151k views
0 votes
The natural rate of unemployment is the unemployment rate at which the inflation rate has no tendency to increase or decrease.​ However, the natural rate of unemployment is not fixed. What causes changes in the natural rate of​ unemployment?

User Vjardel
by
5.3k points

1 Answer

1 vote

Answer:

The natural rate of unemployment = frictional unemployment + structural unemployment. it doesn't include cyclical unemployment because the natural rate of unemployment can only occur when the economy is growing while the cyclical unemployment happens when the economy stops growing or falls in a recession.

The factors that affect the natural rate of unemployment are imperfections in the labor market (e.g. minimum wages or taxes associated to employment), or employees that cannot adjust to changes in the economy, the labor market or even our normal daily lives (e.g. it is extremely difficult for someone that doesn't know how to use a computer to find a job nowadays, and this is a permanent change that applies almost everywhere).

There is no such thing as 0 unemployment, because people are always looking for better jobs and the skills necessary for performing certain jobs keep changing. Some abnormal events like the current health pandemic also increase the natural rate of unemployment, at least temporarily. Other factors that may decrease the natural rate of unemployment are wars, e.g. with WWII there was a labor shortage.

User Tidwall
by
6.0k points