Is 0% unemployment possible?

[Gulf Coast J]

During the debate last night, a candidate was asked what the ideal rate of unemployment is. The candidate answered that it was 0%.

I don't want this to be a discussion of the race, but the answer. So should 0% unemployment be a goal? Even in a 'full employment' economy, there is unemployment because people are constantly entering the labor force, quitting their job and getting fired. New businesses are constantly opening and closing and moving across the country and around the world. Some skills become more in demand and some less so. So even if the government came along and hired every single person without a job to get 0% unemployment, would that be desirable? The way I set up the question should give you my answer. If 0% unemployment is not possible or desirable, what should we shoot for? Or are the wages of people working more important than the number of people looking for a job?.

[stopthegop]

1. not possible...not desirable...

which candidate said that?...IMO it indicates a weakness of economic knowledge...during the 60's and 70's 4% was considered full employment....still leaves a little slack for change/growth....

[afraid_of_the_dark]

4. I would agree

in that it seems to indicate a lack of knowledge about economies and how they work. Did someone skip out on ECON 101 in college?

[WhoCountsTheVotes]

5. Econ 101 said we can't make sure everyone has jobs?

Cite, please...

[Gulf Coast J]

18. Cyclical, structural, frictional unemployment

There are three types of unemployment:

Frictional is caused by people entering the workforce and leaving their jobs for various reasons. When somebody graduates from college or high school, they usually don't find a job right away. People quit their job because they don't like it. People go back to work after raising a child.

Structural is caused by jobs moving around the country or some industries becoming less important. If a furniture factory moves from New England to the Carolinas because of cheap Southern labor, that causes structural unemployment. When computers replace telephone operators, that causes structural unemployment. Structural unemployment sucks for the people laid off and we need some sort of safety net and retraining program. But the economy would be stuck in the 18th century if not for the 'churn of creative destruction.'

Cyclical is caused by recessions. There isn't much good to come from it.


The name of the candidate can be found from transcripts. I don't want this thread to become a pissing match over candidates. There is enough of that on the other board.

[WhoCountsTheVotes]

21. again, those people are NOT included in unemployment statistics

"Unemployed" means that you are currently looking for a job and accepting job offers.

[Yupster]

44. I officially gave my two week notice today

I actually really did.

Two weeks and one day from now, I'll be unemployed. My new job will start five days later. If the survey is taken during that five day period, i'll be unemployed.

There will always be someone who jus happens to be between jobs for a week when the survey is taken, therefore 0 % unemployment is theoretically impossible. Econ 101.

[WhoCountsTheVotes]

53. you will NOT be counted in the unemployment statistics

"There will always be someone who jus happens to be between jobs for a week when the survey is taken, therefore 0 % unemployment is theoretically impossible. "

Of course, if you work one day a month, and don't apply for unemployment insurance, you are not counted in the statistic.

"Econ 101."

Yes, take it, it's quite informative.

[ProfessorGAC]

17. The Dreaded Econ 101 Statement

If you fall back on what you learned in Econ 101 to support any economic contention or belief, that is a sure signal to me to ignore the opinion.

NOTHING in today's macroeconomics behaves as simply or in as straightforward a manner as is taught in Econ 101.

As a matter of fact, i would suggest that if someone answers this question with "No" and then bases it Econ 101, the answer is almost certainly Yes It Is Possible.
The Professor

[redqueen]

29. Thanks ProfessorGAC

For setting that straight.

:toast:

[Gulf Coast J]

35. Then tell us how 0% unemployment would be possible

I'm anxiously awaiting your answer.

[ProfessorGAC]

40. Yawn!

Another worthless challenge.

First, of all, i never said it was possible! I said that if someone siad it was impossible, and their basis was Econ 101, then it's likely that it is possible. The comment was on relying on the knowledge learned in Econ 101, or in using that statement, not on the actual probable lower limit.

But, i have been doing econometric models for more than 20 years and i've yet to see ANY evidence that there are hard floors and ceilings for anything. Not one shred of evidence. Econ 101 talks about floors and ceilings in nearly every chapter, doesn't it? Well, none of those can be proven. Do you grasp the concept of NONE?

