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What Is the Difference Between Frictional and Structural Unemployment?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 08 July 2014
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The difference between frictional and structural unemployment can be deducted from the definition of the two types of unemployment. While frictional unemployment refers to the type of unemployment caused by a lull in between employment, structural unemployment is the result of a decline in demand for the particular goods or services peculiar to an industry. This is of course a generalization of the two terms, because there are other variables that also further define and set the two forms of unemployment apart from each other.

Frictional unemployment is often voluntary is because it often occurs as a result of the desire for already employed people to find other jobs. They may resign from their jobs as they move to other cities in search of better job opportunities, or they may simply experiment with different types of jobs as they try to find their niche. Frictional unemployment often occurs among recent graduates as they try to find jobs after graduating from college. This is in contrast to the difference in frictional and structural unemployment, with structural being more common among established workers.

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Structural unemployment may be caused by the introduction of new technology into an industry, leading to a reduction in the need for the services of certain employees. For example, the introduction of automation in customer care has reduced the need for the services of a percentage of front line customer service agents. Automated prerecorded computer messages now answer the calls and only transfer to human agents when the needs of customers are too complicated for the available choices. In a sense, this shows a difference between frictional and structural unemployment because structural unemployment is involuntary while frictional employment is mostly voluntary.

Sometimes, when there is a reduction in the demand for the goods produced by a company due to variables like changes in customer preferences, competition and high costs, a company will look for ways to save money, including laying off some workers. This is a form of structural unemployment, and it still shows the difference between frictional and structural unemployment since it is involuntary. Sometimes, the cause of frictional unemployment is a lack of adequate communication regarding the availability of jobs, meaning that the job seekers do not know that there are job openings in their preferred industries. The length of time between the two types of unemployment also vary and depends on factors like the availability of jobs and the ability of workers to adapt to new trends in their industry of choice.

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Melonlity
Post 2

Structural unemployment creates its own set of problems, doesn't it? It is not always heralded by technology changes because we do see this take place when, for example, manufacturing employees earning high wages find themselves without jobs when companies outsource their industrial operations to nations with lower labor rates.

The main problem with structural unemployment is that it is often tough to figure out what to do with a bunch of misplaced workers. Do you retrain them to do other things, show them how to adapt to new technologies or what? When you see high unemployment rates, that is often evidence you've got a lot of established workers who suddenly find themselves out of work.

Terrificli
Post 1

A lot of economists will tell you that a decline in voluntary, frictional unemployment is one of the many problems created during recessions. When you see that voluntary unemployment drop, that means people are less willing to take risks and are holding on to the jobs they have because they lack confidence in the economy.

In other words, a drop in voluntary unemployment also means a decrease in entrepreneurial efforts, which is the type of thing an economy needs to grow and adapt to changing consumer demands.

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