Final answer:
A new law prohibiting people from seeking employment before age eighteen would likely increase the natural rate of unemployment. It limits the number of potential workers available, particularly for industries that hire younger individuals, and affects the labor market flexibility. Government policies can affect this rate, which varies over time with economic, social, and political changes.
Step-by-step explanation:
When considering how a new law, which prohibits people from seeking employment before the age of eighteen, would affect the natural rate of unemployment, it's important to understand what this term refers to. The natural rate of unemployment is the level of unemployment consistent with a healthy economy; it includes frictional, structural, and surplus unemployment but not cyclical unemployment caused by economic downturns.
Such a law would likely lead to an increase in the natural rate of unemployment, for a couple of reasons. First, by legally restricting a portion of the potential workforce—those under the age of eighteen—from entering the labor market, the law reduces the number of available workers. Employers seeking to fill entry-level or lower-skilled positions might struggle to find suitable candidates, leaving jobs unfilled. Second, young workers who are often highly flexible and willing to take on part-time or seasonal work would also be unavailable. This absence could impact industries that rely on this demographic, such as retail or hospitality, thus potentially raising the natural unemployment rate.
Governments have limited control over the natural rate of unemployment since it's influenced by factors like the age structure of the population, productivity shifts, and market dynamics. However, policies and regulations, like the one in question, can shape the labor market. Restrictions on labor can deter hiring and contribute to a higher natural rate of unemployment, as can other factors such as high minimum wages, difficulty in firing employees, and strong union presence. Changes in these economic, social, and political factors also mean that the natural rate of unemployment can evolve over time, rather than remaining static.