So, there is no doubt in my mind that if someone claims a floor, it doesn't exist at that level. If they say 2%, i know it's lower. If someone says 1.5%, i know it's lower than that. The only floor that would convince me is Zero! Only because it's impossible to do better than that. There may be one, but it's always lower than conventional economics suggests.

Now, given the multivariate nature of the macroeconomy, i would suggest that the way it could be accomplished would be for a massive expansion of the economy based upon a new technology that drives the manufacturing sector. (Say, for instance, an immutable patent on an hydrogen based electric car that only Detroit could make.)

The sudden shift in microeconomic demand would create massive opportunities for skilled and semi-skilled labor directly to the manufacturing sector, expand the need for service workers in those same industries, increase the need for new infrastructure (hydrogen stations, et al?). As the huge influx of manufacturing jobs saturated the need, the jobs left behind would allow new entrants and chronically underemployed folks to get better jobs. With the exception of those folks who simply don't want a job, or are disabled and can't work, such a sudden shift in the economic paradigm would drive employment to very low levels.

Finally, given that the demand for oil would then dropped dramatically, those costs would fall for all other industries for whom the new technology would not provide direct benefit. Thus, the prices would stabilize, despite the higher wage effect of full employment.

I don't know if that would actually get to 0% UE, but it would get a lot lower than 2% and lot lower than what most believe is possible.

Any other questions?
The Professor

[pocoloco]

16. Not desirable??

As long as you have your job I suppose?

[durutti]

70. One of the treasured myths of economic orthodoxy.

Supposedly, there's a "natural rate of unemployment" of 5-6 percent, and if the unemployment rate gets significantly lower, you have inflation. Those who aren't so quick to forget history remember that just a few decades ago, the "natural" rate was 3-4 percent.

The fact that this supposedly "natural" rate has changed over time underscores a simple fact: it doesn't exist.

In conditions of low unemployment, workers are in a better bargaining position and can fight successfully for higher pay. In order to maintain profits, business pressures the Fed to raise interest rates in order to "loosen up" the labor market, so that they can resist workers' demands. Employers don't want full employment.

Also, it's important to remember that full employment has never caused inflation, nor have workers in their demands for increases in pay. *Employers* cause inflation when they raise prices in their drive for profit.

[KissMyAsscroft]

2. No, its not possible...

nt

[WhoCountsTheVotes]

3. yes, it is possible and desirable

That puts us - workers - in a good bargaining position. Remember, they said that giving us weekends off was going to destroy business and end capitalism as we know it too. Same with banning child labor.

[afraid_of_the_dark]

14. but how can you have everyone employed?

That's the part that isn't clear to me. I understand that the unemployment rate doesn't include those who "can't work" - students, those whose physical disabilities prevent it, the retired, etc. But 0% for those who can work is unrealistic, because that means that all workers (even those who live in small towns/rural areas that don't have a lot of job opportunities) will be employed. This then leads to the assumption that they will be working in their area of expertise (because why would they be doing something for which they have no experience), which would be impossible because of the ebb and flow of the types of jobs available. The needs of the people change - jobs are phased in and out, with no guarantee that what's popular today will be relevant tomorrow.

[WhoCountsTheVotes]

19. think about it

"This then leads to the assumption that they will be working in their area of expertise" - it does? Why?


"(because why would they be doing something for which they have no experience)" - this is immaterial.


"which would be impossible because of the ebb and flow of the types of jobs available." ???

[afraid_of_the_dark]

27. I have thought about it

The job market changes over time. As the needs of the people change, the types of industries and, subsequently jobs, changes. Eventually, people will be laid off when they do a job that is no longer "useful." If they have not managed to acquire some skills that are useful for the "newer" jobs, they will be unemployed.

Or, I guess if the "doing something for which they have no experience" is "immaterial", they should forget their years of experience in the workplace and just get a job at Mickey D's.

[redqueen]

30. Yes, things change

But in a pinch, most people will do any job to feed themselves, pay the rent, feed their families, etc.

The jobs the government would provide would be in areas which are always in need: infrastructure maintenance / repair, outreach / social service jobs, etc., etc., etc.

I'm sure you are aware of many, many jobs that go undone because the govt allocates funds poorly, yet this does not mean the work does not need to be done. By having the govt pay people to do these jobs they are solving two problems with one policy.

