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Frictional Unemployment vs. Cyclical Unemployment

Explain how frictional unemployment differs from cyclical unemployment. [4 marks]

Category:

Unemployment

CIE O level June 2021

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Answer

Simply writing the features frictional unemployment and cyclical unemployment may not be enough to gain full marks. Clearly explain the DIFFERENCES of frictional unemployment and cyclical unemployment in separate points.

(STEP 1 : DEFINE UNEMPLOYMENT)

People are unemployed when they are able and willing to work but cannot find a job.

(STEP 2: COMPARE FRICTIONAL UNEMPLOYMENT WITH CYCLICAL UNEMPLOYMENT)

There are several ways how frictional unemployment differs from cyclical unemployment:

💼(1) Frictional unemployment is temporary and arises where people are in-between jobs whereas cyclical unemployment results from a lack of aggregate demand.

Frictional unemployment is transitional unemployment that occurs when people change jobs, due to the time delay between leaving a job and finding or starting a new one. On the other hand, cyclical unemployment, also known as demand-deficient unemployment, is caused by a lack of aggregate demand, which causes a full in national income.

💼(2) Frictional unemployment tends to be short term whereas cyclical unemployment can happen over a longer period of time.

Frictional unemployment tends to be short term, and does not involve a lack of skills that are in demand. On the other hand, cyclical unemployment can happen over a longer period of time. Cyclical unemployment is experienced during an economic downturn - that is, in recessions and slumps.

💼 (3) Frictional unemployment and cyclical unemployment are tackled using different policies.

Frictional unemployment would be reduced by a rise in labour mobility whereas cyclical unemployment would not be. Frictional unemployment can also be self correcting. Fiscal policy can be used to tackle unemployment caused by demand-side issues cyclical unemployment.




> MARKING SCHEME<

Logical explanation which might include:

Frictional unemployment arises from people being in between jobs (1)
may be waiting for a better paid job / may be seasonally unemployed / may have worked on a short-term contract / may lack information about vacancies (1)
may exist even when there is full employment / may be self-correcting (1).

Cyclical unemployment is caused by a lack of total (aggregate) demand (1)
more people unemployed than there are job vacancies (1)
may arise from a recession / economic downturn (1)
may need government action to reduce it (1).
Frictional unemployment would be reduced by a rise in labour mobility (1)
cyclical unemployment would not be (1).
Frictional unemployment may be short term (1) cyclical unemployment may be long term (1).

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