Cambridge IGCSE Economics 0455 – Government and the Macro‑economy: Employment and Unemployment – Frictional Unemployment
Government and the Macro‑economy – Employment and Unemployment
Frictional Unemployment
Frictional unemployment is the short‑run unemployment that occurs when people are temporarily between jobs or are looking for their first job. It is a natural part of a dynamic labour market and is not caused by a lack of demand for goods and services.
Key Features
Voluntary – workers choose to leave a job to seek a better one or to relocate.
Short‑term – typically lasts only a few weeks or months.
Occurs even when the economy is operating at full capacity.
Reflects the time needed for job matching between employers and job‑seekers.
Causes of Frictional Unemployment
Job Search Process – Individuals need time to gather information about vacancies, apply, and attend interviews.
Geographical Mobility – Moving to a new area for a job creates a temporary period of unemployment.
Career Changes – Switching sectors or occupations often requires retraining or gaining new qualifications.
New Entrants – Recent school or university graduates entering the labour market for the first time.
Retirement Transitions – Older workers may take a short break before fully retiring.
Distinguishing Frictional Unemployment from Other Types
Aspect
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
Primary cause
Job search and matching
Mismatch of skills/locations with available jobs
Insufficient aggregate demand
Voluntary?
Usually voluntary
Often involuntary
Involuntary
Duration
Short‑term (weeks‑months)
Medium‑to‑long term
Varies with business cycle
Relation to full‑employment
Exists even at full‑employment
Persists beyond full‑employment
Increases when below full‑employment
Measuring Frictional Unemployment
The labour force survey reports the total number of unemployed persons (\$U\$). To estimate the frictional component, economists often use the natural rate of unemployment (\$U_n\$) and subtract the structural and cyclical components:
Job‑matching services – Public employment offices and online job portals reduce the time needed to match vacancies with candidates.
Education and training – Providing information about labour market trends helps job‑seekers target growing sectors.
Mobility assistance – Relocation grants or transport subsidies can lower geographical friction.
Information dissemination – Accurate, timely data on vacancies and skill requirements improve market efficiency.
Suggested Diagram
Suggested diagram: A flowchart showing the steps in the job‑search process (search → application → interview → job offer) and where frictional unemployment occurs.
Summary
Frictional unemployment is an inevitable and generally short‑lived form of unemployment that reflects the time needed for workers to move between jobs. While it does not indicate a problem with the overall health of the economy, reducing its duration through effective labour‑market policies can improve productivity and individual welfare.