Question

Define:

Full employment

Frictional employment

Structural employment

1. Why are frictional unemployment and structural unemployment consistent with full employment?

Answer 1

Full employment- Full employment is an economic situation where all the human resources available are used in the most productive way possible. Full employment represents the highest amount of skilled and unskilled labor which can be mobilized at any given time within an economy. True full employment is an ideal situation in which anyone who is eager and able to work will find a job and unemployment is null. It is a theoretical target for economic policymakers to strive for the state of the economy rather than the one currently observed. In practical terms, economists may describe various levels of full employment, correlated with low yet non-zero unemployment rates.

Frictional employment- The consequence of voluntary changes of jobs within an economy is frictional unemployment. There is, of course, frictional unemployment, also in a rising, stable economy. Employees who want to leave their jobs in search of new ones and employees who first join the workplace constitute frictional unemployment. It does not include employees who remain in their current job until they find a new one, because they are, naturally, never unemployed. There is still frictional unemployment within the economy. This adds to the overall job picture and is part of natural unemployment, due to economic forces and labor movement, which is the minimum unemployment rate in an economy.

Structural employment- Structural unemployment is a longer-lasting form of unemployment that is caused by fundamental economic shifts and exacerbated by foreign factors like technology , competition, and government policy. Structural unemployment exists when people lack the appropriate job skills or live too far away from regions where there are jobs and they can not move closer. There are jobs, but there is a significant disparity between what employers need and what employees can deliver.

1. The level of frictional unemployment will depend on how easy it is for workers to learn about alternative jobs, which can reflect the economy's ease of communication about job prospects. To some degree, the degree of frictional unemployment may also rely on how eager people are to migrate to new places to find jobs which can, in effect, rely on history and culture.

A society with a relatively high percentage of relatively young or old workers will tend to have a higher unemployment rate than a society with a higher percentage of its middle-aged workers. Structural unemployment may occur when too many or too few employees are pursuing work-related training or education. Students are unable to predict just how many positions there would be in a specific field when they graduate, and are unlikely to know how many of their fellow students are studying for such positions. Structural unemployment may easily occur when students underestimate how many employees are required or how many are supplied.