Frictional Unemployment Definition
Frictional Unemployment is one of the types of unemployment (apart from structured and cyclical) that occurs when the existing person is looking for a new job, or the person has quit its previous job and he is yet to join the new organization.
No economy is devoid of the frictional unemployment, the reason being there would always be a mismatch between what the employer requires and what that employee has to offer. While calculating the unemployment index of any country, it is also taken into account, even though there is a thin line of difference between the normal and frictional unemployment.
In normal unemployment, the person is unemployed due to the lack of competence required on the job, wherein in the frictional case, he is jobless even though he is competent, due to failure in meeting the expectations of the employer.
Examples of Frictional Unemployment
- A person residing in the Tier-III city moves to the Tier-I city in the hope that he would get the job.
- Rom quits the job and starts looking for a new job. The tenure from the last day in his company till the day he joins the new job would come under the umbrella of frictional unemployment.
- Chris left the job as his father’s health was not good. After 5 months, when all was well, he starts looking for the new job.
How to Reduce Frictional Unemployment?
#1 – Use of Social Media
Due to the recent surge in the usage of social media and other professional communications, one can use the untapped power of social apps. There are various job-related websites, say Monster, SimplyHired, which can help to bring more customized information according to the talent and skill set of the employees. The use of Linkedin and Facebook for recruitment of new talent is also on the rise. One should use them to their utmost advantage.
#2 – Imparting Right Skills
Equipping prospective job seekers with the skill set that the companies require, can also help to some extent to reduce this type of unemployment.
#3 – Incentives
The companies should take active participation in reducing this type of unemployment. They can know the reason of the person leaving the job and can discuss the incentives that they can offer to retain the talent. In this manner, he would not be searching for a new job.
Frictional Unemployment Rate
The formula for calculating the unemployment rate is:
One of the interesting faces of this unemployment rate is the direct relation with the recession and an upward trend in the economy. When the economy is in recession, it experiences downfall as more people are concerned about their job security and they stick to what they have. The same is the case when the economy is experiencing a boom. Keeping in mind the opportunities one can get, employees start shuffling, resulting in an increased rate.
Frictional vs Structural Unemployment
|Meaning||It occurs when the workers are searching for new jobs in the economy.||It happens due to the oversupply of the jobs, but the people are not qualified.|
|Relation with Economy||It is not directly related to the economic factors||It is directly related to economic factors.|
|Nature||It is temporary in nature.||It stays longer than frictional unemployment.|
|Consideration||As it is unavoidable, so the same is not taken into consideration while framing the national policy.||Economists take this into calculation while calculating the unemployment rate of the economy.|
- Out of the job for the temporary phase can erode the confidence of the person who is the sole bread earner of the family.
- But at the same time, this can be seen as the barometer of the growth as people are looking out for better opportunities, which can be in terms of money or perquisites or satisfaction.
- The impact of this type of unemployment on the economy is not so dreary than the one caused by structural unemployment or cyclical unemployment.
There are several factors, which contribute to the cause of this unemployment,
- Unsatisfied with the job profile.
- A mismatch between the worker’s ability and the job on the offer.
- Lack of flow of appropriate information to the intended user.
To give you a sense of relief, frictional unemployment is like a temporary phase that erodes automatically as the economic progress. This is not a problem to be worried about.
This has been a guide to frictional unemployment and its definition. Here we discuss how to reduce frictional unemployment along with examples. We also discuss its causes and effects. You may learn more about finance from the following articles –