The natural or (equilibrium) level of unemployment is determined by calculating the level of unemployment when the labour market is in equilibrium.
The labour force includes everyone of working age, who is either working, or looking for work. The AS of labour is every one who is able and willing to supply their labour. Not everyone in the labour force will actually be able to supply his or her labour, and this leads to the natural rate of unemployment.
The natural rate includes frictional and structural unemployment. Frictional unemployment occurs when workers are in between jobs, for example, it will take time for graduates to find a suitable job. Structural unemployment occurs due to occupational and geographical immobility’s. For example, some workers may not have the necessary skills to apply for a job, therefore, they cannot supply their labour even though jobs are available. The natural rate of unemployment is shown by the below diagram and is Q2- Q1
The natural or (equilibrium) level of unemployment is determined by calculating the level of unemployment when the labour market is in equilibrium.The labour force includes everyone of working age, who is either working, or looking for work. The AS of labour is every one who is able and willing to supply their labour. Not everyone in the labour force will actually be able to supply his or her labour, and this leads to the natural rate of unemployment.The natural rate includes frictional and structural unemployment. Frictional unemployment occurs when workers are in between jobs, for example, it will take time for graduates to find a suitable job. Structural unemployment occurs due to occupational and geographical immobility’s. For example, some workers may not have the necessary skills to apply for a job, therefore, they cannot supply their labour even though jobs are available. The natural rate of unemployment is shown by the below diagram and is Q2- Q1
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