Why should unemployment never be 0?

Question

You'd think this would be the optimum amount

Answer 1

In a capitalistic economy, 100% employment is not possible not desirable. On the other hand in a communist system, that is the goal and it may be possible.

When there is 100% employment, people have money to spend. This spending creates more demand for new jobs. As there are no more free candidates available, employers have to increase the pay scales to make people leave their old jobs and take on the ones. This hurts the smaller and lower end of the employers and also increases inflation. Eventually, the growing inflation, and the interest rates, will make it difficult for the businesses to survive. That inturn creates unemployment.

Capital system will self adjust to a level where there is always certain amount of unemployment.

Answer 2

If the unemployment rate were zero businesses needing more workers would have to get workers from other firms by offering them more money. In principle this is how markets are supposed to allocate all resources, as this would provide the most productive use of scarce labor resources in equilibrium models. In this model the pay increases would not be inflationary because firms would not pay employees more than their productivity so there would be an increase in goods to be purchased with the increased wages. In the real world this is how it works only for high skill workers who are in high demand, but in a changing economy many workers have periods of unemployment between jobs as they look for a new job because firms downsize leaving them without a job. There are also new entrants to the labor force seeking but who have not yet found work. So some level of unemployment is the result of change in the economy, both in the size of firms and the labor force.

Answer 3

It can never be 0. An unemployed person is someone who is looking for a job. My daughter is not unemployed because she's a kid. A bum is not unemployed because he is not looking for work. A student is not unemployed because he's busy studying.
The unemployment rate fluctuates wildly because there are always people entering and leaving the workforce. If the unemployment rate were zero it would create a lot of stress for employers. If the unemployment rate were high workers would have too much stress. The economy can be a crazy game.

Answer 4

There needs to be a pool of workers available for people who want to start new, innovative businesses. This is the only way that there can be dramatic improvement in quality of life.

There were a lot of intellectuals in the 1940's who, as products of the Depression, thought that if the government controlled the whole economy, they could plan things in a way that would ensure zero unemployment, taking advantage of the labor that had been going untapped. These were people who were communists for pragmatic reasons, primarily because they thought everyone would be richer, not because they wanted the distribution of income to be fairer. We now realize what many people realized even then, that the cycle of destruction and creation of jobs in capitalism carries along with it the effect of making many people's labors being used more efficiently.

Answer 5

I think that supposition is false. Without minimum wage, unemployment would not/can not exist. If you are willing and able to work at a particular price, but no one is willing to pay you that price, you technically are not employed IMO. Of course, this isn't the conventional analysis. It's just my thoughts but I am convinced my assertion is correct. If you are not willing and able to supply, that hardly should constitute has unemployment. MIN wage facilities unemployment. Of course, if you define min wage as simply not working, obviously, not everyone willing to work will always be working, most likely. Again, though, MIN wage is the only way unemployment can truly exist.

Answer 6

This because there is always some structural unemployment, with people in-between jobs and people who should otherwise be working, but they are taking a holiday.

Answer 7

Steve has good points and also we have a number of people entering the workforce every month and new jobs being created. These will probably never be equal.

Answer 8

because then there is absolutely nobody looking for a job and then businesses would collapse. especially the small ones. If that happens, it could actually trigger a recession or deperssion, where lots of people have no jobs.

Answer 9

why shouldnt it be. i dont care whether it is or not. at 0 it means everyone is working.