[Sir_Shrek]

43. not desirable

You're talking about an invitation for massive inflation.

As for whether it's possible that I'm not so sure of it. Maybe on paper.

[Kimble]

31. No.

0% unemployment would mean a shortage of goods and services, unimaginable inflation and a shortage of labor. World War II had rationing of food stuffs, a shortage many goods and a build up of capital because people had nothing to spend it on. A job that pays $12 an hour minimum for everyone and a grocery store that has no bananas is not a good place to be.

unemployment at 6%+ means no growth, a weak economy and obviously some people cant afford the basics.

In a nation of 281 million people - 300k looking for new work every week means growth which also means change, and hopefully progress.

Anything below 4.5%-5% is full employment. Like under Clinton.

This means that people who just got out of a MSC class can get a job that starts at 35k or so in the Midwest with little or no experience, and fast food places are paying more than the minimum wage with some bennies.

Good economies are about balance.

Keep in mind that their are only a very few Nobel prizes handed out each year. One for Physics and Chemistry, Physiology or Medicine, Literature, Peace and economics. That’s it folks. If you think you have actually discovered an original and unique system that has never been voiced, published or espoused before I would love to hear it. Frankly, I’ve heard a lot of people champion many systems. Most usually have small additions that borrow from other systems. I have never heard a person speak of a "new" economic system that works out side of Star Trek.

[WhoCountsTheVotes]

34. proof?

"0% unemployment would mean a shortage of goods and services, unimaginable inflation and a shortage of labor."

Example please? If this sort of economics is a science, I'd like to see experimental evidence that this is true. If this sort of economics is a doctrine of "market fundamentalism" than I'll file it with all of the other fundamentalist doctines (like creationism for example).

[tritsofme]

60. Employment is a trade-off with inflation.

More people working means more wages gained, and this puts pressure on prices and moves them upward.

Then to get inflation back in check taxes are raised and so are interest rates, this decreases employment.

The only way you can have it both ways is if you can make supply side work, and it doesn't.

[WhoCountsTheVotes]

62. proof?

There is as much proof of the "high employment causes inflation" as there is of "God created the universe in seven day" - can you link to an experiment proving your assertion?

As for pressure on prices, if you have significant competition and no pricing power, you can't raise prices. the actual pressure is on the profit margin.

[tritsofme]

63. Read up about demand-pull inflation.

Too much money chasing too few goods.

I don't need to do your research for you.

[WhoCountsTheVotes]

64. so, you have none

Thank you. As soon as you have proof of your market fundamentalist theories, let me know, okay, thanks :hi: :)

Also, can you explain what employment has to do with the quanitity of money as well? thanks in advance.

[tritsofme]

65. I'm glad you've been able to overcome a generation of economists,

congratulations.

[WhoCountsTheVotes]

67. Argument from authority?

so far, I've seen nothing except for a bunch of claims made by you, and no proof of anything. When that changes...

[rman]

48. so you don't need/want a 'buffer' of labor force?

in case something comes up, like i large natural disaster

[libview]

6. there is a percentage of elegable workers who

don't want to work.

[WhoCountsTheVotes]

7. they aren't counted in the unemployment figures

so, what is your point?

[Lydia Leftcoast]

8. I took an economics class BEFORE the Reagan era

and my textbook said that 2% was the lowest unemployment rate that was possible in the real world, largely because people do change jobs, get fired, and leave the workforce voluntarily for shorter or longer periods of time. Old-style Communist countries, which required people to have state-assigned jobs, probably managed 0% unemployment on paper, but in reality, they had some so-called "frictional unemployment" themselves.

After the Reagan administration managed to blast the official rate up to 11%, Republicans (and the "new"--i.e. Repiggie Lite--Democrats) started talking about how it would be impossible to bring unemployment below 5% without triggering inflation.

They talked like this until the latter years of the Clinton administration, when unemployment fell into the 4% range without triggering inflation. The Repiggies don't like to talk about this.

Still, you rarely hear the 2% figure cited by anyone, despite the fact that the U.S. maintained it for much of the 1950s and 1960s and Japan maintained it for a good 40 years.

