More on Job Search

Economists generally use job search as a way of explaining frictional unemployment. It takes time to find jobs when a worker enters the work force, changes geographies or changes sectors. While this process is inevitable in any dynamic economy, it will necessarily always capture some workers between jobs.

Frictional unemployment is inevitable because the economy is always changing. Just a century ago, cotton, woolen goods, men’s clothing and lumber were the top employers of labor in the US. Today, those sectors have been replaced by autos, aircraft, communications and electrical components. These sectoral shifts take time to play themselves out, and in the interim, some workers will be temporarily (frictionally) unemployed.

Government attempts to mitigate job search through government-run employment agencies, information services or unemployment insurance all work, in theory, in the same way – allow workers time and resources to facilitate their finding a new job that suits their skills and interests. Critics contend, however, especially with unemployment insurance (a program that partially replaces a worker’s salary when they become unemployed) has moral hazard issues that may reduce the incentive for newly unemployed workers to search for another job. Indeed, part of the explanation for higher frictional unemployment (and thus natural unemployment) rates in Europe are their (relatively) generous UI systems.