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How Natural is the Natural Rate of Unemployment?

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  • John Komlos

Abstract

The “natural” in the natural rate of unemployment is a misnomer, insofar as unemployment does not occur in nature. The concept is especially misleading because many economists and media commentators inappropriately equate it with “full” employment. As a consequence, endemic un- and underemployment is accepted as an inevitable attribute of the labor market. This is inaccurate inasmuch as the concept assumes that the institutional structure of the labor market is held constant. However, with creative restructuring of that market our aim should be bring the underemployment rate down to 1.2%, the rate that obtained in 1944 and which probably represents the lower bound rate physically attainable. Instead of the prevailing system, the right to work needs to be recognized as a natural right, because the right to life depends upon it. Several ways are proposed to create an inclusive labor market that distributes the available work in a more equitable fashion than the current system.

Suggested Citation

  • John Komlos, 2014. "How Natural is the Natural Rate of Unemployment?," CESifo Working Paper Series 5004, CESifo.
    • Handle: RePEc:ces:ceswps:_5004
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    natural rate of unemployment; labor market; underemployment; right to work; work sharing;
    All these keywords.

    JEL classification:

    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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