Question

Discuss: A) Frictional unemployment; B) Structural unemployment. Might a job retraining program be a more useful policy to address structural unemployment than to address frictional unemployment?

Answer 1

Frictional Unemployment:
It is unemployment between jobs. It is also unemployment in the interim period between my graduating from school and finding the best fitting job for me. It is unemployment caused by labor mobility. It is also called search and wait unemployment as people wait for getting the right type of Employment matching their skills, desired salary, desired profile etc. It is inevitable and considered as natural phenomenon.

Examples:
People move from place to place, or from job to job.
In between these movements, they generally have some time off.They are frictional unemployed, in those interim periods.

Tom has recently moved from New York to Los Angeles and is looking for a job (in between jobs).The job search period, trying to find the best fit for themselves.

Structural Unemployment

It is unemployment due to lack of skills demanded by the market place. Structural unemployment is the worst kind of unemployment to get rid of. This kind of unemployment is mostly seen when the economy is surging in terms of rapid technological changes. It requires more attention from government as it may affect the economy adversely for a long term period if not properly handled.

Examples

Harry lost his job as a cashier due to the creation and use of self check out counters (job skills mismatch or replaced by technology).

Data analysts are loosing jobs due to non upgradation of new skills required like VBA, R, Python etc. Only depending upon advance excel will make them obselete.

A job retraining program will be more useful to cure Structural Unemployment. Structural Unemployment is caused due to lack of necessary skills required by the Employers. By job retraining programme employees can learn and acquire the necessary skills required to perform a job effectively and efficiently. In this way they can meet the expectations of employers and will become competitive in the market and will no longer remain unemployed. It may also able to cure frictional unemployment to some extent as the skills learned by a particular person on a particular job may not be his desired skills and desired job. The person may after sometime quit the job voluntarily and look for his desired job.