Question

What factor described in your text book is typically used to explain high natural unemployment?

Answer 1

One of the factor is the unemployment insurance. These is a kind of monetary benefit that is provided to the unemployed person who is looking for a job but is not able to find it for a long time. When a particular region or even economy such as those in European union, has an unemployment insurance equal to 80% of the market wage rate, there is a little incentive for the unemployed to find work. This increases the frictional unemployment and becomes a factor of hai natural unemployment.