Question

The natural rate of unemployment depends on factors that affect the behavior of both workers and firms. Make lists of possible factors affecting workers and firms that you believe are likely to influence the natural rate of unemployment.

Answer 1

The "natural rate of unemployment" is combined by two types of unemployment i.e., the "frictional" and "structural" unemployment. The factors affecting the "workers" and "firms" that are likely to influence the natural rate of unemployment are:

• The old technology : The world is changing and incorporating new and advanced technology. Absence of these technologies slows the production of the firm.

• Poor management : The way of managing the firm affects a lot in a long run and the functioning of the firm. If the management system is bad, then there are high chances of the production to go down.
• Skills don’t match : When a person changes it jobs and apply for another, what happens is that sometimes, the job demands and vacancies are same but the skills are not a perfect. Hence, a person goes through unemployment may be for a temporary period of time.
• Lack of skills : The scenario of employment is changing. So the skills requirement is changing. Either it is completely changed or gone to a little higher level. Absence of these skills affects a person getting a job.