What type of unemployement is the cause of talk of raising the natural unemployment rate?
The natural rate of unemployment is made up of two kinds of unemployment. These are structural unemployment and frictional unemployment. Economists today who believe that our estimates of the natural rate of unemployment should be higher argue that this is because of an increase in structural unemployment.
Structural unemployment occurs when there is no match between workers’ skills and the jobs available. This happens, for example, when the job for which people have trained disappears, like when American manufacturing jobs are sent overseas. Some economists believe that our changing economy has caused a mismatch between skills and jobs, leading to more structural unemployment.
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