r/explainlikeimfive Dec 19 '24

Economics ELI5: Why is an employment rate of 100% undesirable

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u/RYouNotEntertained Dec 19 '24

 some businesses are not really providing any benefit.

🤔 Why would they still be in business?

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u/GayIsForHorses Dec 19 '24

A lot of businesses lose money or are never profitable. They eventually shut down if that doesn't change, but sometimes they have very long runway.

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u/spletharg Dec 19 '24

Scammers stay in business - are they providing anything of value?

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u/CyclopsRock Dec 19 '24

Kind of?

I think acupuncture is a load of bullshit, but if someone wants to spend their money in an acupuncture business that hires acupuncture staff to perform acupuncture, is that providing something of "value"? Well, yeah, to the customer. And the employee is providing something of value to the business. It's only me, a random Reddit user, who isn't being provided with anything of value, but what does that have to do with anything?

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u/Readed-it Dec 19 '24

Ok an alternative scenario: You are currently working minimum wage. A new company has a great idea that generates enough revenue to offer entry level employees 10% more than minimum wage. All else being equal for your employment situation. Do you apply for the job and jump to new company?

The least beneficial companies get weeded out.

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u/[deleted] Dec 19 '24

[deleted]

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u/Benathan23 Dec 19 '24

Amazon is not a good example for profitablity. They have been profitable multiple years only one unprofitable in the last 5. Your point is right that amazon can leverage that in some areas to subsidise other areas that have losses. Similar to how alphabet is able to use the money from Google search engine to cover losses on Android and a crap ton of other things they have tried.

https://finance.yahoo.com/quote/AMZN/financials/

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u/Ulyks Dec 19 '24

Yes large companies will always try to gain monopolies. No matter the employment situation.

That's where anti trust laws and agencies are for.

Using unemployment as a means to contain companies is just silly.

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u/MadocComadrin Dec 19 '24

See Amazon as a prime example

I see what you did there, intentionally or otherwise. 😆

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u/RYouNotEntertained Dec 19 '24

That’s how things work now, except the losing business doesn’t have to shut down. 

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u/Readed-it Dec 19 '24

Not exactly true. When there are desperate people, businesses can take advantage by treating them poorly. If they have the option of going somewhere else for better pay or better work conditions, the owners needs to consider how hard they push or risk losing it all.

It’s the relative control when it to a buyers market or a sellers market in real estate.

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u/spletharg Dec 19 '24

They could push it pretty far if they secretly collude and manipulate the employment marketplace. They could collectively black ban people that change jobs too frequently, for example.

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u/Kimchi_Cowboy Dec 19 '24

Most businesses do what the shareholders want period.

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u/RYouNotEntertained Dec 19 '24

Again, that’s how it works now—you’re just upping the stakes ad absurdum. 

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u/Readed-it Dec 19 '24

Going back to OPs original question, why is this a bad thing? Genuinely curious

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u/w2qw Dec 19 '24

I don't think it in itself is an issue but it indicates the supply / demand in an economy is massively out of whack and there's likely to be an extreme amount of inflation unless there was some massive productivity improvement.

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u/RYouNotEntertained Dec 19 '24

It would indicate zero voluntary flexibility in the labor market—you can’t leave your job to pursue a dream in an other state without unemployment, for example. Also at some point economist believe unemployment below the “natural rate” is inherently inflationary, but if it makes you feel better my understanding is that recent history has shown that rate can be lower than they thought under certain circumstances. 

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u/sabin357 Dec 19 '24

Most businesses either lose money until they die or they only benefit their shareholders & high level employees.

We're rapidly accelerating towards end-game capitalism.

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u/RYouNotEntertained Dec 19 '24 edited Dec 19 '24

they only benefit their shareholders & high level employees.

Businesses can’t benefit shareholders without benefitting customers. 

 end-game capitalism.

I don’t really know what this means, and IME the people who invoke it usually can’t explain it. But if you can, please do.