What is natural unemployment?

natural unemployment is the level of unemployment that is inevitable in the long -term performance of the economy. It is a type of unemployment that is independent of business cycles and short -term economic fluctuations. The term has been used since the 1960s, when it was used to invalidate the long -term link between inflation and unemployment rate. The natural unemployment rate is hypothetical, which assumes that markets are competitive and quickly adapt to changing conditions. The causes of natural unemployment include voluntary reasons and technological changes.

The natural unemployment rate was largely popularized by US economist Milton Friedman at the age of 60. Economic theory before the 1960s generally associated with high inflation with low unemployment, correlation known as the Phillips curve. While Phillips curve indicated that governments could manipulate the economy of low -inflation trading for low unemployment, saw the sixties andThe 1970s and the seventies fly high inflation, so high unemployment. This phenomenon, known as stagflation, caused most economists to reprimand the long -term relationship between inflation and unemployment. Rather, Friedman suggested that a lot of natural unemployment would always be present in the economy.

natural unemployment includes unemployment due to voluntary transitions of jobs, technological changes and geographical mismatch between job seekers and job opportunities. Each of these factors will be present to some extent in the real economy. Economists often disagree with the extent to which natural unemployment will exist, but few claim that these factors can be completely eliminated.

In the market economy, workers sometimes leave their work voluntarily in an effort to change their career. These workers are rarely unemployed for a very long time but that is happeningwith sufficient frequency to significantly contraribute to natural unemployment. An unpredictable technological change can leave some industries on positions that are no longer competitive. If this happens, workers who have been qualified in this industry can consider their skills to find a job. Finally, a change in technology can move the location where new jobs are created to other regions of the country or the world.

The type of unemployment, which increases during economic recessions and depression, is not considered to be natural unemployment. This unemployment is the result of trading cycles that cause fluctuations in the overall level of economic activity. Although trade cycles are not repeated accurately, they are considered inseparable from the market economy. The times of economic recession can see that unemployment increases above natural degree, while the times of prosperity can see that they fall below the natural level.