Natural Unemployment

What is Natural Unemployment?

Natural unemployment meaning refers to the average rate or number of people that are unemployed due to real economic factors. Basically, the unemployment rate gives us an estimate of the average number of unemployed people that don’t have a job due to either lack of skills and qualifications or advancement in technology. With the growing technology, many human jobs are automated. The developers are releasing automated and intelligent software solutions that not only have the ability to understand human language, but these systems are designed to streamline a wide Range of management functions.

From payroll to financial Accounting, almost all the management activities are automated with technology. As a result, the demand for labors has plunged. Full employment refers to the Economy that is performing great. However, that is practically impossible since many college graduates and others are on the lookout for a job. Some of these job-seekers are those who are replaced by the growing technology, while others are unable to find a decent job because of the competition. That being said, the unemployment rates in the economy never remain stable for long. This movement of the manual workforce represents the current unemployment rate.

Causes of Natural Unemployment

Unemployment can occur due to a number of reasons. Not everyone who is sitting idle at home is unemployed because of the technology or lack of skills. There can be seasonal and institutional unemployment. For instance, a financial crisis or economic Recession could result in high unemployment rates. This especially happens when the labors do not have the training and qualifications to apply for a full-time job.

For example, COVID-19 pandemic has resulted in a high rate of natural unemployment. It disturbed the economy. All businesses were closed for a while due to which hundreds of thousands of people remained unemployed for a long time. Now, many companies experienced excessive losses due to this global pandemic. These companies are not in a position to pay employees.

What is Full-employment?

Earlier, economists believed that the only reason for the increasing unemployment was the low demand for workers. They would implement the strategies to speed up the growth of the companies so that the demand for a manual workforce increases. However, this strategy did not work. There were times when thousands of people were unemployed even when the economy was performing well. They came to the conclusion that how well the business is performing has nothing to do with the demand for workers. No country has been able to achieve full employment because of the constant movement of workers. If an economy were to achieve 100% full-employment, then it had to be inflexible.

Due to the regular movement of the workers, there is a flexible Labor Market where people can quit their current job and search for a better one. This wouldn’t be possible if we were to chase full employment. Minimum wages and advanced technology are two of the main factors that contribute to the increasing natural unemployment rate in the economy.