"Zero Unemployment"
Read these articles: “Why 0% Unemployment Isn't Actually a Good Thing” by Mike Moffatt. https://www.thoughtco.com/what-a-0-percent-unemployment-means-1147540
Pathet, Simon. “Why a higher unemployment rate may be good news for the economy”. Economic Article. https://www.pbs.org/newshour/nation/higher-unemployment-rate-may-good-news-economy
Then write a 3-4 paragraphs (about 200 words) including your opinion about the following topics:
Think about what our economy would look like today and what assumptions would have to be met to have a zero rate of natural unemployment.
Is it desirable to eliminate natural unemployment? Why or why not?
Sample Solution
Having a 0% unemployment rate sounds like a great achievement. However, as Mike Moffatt’s article “Why 0% Unemployment Isn't Actually a Good Thing” explains, this isn’t necessarily the case. Achieving an unemployment rate of 0% would require that all available workers find jobs and that all available positions were filled. This means that
any mismatches between job requirements and worker skills or preferences would need to be eliminated. Workers who don’t have the right qualifications for the existing job vacancies would struggle to find employment opportunities, resulting in an overly competitive labor market with wages pushed down as employers are able to hire workers at lower salaries than they had traditionally paid out. The risk of skill gaps in such an economy is also high, since employers won’t have access to talent from different backgrounds with diverse experiences and qualifications.
Ultimately, eliminating natural unemployment may not be desirable due to these issues it could create for our economy. Simon Pathet’s article “Why a higher unemployment rate may be good news for the economy” discusses how having some natural unemployment can actually benefit our economy by creating competition among employers looking for skilled labor, leading to increases in wages which can help drive up consumer spending and economic growth overall. Additionally, when there are more open positions than active applicants searching for those jobs, employers broaden their recruitment efforts beyond traditional hiring pools which helps diversify workplaces by bringing in talents from different backgrounds and perspectives who wouldn't otherwise be considered if there was no shortage of labor supply rather than demand.
Therefore while having 0% natural unemployment sounds nice on paper, achieving it comes with many risks that aren't worth taking into consideration given what we know about its consequences today. Natural levels of unemployment are important when considering how our economies work over long periods of time so it's best not try eliminate them too quickly but rather view them as necessary tools needed when attempting maintain sustainable economic health instead.