Natural Rate of Unemployment, Macroeconomics Video Lecture | Macro Economics - B Com

so the question is that what drives
natural rate of unemployment
well natural rate of unemployment is
caused by a combination of frictional
unemployment and structural unemployment
what exactly is this frictional
unemployment suppose I'm a new worker or
I'm a worker who is out of a job I take
some time to find a new job
so the period for which I am unemployed
that is frictional unemployment good is
short-lived what do you think should
frictional unemployment arise it arises
because I am who is a worker who wants
to get into a new job I want to find a
job which is better suited for me I take
some time to find that job I will not
take up the first job into which I will
get into
similarly the employer with whom I would
work he will also say he will also take
some time to find a worker he will not
get on with the first worker who is
coming for an interview with him so this
is frictional unemployment second is
structural unemployment supposing I am a
worker and amount of the job amount of a
job for a long time probably six months
or more because I don't have a skill I
don't have a skill or I've been
displaced because of some improvements
so that is structural unemployment so
what do you think will drive the changes
in natural rate of unemployment the
change is the natural rate of
unemployment will be driven by the fact
that what causes the changes in
frictional unemployment and the changes
in structural unemployment why do you
think frictional unemployment will be
impacted by by what sources it will be
impacted in case if for in case if
government is going to pass a law that
you can lay off the workers easily to
perform
or I am a leader of worker the home it
is going to give me incentives for some
time at least or I can I'm an unemployed
worker and I can easily find the jobs
which have vacancies what do you think
will cause the changes in structural
unemployment or impact the structural
unemployment in case that there is a
major technological shift there is there
is a requirement of new educational
skill in the for the for the particular
job so all of these all of these will
affect the structural unemployment okay
now in case of a recession time you find
this that unemployment rate increases
okay so so labor force the pool of labor
force is equal to the pool of employed
workers this pool of unemployed workers
so L is the labor force U is the
unemployed workers is the employed
worker so L is equal to u plus e so the
unemployment rate for an economy U is
the ratio of the unemployed workers to
the labour force and
say you n is the natural rate of
unemployment there might be some workers
who are losing their jobs in a given
period with some rate say s and there is
there are fraction of unemployed workers
who can find the jobs in a given period
with the with the rates AF so the total
number of workers who will find the
total number of unemployed workers who
will find the job in a given period is
fu and the total number of employed
workers who will lose their jobs in the
given period is s e so s e is nothing
but your L is nothing but u plus e so e
is nothing but L minus u so it could be
written as s into L u what happens in
boom more people can find jobs than the
people who can lose job so fu would be
greater than SC in time of recession
what happens more people can lose job
then people who can gain job so s e is
greater than fu well the natural rate of
unemployment is the rate of unemployment
that prevails when the economy is
neither in boom when is when is economy
in boom when unemployment rate is
falling or it is in recession when the
unemployment rate is rising so the rate
the two rates must be equal so fu is
equal to SL minus u you can write this
as equal to s plus fu is equal to SL u n
is U by L so the rate of unemployment
that prevails during such time you you
have an equation as plus fu is equal to
SL so you can calculate the value of u
by L which is nothing but s upon
let's s so this is the unemployment rate