Frictional Unemployment

Also known as wait unemployment and search unemployment, frictional unemployment can occur for a number of reasons. The measure includes those individuals that are seeking employment but may not be able to find a job due to factors such as geography, wages, work hours, or interest in a specific industry.

For example, a recent graduate may be looking for a job that pays a certain starting salary. Even if jobs are available, the graduate may not apply or accept a job until their salary threshold is reached. These individuals can be employed, but they choose to wait for a job that matches their requirements.

Since frictional unemployment results from a mismatch between the jobs that are available and the individuals that are unemployed, economists would define true unemployment in the following manner:

Involuntary Unemployment = Unemployment - Frictional Unemployment

In the same way workers choose not to be employed, employers can also contribute to frictional unemployment. For example, a company may not hire individuals because they are having trouble locating what they believe are qualified applicants. In this example, frictional unemployment is a result of imperfect information, since qualified individuals are unemployed. Finally, some of the same factors that result in frictional unemployment may result in a stronger economy. For example, workers and employers that are more selective when accepting or filling a job invest more time into finding a better match for their requirements. When a better match materializes, the worker will be more satisfied with their job, and the employer will have a more efficient worker.

cyclical unemployment, classical unemployment, natural unemployment, structural unemployment, technological unemployment, unemployment benefit