Question

What is a zero unemployment rate not a goal of policymakers? Explain the level of unemployment that the economy experiences in "normal times"? Why does that unemployment occur?

Answer 1

Answer - Zero umenployment offcially means that no individual is unemployed but this is never considered by the policy makers when framing a policy. The reason behind is because unemployment also includes people who are looking for job and are currently not able to find it or people who are shifting from one job to another. Following are the types of unemployment:-

• Frictional unemployment- It refers to the unemployment which occurs when the workers are not able yo find the job because of a mismatch or disfig between the job requirements and the skills and qualities of the workers.. This type of unemployment is generally not possible to resist.

• Cyclical Unemployment- It refers to the unemploymeny which usually occurs at the time of revession when the workers are not able to find the job due to low job availabilities. It mainly occurs with daily wage earners because recession hits them majorly.

• Structural Unemployment- Sometimes jobs are availale but the workers who are available are not qualified enough with the right skills and qualities to get the available jobs. Due to this structural unemployment takes place and it is considered a very bad sign for economy.

Considering the ablove reasons we can conclude that why policy makers do not consider zero rate of unemployment because it practically not possible to have such a rate.

If we look at a normal case we wil find the employment rate to be around 3-7% depending upon the economic growth of the country. As of December 2017 the unemployment rate in USA is nearly 4.1%. Unemployment rate can be calculated by dividing the total number of unemployed people by the total labor force. Here total labor force included the unemployed as well as the employed people.

In normal times the unemployment lies generally between 3-7%. People cannot always find jobs right after they leave one or just after graduating or getting a degree. Sometimes people get old and become less productive even dor the existing jobs or available jobs in the market. Thus, the policy makers need to consider some unemployment rate which will be always present in the economy and thus, cannot be avoided in any circumstances.