Unemployment
Frictional Unemployment (Voluntary)
Frictional unemployment is also known as transitional unemployment. This is unemployment
that is usually short term and occurs when worker leaves one job and seeks that of another.
This is caused by frictions in the labour market that create lag times during which a worker is
unemployed when moving jobs. Frictional unemployment goes under the impression that a
job vacancy exists and that the friction of the labour market caused by the immobility of
labour is stopping that person from filling hat vacancy. The number of open job vacancies in
the economy is used to measure the level of frictional unemployment which is short term. If it
persists then it becomes structural unemployment.
Factors for Frictional Unemployment:
Geographical Immobility of labour (when workers are unwilling or unable to move from one
area to another in search of work) caused by:
 Family ties
 Local friendships discouraging people to move area
 Ignorance about whether there is jobs available in the country
 The cost of moving
 Difficulties of finding a house
An example of this is it would be extremely difficult for someone in Dorset to sell their house
and buy an equivalent one in London where a job vacancy lies.
Occupational Immobility of labour (when workers are unwilling to move from one type of job
to another) caused by:
 Difficulties in training for jobs that need new skills
 Effects of restrictive practises ( New workers requiring unnecessary qualifications)
 Race, Gender and age discrimination in the market
An example of this is a steel worker that has been made redundant will have a specific skill
and the skills need within the growing industry may not need those skills this is a mismatch of
skills between what is on offer and what is required this is structural unemployment.
Search theory of unemployment
This is the theory that high paid workers when they lose their job they will look for one of
equal standards rather than taking up a less paying open vacancy. For example if a worker
makes £1000 a week and then they lose their job they will aspire to find another job that
makes them £1000 a week rather than take a £300 job that they know is available. This is
because the person will have less and less aspiration as the wages between jobs decreases.
This means the worker is likely to search the labour market for high paying jobs and high
status vacancies, which they do not know about currently.
3 different ends can happen to end the search:
 A job that meets the qualifications of the person maybe learned about
 A new job arises within the market that wasn’t currently there
 The worker in a failed attempt to find the job they aspire to have realise that they
were being unrealistic and must settle for a lower-paid, less attractive job.
Structural unemployment
Long term unemployment occurring when some industries are declining, even though other
industries are growing. Also occurs within a growing industry which has automation causing
reduction in the demand for labour. Also a mismatch of skills causes structural unemployment
as the skills in the labour market are not those required by industries.
Structural unemployment is sometimes also referred to as “technologic unemployment” as
this results from the successful growth of new industries using labour saving technology.
Mechanised industry: Workers operating machines, increasing employment
Automation of production: Machines (robots) operate all the other machinery, can lead to a
dramatic shedding of unemployment even though industry output is increasing.
Cyclical unemployment (Involuntary)
Also known as Keynesian unemployment or demand deficient unemployment.
This is where unemployment is caused by a lack of aggregate demand in the economy and
occurs when an economy goes in to a recession or depression.
This type of unemployment is not the fault of the workers themselves and they cannot be
blamed for their idleness.
Seasonal unemployment
Seasonal unemployment is a special case of casual unemployment, which occurs when
workers are laid off on a short-term basis at certain time of the year. It occurs in trades such
as tourism, Agriculture, catering and building. When casual unemployment results from
regular fluctuations in weather conditions or demand it is called seasonal unemployment.