Page 169 - Krugmans Economics for AP Text Book_Neat

lagging sales, even as Japanese companies such as Toyota announced plans to open new
Workers who spend time looking for
plants in North America to meet growing demand for their cars.
employment are engaged in job search.
This constant churning of the workforce is an inevitable feature of the modern econ-
Frictional unemployment is
omy. And this churning, in turn, is one source of frictional unemployment—one main rea-
unemployment due to the time workers
son that there is a considerable amount of unemployment even when jobs are abundant.
spend in job search.
Frictional Unemployment
Workers who lose a job involuntarily due to job destruction often choose not to take
the first new job offered. For example, suppose a skilled programmer, laid off because Section 3 Measurement of Economic Performance
her software company’s product line was unsuccessful, sees a help-wanted ad for cleri-
cal work in the local newspaper. She might respond to the ad and get the job—but that
would be foolish. Instead, she should take the time to look for a job that takes advan-
tage of her skills and pays accordingly. In addition, individual workers are constantly
leaving jobs voluntarily, typically for personal reasons—family moves, dissat-
isfaction, and better job prospects elsewhere.
Economists say that workers who spend time looking for employment are
engaged in job search. If all workers and all jobs were alike, job search wouldn’t
be necessary; if information about jobs and workers were perfect, job search
would be very quick. In practice, however, it’s normal for a worker who loses a
job, or a young worker seeking a first job, to spend at least a few weeks searching.
Frictional unemployment is unemployment due to the time workers
spend in job search. A certain amount of frictional unemployment is in-
evitable, for two reasons. One is the constant process of job creation and job
destruction. The other is the fact that new workers are always entering the
labor market. For example, in January 2010, when unemployment was high,
out of 14.8 million workers counted as unemployed, 1.2 million were new en-
trants to the workforce and another 3.6 million were “re -entrants”—people
who had come back after being out of the workforce for a time.
A limited amount of frictional unemployment is relatively harmless and
may even be a good thing. The economy is more productive if workers take the
time to find jobs that are well matched to their skills, and workers who are un- istockphoto
employed for a brief period while searching for the right job don’t experience
great hardship. In fact, when there is a low unemployment rate, periods of un- During the housing slump of 2009 when
unemployment was running very high,
employment tend to be quite short, suggesting that much of the unemploy- many construction workers resorted to
ment is frictional. Figure 13.1 shows the composition of unemployment in more traditional methods of finding work.

figure 13.1

Distribution of the Unemployed
by Duration of Unemployment, 27 weeks
and over Less than
2000 and 2010
15 to 11% 5 weeks
In years when the unemployment rate is low, most 26 weeks 20%
unemployed workers are unemployed for only a short 12% Less than 27 weeks
period. In 2000, a year of low unemployment, 45% of 5 weeks and over
41%
the unemployed had been unemployed for less than 45% 5 to 14
5 weeks and 77% for less than 15 weeks. The short 5 to 14 weeks
duration of unemployment for most workers suggests weeks 15 to 22%
that most unemployment in 2000 was frictional. In 32% 26 weeks
early 2010, by contrast, only 20% of the unemployed 17%
had been unemployed for less than 5 weeks, but
41% had been unemployed for 27 or more weeks, in-
2000 2010
dicating that during periods of high unemployment, a
smaller share of unemployment is frictional.
Source: Bureau of Labor Statistics.

module 13 The Causes and Categories of Unemployment 127