I think that "triggering inflation" is Repiggie-speak for workers getting their fair share of the profits;.

[WhoCountsTheVotes]

11. misleading and possibly false...

"my textbook said that 2% was the lowest unemployment rate that was possible in the real world, largely because people do change jobs, get fired, and leave the workforce voluntarily for shorter or longer periods of time."

They are not included in the unemployment figures, so...

[Gulf Coast J]

22. People who get fired ARE included

As do people who leave a job and look for another one.

[WhoCountsTheVotes]

25. if they get a job shortly after they are fired, they aren't unemployed

...now are they?

[afraid_of_the_dark]

28. But doesn't that imply that companies would be running "shorthanded"

on employees if they have all these jobs available for someone who happens to lose their job? And if they are running "shorthanded," but still manage to churn out their product, that's just a boost for productivity. They're going to go for productivity any day over hiring more people to do the work of less.

[tritsofme]

61. Inflation did rear its head in 2000,

that's why the fed hiked interest rates 7 times.

UE under 4% probably contributed to that.

[rogerashton]

9. No, BUT

those who think they know that 4% or 6% is "the natural rate of unemployment" are probably confused about other things as well.

It is true that we would expect some "frictional unemployment" in the best of circumstances. It is also true that the doctrine of my profession holds that there is a "natural rate" of unemployment and that below the "natural rate" inflation is unlimited. But the "natural rate" has proven impossible to pin down -- in the mid 1990's "everybody knew" that this rate was about 6%; but by late 1999 we had unemployment at 4% and decreasing inflation.

Nobody knows, and those who think they know are likely to be confused about other things as well.

[Racenut20]

10. Theoretically, as I was taught in college

There is always about 1% moving from job to job voluntarily, thus there would always be at least 1% unemployment.

[WhoCountsTheVotes]

13. again, NOT counted in the unemployment figures

"There is always about 1% moving from job to job voluntarily, thus there would always be at least 1% unemployment."

Sigh. These people are NOT counted in the unemployment figures...

[Gulf Coast J]

23. Yes they are

If you don't have a job, but want one and are actively looking for one, then you are unemployed.

[WhoCountsTheVotes]

26. right - and IF those people get jobs during a certain amount of time

what is it - working one day a month means you are official employed - they won't be included.

[Teaser]

12. It would be very problematic.

At least, given our current economic structure.

As new businesses popped up, they would have to offer higher and higher salaries, leading to runaway wage inflation.

There's a point at which this inflation would become detrimental to the economies ability to generate new businesses. Pressure would be placed on shareholder profits. Eventually we'd have a stock market collapse, because there would be no return on investment. This would demotivate any investment in the stock market.

We'd begin experiencing runaway rice inflation as businesses attempt to recoup profits by jacking up prices.

All of these factors would happen only if unemployment was somehow clamped at zero. However, these very factors would insure a rise in unemployment. Any real world, profit-oriented business would have to fire people if things got even a fraction this bad.

Unemployment is a necessary slack in the capitalist system. It acts as a lubricant for the economic system. If you want to change that, you have to change the kind of economy we have from the ground up. And good luck at that.

[WhoCountsTheVotes]

15. "wage inflation" does NOT mean price inflation

So much disinfo, so little time. Under Clinton we had 4% unemployment, rising wages, and NO INFLATION IN SIGHT.

"As new businesses popped up, they would have to offer higher and higher salaries, leading to runaway wage inflation."

I think you mean:

"As new businesses popped up, they would have to offer higher and higher salaries, leading to a high living standard for most Americans."

[Teaser]

47. No, I meant what I said.

Don't accuse me of disinformation. Got it? I'm stating an informed opinion. If you disagree, fine. I'm not trying to obfuscate anyone and the implication that I am is obnoxious and insulting.

Wage inflation can lead to price inflation. And will, if unemployment is clamped at zero, because the money for increased wages has got to come from somewhere. But unemployment cannot be clamped at zero.

[WhoCountsTheVotes]

54. "the money for increased wages has got to come from somewhere"

it does - it comes from what would have been profits.

