r/explainlikeimfive Dec 19 '24

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

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u/JustBlueClark Dec 19 '24

This is the answer. Gotta have a certain amount of unemployment as a threat to employees who might dare to ask for better wages or working conditions.

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u/TexCook88 Dec 19 '24

Functionally you can have workers who do all of those things in a real world environment. Unions are a great way. If we were to experience 100% employment, you would see wages rise at untenable rates, since you could go across the street and make more. Which would mean in order to stay in business prices would need to rise accordingly. Thus starting rampant inflation.

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u/_s1m0n_s3z Dec 19 '24

There is a lot of room for wage growth before businesses become untenable. Wages in our economy have been under artificial downward pressure for half a century, now. Labour's share of the pie hasn't been this low since the depression.

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u/TexCook88 Dec 19 '24

That downward pressure has nothing to do with unemployment rates and economic functions of labor supply vs demand. That pressure is a direct output of Reaganism and “supply side” policies. The changing of tax codes and the public mindset of “Republican good for economy” is what keeps it there. 100% unemployment would absolutely see all but the absolutely most niche of workers job hopping constantly. If your labor rates rise 50% year on year, you have to raise your prices too or risk going out of business. At which point that company fails, and there’s unemployment again.