Differences Between Frictional And Structural Unemployement

1. Explain the difference between frictional unemployment and structural unemployment. How might unemployment insurance, minimum wage laws and trade union strength affect the natural rate of unemployment? How can Government policy change the natural rate?

Frictional unemployment is transitional unemployment due to people moving between jobs:
For example, redundant workers or people joiningthe labour market for the first time such as university graduates may take time to find the types of work they want at wage rates they are prepared to accept.  Many are unemployed for a short time whilst involved in job search.
Imperfect information in the labour market may make frictional unemployment worse if the jobless are unaware of the available jobs. Incentives problems can also cause somefrictional unemployment as some people looking for a new job may opt not to accept paid employment if they believe the tax and benefit system will reduce the net increase in income from taking work. When this happens there are disincentives for the unemployed to accept work.
In short, frictional unemployment happens when it takes time for the labour market to match the available jobs with thosepeople seeking work. The chart below is linked to this cause of unemployment because it shows the monthly level of unfilled vacancies in the UK. Stripping out the effects of seasonal variations in the demand for labour, we see that in the summer of 2008 there were still well over 600,000 vacancies at a time when unemployment was 1.65 million. If the economy was better at filling these jobs, itcould achieve a much lower level of unemployment.
Structural unemployment occurs when there is a long run decline in demand in an industry leading to a reduction in employment because of international competition. Globalisation is a fact of life and inevitably it leads to changes in the patterns of trade between countries from year to year. Britain has probably now lost forever, its cost advantagein manufacturing goods such as motor cars, household goods and audio-visual equipment, indeed our manufacturing industry has lost over 400,000 jobs in the last five years alone as production has shifted to lower-cost centres for example in Eastern Europe and emerging market countries in Far East Asia. Many of these workers may suffer from a period of structural unemployment, particularly if theyare in regions of above-average unemployment rates where job opportunities are scarce.
Structural unemployment exists where there is a mismatch between their skills and the requirements of the new job opportunities.
Frictional unemployment
Frictional unemployment involves people being temporarily between jobs, while searching for new ones; it is compatible with full employment. (It issometimes called "search unemployment" and is seen as largely voluntary.) It arises because either employers fire workers or workers quit, usually because the individual characteristics of the workers do not fit the particular characteristics of the job (including matters of the employer's personal taste or the employee's inadequate work effort). Sometimes new entrants (such as graduating students) andre-entrants (such as former homemakers) suffer from spells of frictional unemployment.
Some employers—such as fast-food restaurants, chain stores, and job providers in secondary labor markets—use management strategies that rely on rapid turnover of employees, so that frictional unemployment is normal in these sectors.
This type of unemployment coincides with an equal number of vacancies and cannotbe solved using aggregate demand stimulation. The best way to lower this kind of unemployment is to provide more and better information to job-seekers and employers, perhaps through centralized job-banks (as in some countries in Europe). In theory, an economy could also be shifted away from emphasizing jobs that have high turnover, perhaps by using tax incentives or worker-training programs....