Cyclical or "natural"?
The Natural Rate of Unemployment is such rate of Unemployment that forms when at a certain real wage there is a certain part time employment. This situation comes as a result of mobility barriers, lack of information, demographic changes and other consequences of imperfect markets.
Main factors of the Natural rate of unemployment were explained by M. Freidman. The absence of available job information prevents timely employment of workers. Workers’ skills and education limit the possibility to find an appropriate job. If the demand for workers with certain occupation and skills in the market decreases, this factor is decisive for a successful job search. The higher is the degree of the labor mobility, the more effective worker’s job search is. Flexibility of the labor market is an important factor of unemployment, because if the market reacts slowly on the mismatch of supply and demand the rate of unemployment increases. And the last factor is hysteresis, when a high level of unemployment caused by a recession makes people lose their skills and demotivates them.
Over the last three years the number of jobs has increased, but the size of the working-age population has increased too. So this trend of growth couldn’t make the constant proportion of employment. The U.S. labor market still can’t get back pre-recession number of jobs. It’ll take more than a decade to reach pre-recession level of employment.
But what can explain that people stop actively seeking jobs? Some people leave their low-paid jobs for government benefits like unemployment insurance, disability benefits and food stamps. This lack of motivation may help to explain the high quantity of those who have been out of work for more than half a year. The number of unemployed who are long-termers is still above 37%.
Many recent researches have shown that the presence of benefits greatly reduces the motivation of the unemployed to look for a new place of work. Long-term data gathered by the Bureau of Labor Statistics shows that most of unemployed usually find a job within 2-3 weeks after the expiration of terms of the benefits they receive. There are many possible reasons for this phenomenon. For example the company that fired the worker may start the recruitment again. Another factor may be the change in economic environment or that unemployed may agree to accept a job offer that he wasn’t satisfied with earlier. Also workers can become more mobile and even move to another city searching for suitable jobs. There is also one feature that unemployed people receiving benefits prefer not to spend, but save money, limiting the impact of these funds on the economy.
Another argument against too large and too continuous benefits is as follows: such kind of system encourages employers to avoid the registration of long-term relationships with its employees. To avoid spending money on this kind of social payments, they prefer to use the services of temporary employees and outside contractors. This leads to further complication of the situation on the labor market and the social security system.
Unemployment is mostly structural, therefore government policy should stimulate unemployed people to look for jobs by reduction of benefits and terms of payment, encouraging unemployed to study and change profession if it is necessary. Changes in production and consumption patterns are deep and have a global nature. Therefore, to identify all the causes of todays unemployment would be possible only with the passage of time.
