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

(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).