In this paper we have discussed what is meant by frictional unemployment and the factors that lead to it.
Unemployment that arises out of the transition of an individual from one job to another is known as frictional unemployment. Frictional unemployment is a result of imperfect information in the labor market.
For instance, a person who is looking for a job first time may not be equipped with resources for finding a job and hence remains unemployed. Frictional unemployment also takes place for an organization, which stops hiring on the belief that they are unable to find employees who may qualify for the post although in reality such employees do exist.
Causes of frictional unemployment
Frictional unemployment may be a result of the following reasons:
Mobility of labor
People generally seek another job either because they are fired from the existing job or because they are they want to get a better job. In the transition period they are unemployed.
Expansion of the Labor force
Every year more and more individuals join the labor force. During the phase of their job search they are unemployed.
Many economists have termed frictional unemployment a sign of economic well being. Frictional unemployment can exist only in a fast growing economy where the labor force is expanding, mobile, flexible and adaptable.