[hexola]

20. Sure, just like the 0% dropout rate in Houston schools...

Just be creative...just create a new designation...like "Between Employment" - and then change it so you are only called "Unemployed" if you are out of work for a year. That will really reduce "Unemployment"!!!

POW!!! Just like that - another "Bush Miracle"

[Snivi Yllom]

24. yes

if the world blows up and all human die

[wtmusic]

32. Possible yes, realistic no

statistically it is possible.

[redqueen]

33. Yes

Splitting hairs about people moving from job to job are meaningless canards. The crux of the matter is whether people will be able to provide for themeselves and their families.

Another red herring is the idea that private employers will be necessary in order to achieve this feat. Public works, anyone? We have deteriorating sewer systems, highways, schools, etc. etc. etc. Plenty of jobs. But our leaders would rather spend the money on warmongering for empire or on the 'drug war'.

[Gulf Coast J]

37. Meaningless canards?

You mean like the actual definition of 'unemployment'? Thirty-one percent of the unemployed are unemployed for less than five weeks. Should they not be counted? What happens when a company goes out of business or they have to cut staff to stay open? Will the workers automatically get a government job?

[redqueen]

46. Yeah like the actual 'definition'

You do realize this is based on a telephone survey, right?

SO MUCH of the government's 'indicator' type information is based on such nebulous and loosely-defined or poorly-defined input... it's a wonder it's not a story in and of itself. No, wait a second... it's not. Nevermind. :)

Anyway, sure, count them. Don't count them, whatever. Maybe it's just me, but when I hear 'full employment' or 'zero unemployment', I don't automatically start imagining how under what kind of nitpicky detail that can be construed to be misleading or a lie. When I hear that, I hear a genuine attempt to formulate a policy which guarantees - yes - government-related work for those who cannot find a job elsewhere.

Don't know if you saw my other post where I explained that we have massive infrastructure needs, and we could employ a whole bunch of people doing just that for the forseeable future.

[Gulf Coast J]

49. There are over 8 million unemployed people

That's actually a fairly low number historically. If the government gave jobs to everybody who wanted them (8 million), and labor costs were around $40,000 per person (salary, training, insurance, pension, taxes, paperwork); that would cost $320 billion a year. Not to mention relocation costs if somebody in West Virginia were needed to build a school in Arizona. Not even a 15% cut in the Pentagon budget or a repeal of the Bush tax cuts would pay for that.

Give people a safety net, provide for some retraining and let businesses and employees decide what needs to be done.

[cryofan]

36. Who cares? The slaves had 100% employment....try 100% UNemployment

Now, that would be ideal.

Why set your sights so low? If we really lived using our brains as the rational instruments that they could be, we would be trying to figure out how to arrange it so that no citizen of America would have to work unless he/she felt like it.

[Gulf Coast J]

38. I like the way you think!

nm

[Demeter]

71. I Have a Feeling GWB is way ahead of you on this

100% unemployment, here we come! It's a Brave New World!

[northzax]

39. technically? sure

it is possible, in the short term, to ensure a job for anyone who wants one, as long as they are willing to do anything offered, for the salary offered.

Now, why is this only possible in the short term? because of two problems. First, employment is truly cyclical in the private sector as productivity increases. Think of all the typewriter repairmen. Skillsets become obselete, and jobs become redundant. And yet the increse in productivity often leads to more preoductive employment in the long run. Second, the public sector costs of continuing to employ theses people will continue to skyrocket. To ensure 100% employment, defined here as " a job for everyone who wants on, all th etime" would require, today, the creation of 100,000+ new jobs every month to make up for people entering the workforce alone. Since we've already demonstrated that keeping everyone currently employed working requires the stifling of productivity, and a commensurate increae in public sector spending, it is unlikely that the climate would encourage the growth of 100,000 new jobs every month just to match the birthrate.

So, in summation, possible in the short term, not in the long term.

[afraid_of_the_dark]

41. Now that's something I can agree with

If 0% unemployment is possible, it wouldn't be stable and wouldn't last long term.

[Silverhair]

42. 4% is usually considered "full employment".

I am not an economist by any means, and I don't feel like searching for a link. That is a number that I have seen from time to time as being the best that an economy can hope for, even in a labor shortage. Current unemployment is 5.7%.

