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| Dear Yahoo!: |
| Is 0% unemployment possible? |
Gerard
Foster City, California |
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| Dear Gerard: |
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Not only is 0% unemployment impossible, it's not recommended. A healthy economy will always include some percentage of unemployment. There are four broad types of unemployment: - Frictional unemployment: This is simply the time it takes a company to match a qualified job applicant with the right position. It also includes people who are between jobs.
- Seasonal unemployment: Certain industries are more affected by the weather than others. Construction and agriculture, for instance, reduce workforces in the winter.
- Structural unemployment: This is unemployment that results from fluctuating
consumer taste and/or technological innovation. If a worker has the opportunity to learn new skill sets, or move to a new employer, that's OK. If not, it can be problematic -- witness the recent debate over outsourcing.
- Cyclical unemployment: This is joblessness that arises from changes in production volumes. Companies increase or reduce their production according to how much the economy can handle. Repeated cyclical unemployment is a bad thing -- it means the economy is weak and consumers aren't buying.
Unnaturally low unemployment can actually hurt the economy by pressuring wages, which can lead to higher production costs and prices. This excellent article from the U.S. Chamber of Commerce
covers more of the basics.
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