Would An Unemployment Rate Of Zero Ever Be Desirable?
There is a strong desire on the part of most nations to keep their unemployment rates as low as possible. However, in the U. S. , full employment is often associated with an unemployment rate of around 3. 5-5. 0 percent. Would an unemployment rate of zero ever be desirable? Why or why not?
A zero rate is not possible because there are always people between jobs. Also when the unemployment rate is low firms bid up wages competing for employees, so new people are attracted into the work force and until they find work they are also unemployed. If the competition for workers is too intense firms raise prices so they can pay workers more and still make a profit so inflation is the result. The lowest unemployment rate ever was during WWII at 1.5% and only rationing and price controls kept inflation from skyrocketing, that only worked for a short time and because we in the middle of a war for survival. The reverse is also true that when unemployment rate is high as it has been for much of the last thirty years wages for most people barely keep up with inflation. With very high unemployment like during the 1930′s wages actually fall, and we see deflation.
No . In my market (city) that Im in right now , there is a 2% rate . This makes it very hard to find employees . Also I am payingMORE than 25% above the minimum wage , just for part time pizza drivers.
the last city I had a store in had a much higher rate of around 5% …… I was able to pay minimum wage and net more money each month to further grow the business and therefore hire more employees.
I do not think a low unemployment rate is a ‘good’ thing.
not desirable as there is always “frictional” unemployment from people looking for jobs after losing the current one, or recent graduates.
Pushing unemployemnt down means pushing production up, which is is likely to “overheat” the economy and cause inflation.
No. If you are starting a new business, and want to hire someone, you had best hope that there is someone who wants the job.