Frictional Unemployment

Frictional unemployment arises since employees spend time searching what they believe will be the best match available. This unending flow of people into and out of the labour force and the process of job creating and job destruction creates the need for people to search for the jobs and for firms to find suitable employees.

In other words, frictional unemployment arises because of the lack of perfect information in the labour market as it takes time for workers to be matched with suitable jobs.

To deal with frictional unemployment, policies could be made to improve labour market information and help improve efficiency of the labour market. For example in the US, state governments set up websites to help collate potential employees's details and match them to the needs of prospective websites to help collate employee's details and match them to the needs of prospective employees. The Singapore government tries to  include job fairs that the CDC in Singapore organize regularly to bring together employers of the same industries to hold a mass recruitment exercise where workers can seek out their most suitable jobs.

These policies aim to improve the labour market information and helps to shorten the period of searching jobs of the employers. However, there are some limitations as much of the success of these policies lies with the attitude of the job seekers, whether they are keen to get employed sooner. Moreover, with the job fairs, frictional unemployment may not be solved quickly since workers has more to choose from and vice versa, and would in fact lengthened the job searching process.

However, we are not that concerned about this problem of frictional unemployment! In fact, this type of unemployment may be beneficial for our economy as it provides a better match between workers and their jobs, which would in fact make the economy far more efficient since everyone is doing a job which they are most suited to do.