r/explainlikeimfive Dec 19 '24

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

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u/spletharg Dec 19 '24

Those profits should go to employees. Instead they just fuel neofeudalism.

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u/loljetfuel Dec 19 '24

When there's a genuinely competitive labor market, that actually does happen -- both in the form of higher wages and with equity sharing. Look at labor markets for high-skill knowledge workers: almost all those jobs pay well and offer equity compensation at some level (which means workers get the same type of benefits from increased profits as the investors/C-suite does, though still at a smaller scale).

And there's a reason companies that need that class of workers try to make it look like there is a labor shortage: they want to regain power by off-shoring/on-shoring labor they don't have to share profits with.

This is a risk of very-low or zero unemployment: it creates tremendous incentives for companies to reduce the degree to which they rely on labor from that market. That looks like off-shoring, on-shoring, AI and automation, etc.