A while back, presidential candidate Frank Hsieh of Taiwan’s main independence party called for reducing the unemployment rate here to zero percent. Today’s China Post correctly points out that that’s easier said than done:
…above all, no country has ever been successful at reducing unemployment to zero, unless it has been at war.
The reason why that’s true is that in a free economy, some people are always going to quit their jobs. They don’t like their boss, or their coworkers, or their hours, or whatever. So they quit. Involuntary work gulags might be one solution, but the cure would be somewhat worse than the disease.
Not only is zero unemployment difficult to reach, but it would be positively undesirable even if it COULD be achieved. Zero unemployment means that people grab the first job offer they receive, and hold onto it for dear life. That’s bad for efficiency, because it’s a waste of human capital. The economy is surely better off when society’s computer science graduates hold out a little for plum programming jobs rather than leaping at those easy computer operator openings. A moment’s reflection will reveal that a LITTLE unemployment is a GOOD thing.
Long story short here: If Hsieh LITERALLY meant that he wants a 0% unemployment rate, then it’s time to break out the dolls and the pins and the plucked chickens. On the other hand, if he was just employing political shorthand as a way of saying that he’d like to reduce current levels of unemployment – well, I suppose that’s possible. Given that the the current unemployment rate is 4% however, I’m not sure how much greater progress can be done on that front.
(Incidentally, if the Post is so put off by voodoo economics, it might want to spare a word or two of condemnation for KMT presidential candidate Ma Ying jeou’s recent advocacy of totalitarian price controls. Much more talk like that, and wags are gonna start calling him Ma-gabe.)
The Isle of Man nearly always has more jobs available than people, negative unemployment. That does not mean there aren’t any unemployed people though, people who are unemployed simply don’t want to work. I’m sure the IOM isn’t the only place in the world to achieve this. You will never get rid of lazy people.
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The Isle of Man may have a negative unemployment rate, but only in the colloquial, not the economist’s, sense of the word. As it turns out, there’s a big difference between the everyday use of the word “unemployment” and the economist’s definition.
Most (including myself, sometimes) use the word to mean people not working, but that’s really an unsatisfying way of putting it. Stay-at-home moms, elderly people and students aren’t working (for remuneration, anyways), but economists don’t consider them to be unemployed. Economists define an unemployed person as someone who wants work in the labor force, and demonstrates his willingness to work by having recently applied for a job.
(I can’t remember what the exact cut-off time for the definition is: it could be 4 or 6 or 8 weeks, or something like that.)
The economist’s definition may be better in some ways, but it still sometimes leads to paradoxical situations. If a recession lasts for a long time, people can start to give up looking for work, and the number of the unemployed, as defined by economists, can DECREASE. Bizarre stuff.
(The reverse can happen as well. An economy may pick up after a long recession, and suddenly all those people who had given up looking for work suddenly decide they have a chance. By definition, they weren’t unemployed, but once they send out their first job application in six months or whatever, they then re-enter the ranks of the unemployed. So unemployment numbers can sometimes go UP temporarily when an economy is on the upswing.)