Explain why an economy never attend the Unemployment rate of zero percent?
Unemployment is the situation in which people are actively looking for a job and cannot find one. High levels of unemployment highly affect the economy of the country. The lower the rate reflects the better health of the economy. People who are under the legal age, cannot work, not interested in working, part-time employed are not counted as unemployed. Due to the continual process of job creation and destruction, an economy can never achieve zero unemployment.
The different types of employment are explained below;
- Frictional Unemployment:
These types of unemployment are unavoidable in nature which are caused when a worker is searching for a job or switching from one job to another. Graduates entering the labor market in search of a job is an example of frictional unemployment.
- Structural Unemployment:
These types of unemployment are caused due to a lack of or mismatch of labor skills. Advancement in technologies is one of the reasons for structural unemployment.
- Cyclical Unemployment:
The unemployment which is caused due to recession in the economy is called cyclical unemployment. The main aim of the economy is to achieve zero cyclical unemployment. It is also caused when people stop buying goods and services due to which businesses lay off their staff.
- Seasonal Unemployment:
This is a type of unemployment where the workers are unemployed for a certain time period due to a lack of jobs because of the seasonal variations. Seasonal unemployment is temporary unemployment in which the demand for workers is lower under certain conditions. The workers can find a job in one season and remains idle in another season. For example; maize farmers become employed in one season and unemployed in another season.
Unemployment is the situation in which individuals are actively seeking jobs and are not able to find them. Unemployment can be caused by a slowing economy, competition in a particular industry, advancing technology, and outsourcing. For example, a worker who has recently quit a job and is unable to find one is an example of being unemployed. The unemployment rate is calculated by dividing the total number of people that are unemployed by the total number of people in the labor force and is expressed in percentage. An economy never attends the unemployment rate of zero percent because of the natural types of unemployment that are frictional, structural, and cyclical unemployment. Frictional unemployment is temporary unemployment that exists due to workers spending time searching for a job or when switching from one job to another. Structural unemployment is a type of unemployment where there are more workers seeking jobs in a particular labor market than the available jobs in the existing wage rate. Unemployment caused due to recession is called cyclical unemployment. People stop buying stuff due to decreased income due to which more people lose jobs. These types of unemployment are temporary in nature which makes active workers unemployed for a certain time period.