Sat, 14 Oct 2006

Too Little Unemployment?

Could there be such a thing as too little unemployment? Leftists will say "Not for us, but maybe for businesses. They can only exploit workers when unemployment is high enough to force everybody to take the first job they can get no matter how lousy. From businesses perspective, there can definitely be too little unemployment."

If you accept the idea that there is a natural rate of unemployment, which results from the cultural amount of job-switching, the acceptance of unemployment, and people's expectations, then yes, a rate of unemployment lower than that would be a bad thing. It would mean that the economy is providing sufficient jobs, but that people don't feel that way. It could also mean that people are reluctant to stay unemployed for any period of time. They might be expecting bad times.

It could also be that people don't switch jobs too often, so that people take a new job because they're scarce. People might not switch because of benefits designed to retain employees; for example leave time, or sick days, or liberal sabatticals, or health insurance tied to employment.

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