Macroeconomics For Dummies®, uk edition Published by: John Wiley & Sons, Ltd

Frictional unemployment: Finding a job is like finding a spouse

Not happy with simply analysing the economy, economists have also tried to

apply economic reasoning to all kinds of areas not traditionally associated with the discipline. One of these areas is marriage. Strangely enough, it turns out that many of the difficulties people face when looking for a spouse are the same difficulties they face when looking for a job! Interested? Then read on!

The ‘marriage market’ is an example of a two-sided matching market: the market has two sides (men and women), each of whom is looking to match with someone from the other side of the market.

Figure 6-3 shows an example of a possible matching. Four men

{m₁,m₂,m₃,m₄} and four women {w₁,w₂,w₃,w₄} want to match with each other. Man 1 and Woman 2 have decided to match; Man 2 and Woman 4 have decided to match and so on.

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Figure 6-3: A two-sided matching market.

In an ideal world all participants would be very well informed: they’d know a lot about all their potential matches – their personalities, what they look like, their job, their level of education and so on. With this information they should be able to form preferences regarding the other side of the market. So, for example, Woman 1 (w₁) may have the following preferences regarding the men:

That is, her favourite man to be matched with is Man 2, and if not him then

Man 3, and if not him then Man 1, and finally if all else fails, Man 4.

Similarly, each man should be able to rank each of the women.

If everyone is well informed so they know not only their own ranking but also everyone else’s rankings, the matching problem is relatively straightforward. You simply approach someone you like and whom you know also likes you. You match, get married, have kids and live happily ever after.

Of course, as you may have noticed, things aren’t that simple! Or as an economist would say, the marriage market has frictions, such as:


People aren’t well informed about the other side of the market. Hence the reason people date each other – to find out more about them.


Someone may be a really great match for you, but you don’t even know the person exists. How sad!


Two people who’d otherwise be a great match live too far away from each other and their commitments mean they can’t easily move.

These frictions and others make the marriage market inefficient. A lot of good matches don’t occur that otherwise should occur. Equally, some people get matched when they really shouldn’t have been matched.

Like the marriage market, the labour market is also a two-sided matching market. Except this time the people who need to match are workers and employers. Workers have different preferences regarding the firms they’d like to match with – some would like an office-based job, others a job where they can travel, others a job at a small firm and so on. Firms also have preferences regarding the workers – an accountancy firm wants highly

numerate workers, a tech firm wants people with advanced IT skills and so on.

Also like the marriage market, matching would be easy if workers had a lot of information about firms and firms had a lot of information about workers. Firms would be able to hire those workers who best fit with their needs and workers would be able to work for firms that complement their skills.

The problem is – like the marriage market – the labour market has frictions:


Firms don’t have good information about workers and workers only have limited information about firms. Hence the need for interviewing.

But even an interview doesn’t tell you that much: interviews are short and both sides are on their best behaviour.

A certain worker may be a very good match for a firm but doesn’t