The most important factors determining the level of frictional, structural and seasonal unemployment are:
Level of Economic Activity – When
actual output is close to potential output, employers will face a competitive
labor market. Employers will be more likely to advertise and to spend on
recruiting. Employers will also likely offer better retraining programs and
relocation assistance. These measures will reduce structural unemployment. When
unemployment is high, companies will have an easier time finding employees to
hire and will be less willing to pay for this type of program.
Transmission of Information – Jobs
cannot be filled unless job-seekers can find out about openings and hiring
managers can find out about candidates. The more effectively the information is
transferred, the lower frictional (and to some extent structural) unemployment
will be.
Structural Change – The overall
composition of the goods produced by an economy changes with time, as tastes
change, new products are invented, world trade patterns move production of
particular goods between different nations, etc. Sometimes it changes quickly,
sometimes slowly. If structural change is occuring at a rapid pace, the number
of people unemployed due to having the wrong skills or living in the wrong
location will tend to be higher.
Workforce Mobility – The easier it is
to change location, and the easier it is to gain training in new fields, the
lower structural unemployment will be. This will depend on factors such as the
cost and availability of training, the cost of travel and moving expenses, the
degree to which appropriate schools and hospitals are universally available,
and so forth.
Institutional Restrictions and
Barriers – Governments, trade unions and even employers will sometimes take
actions designed to protect particular groups of workers. These actions reduce
the efficiency of the labor market and lead to additional structural and
frictional unemployment. Examples: restrictive union practices, required
professional certifications, pension and medical plans tied to the job, or even
local policies which favor existing residents over new arrivals.
Seasonal Industries – Some industries
are seasonal by nature: Fishing, farming, forestry, tourism, construction.
Despite the fact that predictable unemployment will occur in some periods of
the yearly cycle, some economies have clear natural advantages in these
industries and find it worthwhile to pursue them.