What are the differences between frictional and structural unemployment Should w

Question

What are the differences between frictional and structural unemployment Should we be equally concerned with both types of unemployment Do the same policies help alleviate frictional and structural unemployment Describe an example of a policy that could be implemented to reduce each of these two types of unemployment. Discuss the effects of unemployment insurance on job search behavior and the duration of unemployment. In what type of situation (in terms of unemployment rate) is it more convenient to implement a more generous (higher unemployment compensation and/or longer duration) unemployment insurance policy

Explanation / Answer

Frictional unemployment is always seen in an economy and occurs during the period when workers are searching for jobs. Conversely, structural unemployment is caused by shifts in the economy, which makes it difficult for workers to find employment.

Frictional unemployment occurs during a period when workers are searching for new employment or transitioning from their old jobs to new jobs. Frictional unemployment is considered voluntary unemployment because workers choose to remain unemployed rather than take the first job they are offered. Thus, frictional unemployment is usually present in an economic system because some people always search for new jobs.
For example, a recent college graduate is searching for jobs and expects he is not likely to find a job within one year due to his lack of experience. However, he gets job offers for jobs that are not in the field he studied. Due to the jobs not being the type of work he is looking for, he rejects these offers. Therefore, this period is known as frictional unemployment.

Contrary to frictional unemployment, structural unemployment is a type of long-term unemployment caused by changes in market conditions and business cycles. One of the main causes of this type of unemployment is an economy's inability to provide unemployed people with jobs that fit their skills.

For example, suppose there are recent technological advances in industries throughout an economy. Companies need to hire workers who have technical skills, such as programming and mathematical skills, to increase their size and profits. Therefore, many individuals without these skills may experience structural unemployment, because they are not fit for jobs in the market and the skills they already have may be obsolete.

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