Zero is simply impossible. In addition to the reasons that you sited, the is also the problem that some people are just not hireable for anything.

[cryofan]

45. What we should do is restrict labor supply so that labor prices go up

That way we get more money and can take more time off.

If we slow immigration way down, labor prices go up and up. That is good. Business like it when competition is less, that way they get more profit. Same thing for us citizen workers: we should vote for politicians who want to restrict the labor supply. Only problem is, where are they?

[IronLionZion]

50. some people want to be unemployed

and others are physically unable to work at any job. It's an honorable goal but is economically unattainable and extremely innefficient. wages would have to be ridiculously low and there would be a lot of socialization and deadwight loss in industry.

[WhoCountsTheVotes]

55. "physically unable to work at any job"

they are NOT counted as unemployed.

[picus9]

51. No, there will always be those

Who would like to not work and earn unemployment benefits.

[WhoCountsTheVotes]

56. "Who would like to not work and earn unemployment benefits"

yet again, those people are NOT counted as unemployed...

[fob]

52. I think a 0% answer is a political "Duh" answer.

If you get that question as a candidate it should be poli-sci 101 that gives you the 0% answer. Of course in poli-sci 999 you are taught the econ 999 follow-up!

As for the practicality of 0% UE can anyone answer the following questions?

A. How many workers are there? (Include every category possible)

B. How many jobs are there currently? (Add current want-ads, job board postings and help wanted signs to current # of employed)

If A is greater than B, more jobs are needed, is the amount needed possible?, plausible?

If B is greater than A, the possibility for 0% UE already exists and the market apparently rejects the idea.

[Fescue4u]

57. Only in a communist state

In a capitalist state 0% un-employment will lead to rapid and even hyper inflation. First even working people will not be able to afford necessitys, then cost of production for both labor and materials skyrockets. Eventually, the economy implodes then you have massive unemployment.

In a communist state, you can have 100% employment, although your quality of life will crappy and freedom will be zilch.

Sadly, some unemployment* is necessary in a free, prospherous capitalist economy


*(Which is why it necessary to have proper safety nets in place for those affected)

[WhoCountsTheVotes]

59. proof, Fescue4u?

"In a capitalist state 0% un-employment will lead to rapid and even hyper inflation."?

Do you have ANY proof to back this up, or are you repeating market fundamentalist dogma? Tell us about creationism next...

[Ilsa]

58. I thought 4% was considered full employment by economists.

There are people who are in the midst of changing jobs, careers, moving with a spouse, etc, leaving the military, etc. It is thought that 4% should cover those who choose temporary unemployment.

Was this updated while I was out of college over the last twenty years?

[NewJerseyDem]

66. I don't think so

I would think that there would still be a small amount of people that are unemployed. For instance, if a company went out of business, then all of their employees would be without a job. Ideally, they could find a job soon, but almost certainly they would take a while when they are considered unemployed before they could find that job. I would also think that 0% unemployment wouldn't be good because there wouldn't be a competition for jobs. If every person can get a job even if they don't have any skills then we will have incompetent people doing some jobs.

Other countries like the Netherlands that have really low unemployment rates have to basically import people just to have their economy function. That isn't good. If you have 0% unemployment then you could end up with basically -.5% unemployment or something like that when companies can't function due to a lack of employees.

[durutti]

68. It is possible and desirable.

I don't know why it wouldn't be.

[enki23]

69. he didn't say it was a goal, he said it was "ideal." and it is.

it was a good answer, because everyone knows that the candidate didn't really mean that we must achieve a "0" unemployment rate. it would be a lot more difficult to defend 4 or a 3.2 wouldn't it? why not 3.1? how in hell can you lay out your reasoning for such a thing in a general debate? (3.2 is better than 3.1 because it represents the calculated threshhold under our current conditions where... blah blah blah blah) it's a ridiculous "gotcha" question, not one which is intended to be really answerable.

(yes virginia, there *are* silly questions.)

[Cleita]

72. Don't know much about economics, but common sense

tells me that full employment would raise wages and a large group of unemployed workers would lower them because of supply and demand. Why not give everyone a job? There is always stuff that needs to be done in government, even if it's mowing lawns in public parks or repairing and painting public buildings.