker’s wages would increase, which in turn would reduce the income inequality in the United States of America. 
  5. Some individuals, who have been able to save enough money, could have the luxury to quit an unfulfilling job and search for the right one. 

It is essential to note that during a recession, the frictional unemployment rate drops. Typically, during a recession, workers are afraid to quit their jobs even if they don’t like it as there is no certainty that they will be able to find a new one. 

Examples

A good illustration of frictional unemployment is workers who quit abruptly. Moreover, workers who move to a new town, workers who decide to leave the workforce for personal reasons like retirement, or pregnancy are also a part of this type of unemployment. 

Further, students who want to join the labor force but don’t have a job or mothers who rejoin the workforce after pregnancy are also great examples of frictional unemployment. Indeed there are numerous examples of people who drop out of the labor force for similar reasons like the above mentioned. 

However, once they decide to return to the labor force and start searching for a new job, then they all become part of the frictional unemployment count. As you can notice, all these people are trying to improve their financial situations. 

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