Full employment embodies the highest amount of skilled and unskilled labor that can be employed within an economy at any given time. True full employment is an ideal—and probably unachievable—situation in which anyone who is willing and able to work can find a job, and unemployment is zero.

The natural rate of unemployment is the unemployment rate that would exist in a growing and healthy economy. The economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate. When the economy is at full employment, real GDP is equal to potential real GDP.

The natural rate of unemployment NRU is equal to the sum of frictional and structural unemployment. Even though an economy may be operating efficiently, there will still be some unemployment. Because of that, the natural rate of unemployment is never equal to zero.

A 0% Jobless Rate Could Mean Little Technological Advancement. Economists define a type of unemployment called structural unemployment. Since a 0 percent unemployment rate often comes at the expense of technology, it is highly impractical and undesirable.

Policies for Reducing Unemployment – Key Themes

• Boosting human capital – education and training – a long run strategy to make the workforce more employable and to raise the level of labour productivity.
• Lower employment taxes to increase labour demand – for example, a reduction in national insurance contributions.

Lower unemployment will reduce government borrowing and help economic growth. If the unemployed gain work, they will increase spending, and this will cause a positive multiplier effect which helps to increase economic growth.

Unemployment negatively impacts the federal government’s ability to generate income and also tends to reduce economic activity. When unemployment is high, fewer people are paying taxes to the government. At the same time, unemployment means there are fewer people with disposable income to spend on goods and services.

Effects of Unemployment When unemployment rates are high and steady, there are negative impacts on the long-run economic growth. Unemployment wastes resources, generates redistributive pressures and distortions, increases poverty, limits labor mobility, and promotes social unrest and conflict.

Explain three ways to solve the problems of underemployment?

1. Government should make good transport system so that delivery of goods should be on time.
2. many people could start honey collection in forest to increase their employment.
3. many industries should be set up to get employment opportunities for the people.

Answer: Government should encourage and develop the agriculture based industries in rural areas so that the rural candidates don’t migrate to the urban areas. More employment should be generated in rural areas for the seasonal unemployment people.