Skill-Mismatch Unemployment Rate
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A Skill-Mismatch Unemployment Rate is a hypothetical unemployment rate due to skill-mismatch unemployment causes.
- AKA: Long-run Normal Level of Unemployment, Structural Unemployment.
- Context:
- It can be associated with a high High-Skill Job Vacancy Rate.
- It can be associated with a high Low-Skill Worker Unemployment Rate.
- Example(s):
- the 2013_U.S. Structural Unemployment Rate (of ~6%).
- It can be related to a Beveridge Rate.
- …
- Counter-Example(s):
- See: Equilibrium Point, Technological Unemployment, Aggregate Production.
References
2013
- http://en.wikipedia.org/wiki/Natural_rate_of_unemployment
- The natural rate of unemployment (sometimes called the structural unemployment rateTemplate:FACT) is a concept of economic activity developed in particular by Milton Friedman and Edmund Phelps in the 1960s, both recipients of the Nobel prize in economics. In both cases, the development of the concept is cited as a main motivation behind the prize.[1][2] It represents the hypothetical unemployment rate consistent with aggregate production being at the "long-run" level. This level is consistent with aggregate production in the absence of various temporary frictions such as incomplete price adjustment in labor and goods markets. The natural rate of unemployment therefore corresponds to the unemployment rate prevailing under a classical view of determination of activity. It is mainly determined by the economy's supply side, and hence production possibilities and economic institutions. If these institutional features involve permanent mismatches in the labor market or real wage rigidities, the natural rate of unemployment may feature involuntary unemployment.
Occurrence of disturbances (e.g., cyclical shifts in investment sentiments) will cause actual unemployment to continuously deviate from the natural rate, and be partly determined by aggregate demand factors as under a Keynesian view of output determination. The policy implication is that the natural rate of unemployment cannot permanently be reduced by demand management policies (including monetary policy), but that such policies can play a role in stabilizing variations in actual unemployment.[3] Reductions in the natural rate of unemployment must, according to the concept, be achieved through structural policies directed towards an economy's supply side.
- The natural rate of unemployment (sometimes called the structural unemployment rateTemplate:FACT) is a concept of economic activity developed in particular by Milton Friedman and Edmund Phelps in the 1960s, both recipients of the Nobel prize in economics. In both cases, the development of the concept is cited as a main motivation behind the prize.[1][2] It represents the hypothetical unemployment rate consistent with aggregate production being at the "long-run" level. This level is consistent with aggregate production in the absence of various temporary frictions such as incomplete price adjustment in labor and goods markets. The natural rate of unemployment therefore corresponds to the unemployment rate prevailing under a classical view of determination of activity. It is mainly determined by the economy's supply side, and hence production possibilities and economic institutions. If these institutional features involve permanent mismatches in the labor market or real wage rigidities, the natural rate of unemployment may feature involuntary unemployment.
- ↑ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1976. Press release". Nobelprize.org. October 14, 1976. http://nobelprize.org/nobel_prizes/economics/laureates/1976/press.html. Retrieved February 16, 2009.
- ↑ "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2006. Press Release". Nobelprize.org. September 11, 2006. http://nobelprize.org/nobel_prizes/economics/laureates/2006/press.html. Retrieved February 16, 2009.
- ↑ Walsh, Carl E. (2003). Monetary Theory and Policy, 2nd Edition. Cambridge, MA: The MIT Press. ISBN 0-262-23231-6.
- http://www.federalreserve.gov/faqs/economy_14424.htm
- Many estimates suggest that the long-run normal level of the unemployment rate- - the level that the unemployment rate would be expected to converge to in the next 5 to 6 years in the absence of shocks to the economy-- is in a range between 5 and 6 percent.
2012
- (Daly, Robijn et al., 2012) ⇒ Mary Daly, Bart Hobijn, Aysegul Sahin, and Robert Valletta. (2012). A Rising Natural Rate of Unemployment: Transitory or Permanent?. In: Journal of Economic Perspectives, 26(12).
- QUOTE: ... we examine whether the natural rate of unemployment has increased since the recession began, and if so, whether the underlying causes are transitory or persistent. Our analyses suggest that the natural rate has risen over the past several years, with our preferred estimate implying an increase from its pre-recession level of close to a percentage point.
2011
- (Daly, Hobijn, & Valletta, 2011) ⇒ Mary C. Daly, Bart Hobijn, and Rob Valletta. (2011). “The Recent Evolution of the Natural Rate of Unemployment." FRBSF Working Paper 2011-05.
2009
- (Schettkat & Sun, 2009) ⇒ Ronald Schettkat, and Rongrong Sun. (2009). “Monetary policy and European Unemployment.” In: Oxford Rev Econ Policy (2009) 25 (1): 94-108. doi: 10.1093/oxrep/grp003
- QUOTE: ... Whatever the wording - “natural employment”, “full employment”, “natural unemployment”, “equilibrium unemployment”, “neutral unemployment”, “equilibrium output” “potential output”, “natural growth” - it seems to be generally accepted among economists that resources may be overused and that this may create inflationary pressure.9 However, since the “potential” (to use a shortcut for the different wordings) cannot be observed directly but needs to be estimated, the measurement (in a theoretical sense as well as with respect to econometric methods) is under debate10. When do economies depart from the natural rate of unemployment (from full employment)?
2007
- (Brauer, 2007) ⇒ David Brauer. (2007). “The Natural Rate of Unemployment." CBO Working Paper 2007-06.
- QUOTE: This paper assesses the natural rate of unemployment - the unemployment rate that arises from all sources other than fluctuations in demand associated with business cycles. The natural rate is determined by the rate at which jobs are simultaneously created and destroyed, the rate of turnover in particular jobs, and how quickly unemployed workers are matched with vacant positions. Those factors in turn depend on the characteristics of jobs and of workers and on the efficiency of the labor market’s matching process. Evidence points to a natural rate that has declined over the past two decades, in part as a result of shifts in the age composition of the labor force and in part because of some combination of an improved match between workers and jobs and a more efficient matching process.
2000
- (Pissarides, 2000) ⇒ Christopher A. Pissarides. (2000). “Equilibrium Unemployment Theory". Cambridge, MA: MIT Press.
1997
- (Blanchard & Katz, 1997) ⇒ Olivier Blanchard, and Lawrence F. Katz. (1997). “What We Know and Do Not Know About the Natural Rate of Unemployment.” In: Journal of Economic Perspectives, 11.
- ABSTRACT: Over the past three decades, a large amount of research has attempted to identify the determinants of the natural rate of unemployment. It is this body of work we assess in this paper. We reach two main conclusions. First, there has been considerable theoretical progress over the past 30 years. A framework has emerged. We present it, and show how it can be used to think for example about the relation between technological progress and unemployment. Second, empirical knowledge lags behind. Economists do not have a good quantitative understanding of the determinants of the natural rate, either across time or across countries. We look at two issues, the relation of wages to unemployment, and the risk of European unemployment.