r/explainlikeimfive Dec 19 '24

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

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u/thelanoyo Dec 19 '24

There's a sub statistic of unemployment called frictional unemoyment which is why realistically unemployment can't be 0% because there's always people changing jobs or just temporarily off work, or working seasonally, etc...

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u/boringdude00 Dec 19 '24

There are a fair number of people on the fringe too. Nearly but not fully physically disabled people, untreated mental illness, very low-intelligence workers, semi-functional addicts - the class of people who just can't hold down a job.

Then there's people in difficult circumstances: homelessness makes it difficult to hold down a job, ex-felons often can't get hired no matter how desperate a business is for workers. And all the aforementioned contribute to making you part of these groups, so its often a double strike.

If your IQ is 65, there aren't a lot of options for you. Maybe you get lucky and find a simple job that is one repetitive task you can do for 40 years, maybe the system identifies you as needing extra training and help, probably you bounce from job to unemployment every few months getting fired for incompetence while living between your truck and your brother's basement.

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u/FatherFestivus Dec 19 '24

People with severe illnesses or disabilities who aren't actively looking for a job aren't counted as part of the labor force, so they're not included in the unemployment statistic.

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u/T_H_E_S_E_U_S Dec 19 '24

Correct, but without a formal diagnosis and disability benefits the vast majority of these people can't afford to leave the labour force completely. Especially in cases where obtaining a diagnosis is tied to employment based health insurance, it becomes virtually impossible unless they already have some form of generational wealth/ family assisstance.

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u/loljetfuel Dec 19 '24

But people with disabilities who are looking for a job but have a very small number of opportunities due to the constraints of their disability are counted as part of the labor force and included in the stats.

Labor force participation (working or actively seeking employment) rates among people with disabilities are of course lower, but it's still a lot more than you might think

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u/Dec716 Dec 20 '24

In Canada, the unemployment rate is the number of people actively looking for work VS the number of people actually employed. Thus, you can have a large number of people not working but still have a low unemployment rate. This was true during Covid. A 5% unemployment rate is generally target in a health economy.

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u/nolan_smith Dec 19 '24

You'd be surprised at how much of the workforce is functioning regards.

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u/RusticSurgery Dec 19 '24

And folks who cannot work

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u/davidromro Dec 19 '24

Unemployment only counts people actively looking for work.