Primary Cause of Frictional Unemployment

C

Frictional unemployment results from a scarcity of information and the search activities of both employers and employees for information that will help them make better employment choices.

Frictional unemployment refers to the temporary unemployment that occurs when individuals are in the process of transitioning between jobs. It is often considered a natural and unavoidable part of the labor market as workers move between different positions or enter the workforce for the first time. The primary cause of frictional unemployment can be attributed to several factors, and each answer choice represents a possible cause. Let's examine each option:

A. The presence of legislated high minimum wages that price unskilled workers out of the market: This answer suggests that high minimum wages set by legislation may lead to frictional unemployment. The argument is that when minimum wages are set above the equilibrium wage rate (the wage level at which labor supply meets labor demand), employers may find it too costly to hire unskilled workers. Consequently, some unskilled workers may become unemployed due to their inability to find employment at the higher wage level. However, it's worth noting that the impact of minimum wages on employment is a topic of debate among economists, and the relationship is not universally agreed upon.

B. Discouraged workers who quit looking for a job after extended periods of unsuccessful job search: This answer refers to individuals who have become discouraged and have stopped actively seeking employment due to extended periods of unsuccessful job search. These individuals may feel demoralized by the lack of job opportunities and eventually withdraw from the labor force altogether. While this can contribute to frictional unemployment, it is important to note that discouraged workers are not always counted as part of the official unemployment rate. They are classified as "out of the labor force" rather than unemployed, so their impact on the measured unemployment rate may be limited.

C. Inaccurate and costly information about job opportunities: This answer suggests that a lack of accurate and easily accessible information about job opportunities can lead to frictional unemployment. If job seekers are unaware of available positions or find it difficult to obtain information about job openings, they may face challenges in matching their skills and qualifications with the available job opportunities. As a result, the job search process may take longer, leading to frictional unemployment.

D. High unemployment benefits that reduce the incentive of unemployed workers to search for employment: This answer points to the possibility that generous unemployment benefits can reduce the incentive for unemployed individuals to actively search for employment. When unemployment benefits provide a significant portion of a worker's previous income and are available for an extended period, some individuals may choose to delay their job search or be less motivated to actively seek employment. This could contribute to frictional unemployment.

To summarize, frictional unemployment can arise due to various factors, including the presence of legislated high minimum wages (A), discouraged workers (B), inaccurate and costly information about job opportunities (C), and high unemployment benefits that reduce the incentive to search for employment (D). Each of these factors can contribute to temporary unemployment as individuals transition between jobs or face challenges in finding suitable employment.